[Title 42 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2008 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          42


          Parts 400 to 413

                         Revised as of October 1, 2008


          Public Health
          



________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2008
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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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........     821
      Table of CFR Titles and Chapters........................     823
      Alphabetical List of Agencies Appearing in the CFR......     843
      List of CFR Sections Affected...........................     853

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 42 CFR 400.200 
                       refers to title 42, part 
                       400, section 200.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, October 1, 2008), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

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separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
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also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

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    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    October 1, 2008.







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                               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, 2008.

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

    For this volume, Rob Sheehan was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of Michael L. 
White, assisted by Ann Worley.


[[Page 1]]



                         TITLE 42--PUBLIC HEALTH




                  (This book contains parts 400 to 429)

  --------------------------------------------------------------------
                                                                    Part

chapter iv--Centers for Medicare & Medicaid Services, 
  Department of Health and Human Services...................         400

[[Page 3]]



  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 
                        HEALTH AND HUMAN SERVICES




  --------------------------------------------------------------------


  Editorial Note: 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.

                    SUBCHAPTER A--GENERAL PROVISIONS
Part                                                                Page
400             Introduction; definitions...................           5
401             General administrative requirements.........           9
402             Civil money penalties, assessments, and 
                    exclusions..............................          23
403             Special programs and projects...............          43
                     SUBCHAPTER B--MEDICARE PROGRAM
405             Federal health insurance for the aged and 
                    disabled................................          91
406             Hospital insurance eligibility and 
                    entitlement.............................         285
407             Supplementary medical insurance (SMI) 
                    enrollment and entitlement..............         302
408             Premiums for supplementary medical insurance         312
409             Hospital insurance benefits.................         329
410             Supplementary medical insurance (SMI) 
                    benefits................................         356
411             Exclusions from Medicare and limitations on 
                    Medicare payment........................         422
412             Prospective payment systems for inpatient 
                    hospital services.......................         507
413             Principles of reasonable cost reimbursement; 
                    payment for end-stage renal disease 
                    services; optional prospectively 
                    determined payment rates for skilled 
                    nursing facilities......................         677

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                     SUBCHAPTER A_GENERAL PROVISIONS



PART 400_INTRODUCTION; DEFINITIONS--Table of Contents




Subpart A [Reserved]

                          Subpart B_Definitions

Sec.
400.200 General definitions.
400.202 Definitions specific to Medicare.
400.203 Definitions specific to Medicaid.

  Subpart C_OMB Control Numbers for Approved Collections of Information

400.300 Scope.
400.310 Display of currently valid OMB control numbers.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh) and 44 U.S.C. Chapter 35.

Subpart A [Reserved]



                          Subpart B_Definitions



Sec. 400.200  General definitions.

    In this chapter, unless the context indicates otherwise--
    Act means the Social Security Act, and titles referred to are titles 
of that Act.
    Administrator means the Administrator, Centers for Medicare & 
Medicaid Services (CMS), formerly the Health Care Financing 
Administration (HCFA).
    ALJ stands for administrative law judge.
    Area means the geographical area within the boundaries of a State, 
or a State or other jurisdiction, designated as constituting an area 
with respect to which a Professional Standards Review Organization or a 
Utilization and Quality Control Peer Review Organization has been or may 
be designated.
    CMP stands for competitive medical plan.
    Conditions of participation includes requirements for participation 
as the latter term is used in part 483 of this chapter.
    Condition level deficiencies includes deficiencies with respect to 
``level A requirements'' as the latter term is used in parts 442 and 483 
of this chapter.
    CORF stands for comprehensive outpatient rehabilitation facility.
    CFR stands for Code of Federal Regulations.
    CMS stands for Centers for Medicare & Medicaid Services, formerly 
the Health Care Financing Administration (HCFA).
    CY stands for calendar year.
    DAB stands for Departmental Appeals Board.
    Department means the Department of Health and Human Services (HHS), 
formerly the Department of Health, Education, and Welfare.
    ESRD stands for end-stage renal disease.
    FDA stands for the Food and Drug Administration.
    FQHC means Federally qualified health center.
    FR stands for Federal Register.
    FY stands for fiscal year.
    HCPP stands for health care prepayment plan.
    HHS stands for the Department of Health and Human Services.
    HHA stands for home health agency.
    HMO stands for health maintenance organization.
    ICF stands for intermediate care facility.
    ICF/MR stands for intermediate care facility for the mentally 
retarded.
    Medicaid means medical assistance provided under a State plan 
approved under title XIX of the Act.
    Medicare means the health insurance program for the aged and 
disabled under title XVIII of the Act.
    NCD stands for national coverage determination.
    OASDI stands for the Old Age, Survivors, and Disability Insurance 
program under title II of the Act.
    OIG stands for the Department's Office of the Inspector General.
    QDWI stands for Qualified Disabled and Working Individual.
    QIO stands for quality improvement organization.
    QMB stands for Qualified Medicare Beneficiary.
    Qualified Disabled and Working Individual means an individual who--

[[Page 6]]

    (1) Is eligible to enroll for Medicare Part A under section 1818A of 
the Act.
    (2) Has income, as determined in accordance with SSI methodologies, 
that does not exceed 200 percent of the Federal poverty guidelines (as 
defined and revised annually by the Office of Management and Budget) for 
a family of the size of the individual's family;
    (3) Has resources, as determined in accordance with SSI 
methodologies, that do not exceed twice the relevant maximum amount 
established, for SSI eligibility, for an individual or for an individual 
and his or her spouse; and
    (4) Is not otherwise eligible for Medicaid.
    Qualified Medicare Beneficiary means an individual who--
    (1) Is entitled to Medicare Part A, with or without payment of 
premiums, but is not entitled solely because he or she is eligible to 
enroll as a QDWI;
    (2) Has resources, as determined in accordance with SSI 
methodologies, that do not exceed twice the maximum amount established 
for SSI eligibility; and
    (3) Has income, as determined in accordance with SSI methodologies, 
that does not exceed 100 percent of the Federal poverty guidelines.
    Quality improvement organization means an organization that has a 
contract with CMS, under part B of title XI of the Act, to perform 
utilization and quality control review of the health care furnished, or 
to be furnished, to Medicare beneficiaries.
    Regional Administrator means a Regional Administrator of CMS.
    Regional Office means one of the regional offices of CMS.
    RHC stands for rural health clinic.
    RRB stands for Railroad Retirement Board.
    Secretary means the Secretary of Health and Human Services.
    SNF stands for skilled nursing facility.
    Social security benefits means monthly cash benefits payable under 
section 202 or 223 of the Act.
    SSA stands for Social Security Administration.
    United States means the fifty States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, 
and the Northern Mariana Islands.
    U.S.C. stands for United States Code.

[48 FR 12534, Mar. 25, 1983, as amended at 49 FR 7206, Feb. 27, 1984; 50 
FR 15326 and 15358, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985; 51 FR 
43197, Dec. 1, 1986; 52 FR 27764, July 23, 1987; 56 FR 8852, Mar. 1, 
1991; 56 FR 38077, Aug. 12, 1991; 57 FR 24975, June 12, 1992; 57 FR 
55912, Nov. 25, 1992; 63 FR 35065, June 26, 1998; 63 FR 52611, Oct. 1, 
1998; 63 FR 68690, Dec. 14, 1998; 66 FR 39452, July 31, 2001; 67 FR 
36540, May 24, 2002]



Sec. 400.202  Definitions specific to Medicare.

    As used in connection with the Medicare program, unless the context 
indicates otherwise--
    Beneficiary means a person who is entitled to Medicare benefits.
    Carrier means an entity that has a contract with CMS to determine 
and make Medicare payments for Part B benefits payable on a charge basis 
and to perform other related functions.
    Critical access hospital (CAH) means a facility designated by HFCA 
as meeting the applicable requirements of section 1820 of the Act and of 
subpart F of part 485 of this chapter.
    Departmental Appeals Board means: (1) Except as provided in 
paragraphs (2) and (3) of this definition, a Board established in the 
office of the Secretary, whose members act in panels to provide 
impartial review of disputed decisions made by operating components of 
the Department or by ALJs.
    (2) For purposes of review of ALJ decisions under part 405, subparts 
G and H; part 417, subpart Q; part 422, subpart M; and part 478, subpart 
B of this chapter, the Medicare Appeals Council designated by the Board 
Chair.
    (3) For purposes of part 426 of this chapter, a Member of the Board 
and, at the discretion of the Board Chair, any other Board staff 
appointed by the Board Chair to perform a review under that part.
    Entitled means that an individual meets all the requirements for 
Medicare benefits.
    Essential access community hospital (EACH) means a hospital 
designated by CMS as meeting the applicable requirements of section 1820 
of the Act and of subpart G of part 412 of this chapter, as in effect on 
September 30, 1997.

[[Page 7]]

    GME stands for graduate medical education.
    Hospital insurance benefits means payments on behalf of, and in rare 
circumstances directly to, an entitled individual for services that are 
covered under Part A of title XVIII of the Act.
    Intermediary means an entity that has a contract with CMS to 
determine and make Medicare payments for Part A or Part B benefits 
payable on a cost basis and to perform other related functions.
    Local coverage determination (LCD) means a decision by a fiscal 
intermediary or a carrier under Medicare Part A or Part B, as 
applicable, whether to cover a particular service on an intermediary-
wide or carrier-wide basis in accordance with section 1862(a)(1)(A) of 
the Act. An LCD may provide that a service is not reasonable and 
necessary for certain diagnoses and/or for certain diagnosis codes. An 
LCD does not include a determination of which procedure code, if any, is 
assigned to a service or a determination with respect to the amount of 
payment to be made for the service.
    Medicare integrity program contractor means an entity that has a 
contract with CMS under section 1893 of the Act to perform exclusively 
one or more of the program integrity activities specified in that 
section.
    Medicare Part A means the hospital insurance program authorized 
under Part A of title XVIII of the Act.
    Medicare Part B means the supplementary medical insurance program 
authorized under Part B of title XVIII of the Act.
    Medicare Part C means the choice of Medicare benefits through 
Medicare Advantage plans authorized under Part C of the title XVIII of 
the Act.
    Medicare Part D means the voluntary prescription drug benefit 
program authorized under Part D of title XVIII of the Act.
    National coverage determination (NCD) means a decision that CMS 
makes regarding whether to cover a particular service nationally under 
title XVIII of the Act. An NCD does not include a determination of what 
code, if any, is assigned to a service or a determination with respect 
to the amount of payment to be made for the service.
    Nonparticipating supplier means a supplier that does not have an 
agreement with CMS to participate in Part B of Medicare in effect on the 
date of the service.
    Participating supplier means a supplier that has an agreement with 
CMS to participate in Part B of Medicare in effect on the date of the 
service.
    Payment on an assignment-related basis means payment for Part B 
services--
    (1) To a physician or other supplier that accepts assignment from 
the beneficiary, in accordance with Sec. 424.55 or Sec. 424.56 of this 
chapter;
    (2) To a physician or other supplier after the beneficiary's death, 
in accordance with Sec. 424.64(c)(1) of this chapter; or
    (3) To an entity that pays the physician or other supplier under a 
health benefit plan, in accordance with Sec. 424.66 of this chapter.
    Provider means a hospital, a CAH, a skilled nursing facility, a 
comprehensive outpatient rehabilitation facility, a home health agency, 
or a hospice that has in effect an agreement to participate in Medicare, 
or a clinic, a rehabilitation agency, or a public health agency that has 
in effect a similar agreement but only to furnish outpatient physical 
therapy or speech pathology services, or a community mental health 
center that has in effect a similar agreement but only to furnish 
partial hospitalization services.
    Railroad retirement benefits means monthly benefits payable to 
individuals under the Railroad Retirement Act of 1974 (45 U.S.C. 
beginning at section 231).
    Services means medical care or services and items, such as medical 
diagnosis and treatment, drugs and biologicals, supplies, appliances, 
and equipment, medical social services, and use of hospital, CAH, or SNF 
facilities.
    Supplementary medical insurance benefits means payment to or on 
behalf of an entitled individual for services covered under Part B of 
title XVIII of the Act.
    Supplier means a physician or other practitioner, or an entity other 
than a

[[Page 8]]

provider, that furnishes health care services under Medicare.

[48 FR 12534, Mar. 25, 1983, as amended at 48 FR 56024, Dec. 16, 1983; 
49 FR 3658, Jan. 30, 1984; 51 FR 43197, Dec. 1, 1986; 52 FR 27764, July 
23, 1987; 55 FR 24567, June 18, 1990; 56 FR 8852, Mar. 1, 1991; 58 FR 
30666, May 26, 1993; 59 FR 6576, Feb. 11, 1994; 60 FR 63175, Dec. 8, 
1995; 62 FR 46025, Aug. 29, 1997; 62 FR 59098, Oct. 31, 1997; 63 FR 
35065, June 26, 1998; 68 FR 63715, Nov. 11, 2003; 70 FR 4525, Jan. 28, 
2005; 72 FR 48885, Aug. 24, 2007]



Sec. 400.203  Definitions specific to Medicaid.

    As used in connection with the Medicaid program, unless the context 
indicates otherwise--
    Applicant means an individual whose written application for Medicaid 
has been submitted to the agency determining Medicaid eligibility, but 
has not received final action. This includes an individual (who need not 
be alive at the time of application) whose application is submitted 
through a representative or a person acting responsibly for the 
individual.
    Federal financial participation (FFP) means the Federal Government's 
share of a State's expenditures under the Medicaid program.
    FMAP stands for the Federal medical assistance percentage, which is 
used to calculate the amount of Federal share of State expenditures for 
services.
    Medicaid agency or agency means the single State agency 
administering or supervising the administration of a State Medicaid 
plan.
    Nursing facility (NF), effective October 1, 1990, means an SNF or an 
ICF participating in the Medicaid program.
    PCCM stands for primary care case manager.
    PCP stands for primary care physician.
    Provider means either of the following:
    (1) For the fee-for-service program, any individual or entity 
furnishing Medicaid services under an agreement with the Medicaid 
agency.
    (2) For the managed care program, any individual or entity that is 
engaged in the delivery of health care services and is legally 
authorized to do so by the State in which it delivers the services.
    Recipient means an individual who has been determined eligible for 
Medicaid.
    Services means the types of medical assistance specified in section 
1905(a) of the Act and defined in subpart A of part 440 of this chapter.
    State means the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa 
and the Northern Mariana Islands.
    State plan or the plan means a comprehensive written commitment by a 
Medicaid agency, submitted under section 1902(a) of the Act, to 
administer or supervise the administration of a Medicaid program in 
accordance with Federal requirements.

[48 FR 12534, Mar. 25, 1983, as amended at 50 FR 33029, Aug. 16, 1985; 
56 FR 8852, Mar. 1, 1991; 57 FR 29155, June 30, 1992; 67 FR 41094, June 
14, 2002]



  Subpart C_OMB Control Numbers for Approved Collections of Information

    Source: 49 FR 4477, Feb. 7, 1984, unless otherwise noted.



Sec. 400.300  Scope.

    This subpart collects and displays control numbers assigned by the 
Office of Management and Budget (OMB) to collections of information 
contained in CMS regulations, in accordance with OMB's regulations for 
controlling paperwork burdens on the public, 5 CFR part 1320. CMS 
intends that the subpart comply with the requirements of section 3507(f) 
of the Paperwork Reduction Act of 1980, 44 U.S.C. chapter 35 which 
requires that agencies shall not engage in a ``collection of 
information'' without obtaining a control number from OMB.



Sec. 400.310  Display of currently valid OMB control numbers.

------------------------------------------------------------------------
                                                             Current OMB
Sections in 42 CFR that contain collections of information  control Nos.
------------------------------------------------------------------------
403.510...................................................    0938--0641
405.509...................................................    0938--0666
405.512...................................................    0938--0008
405.2112, 405.2123, 405.2134, 405.2136-405.2140, 405.2171.    0938--0386
409.43....................................................    0938--0365
410.105...................................................    0938--0267
411.25, 411.32............................................    0938--0564

[[Page 9]]

 
411.54....................................................    0938--0558
411.165...................................................    0938--0564
411.404, 411.406..........................................    0938--0465
411.408...................................................    0938--0566
412.42....................................................    0938--0666
412.92....................................................    0938--0477
412.105...................................................    0938--0456
412.230, 412.232, 412.234, 412.236, 412.254, 412.260,         0938--0573
 412.266, 412.278.........................................
415.60....................................................    0938--0301
415.162...................................................    0938--0301
416.43....................................................    0938--0506
416.47....................................................    0938--0266
                                                                     and
                                                              0938--0506
417.126...................................................    0938--0472
417.436, 417.801..........................................    0938--0610
418.22, 418.24, 418.28, 418.56, 418.58, 418.70, 418.74....    0938--0302
418.30, 418.82, 418.83, 418.96, 418.100...................    0938--0475
418.96, 418.100...........................................    0938--0302
421.117...................................................    0938--0542
424.3.....................................................    0938--0008
424.5, 424.7, 424.20......................................    0938--0454
424.22....................................................    0938--0489
424.32, 424.34............................................    0938--0008
431.17....................................................    0938--0467
431.50, 431.52, 431.55....................................    0938--0247
431.107...................................................    0938--0610
431.306...................................................    0938--0467
431.625...................................................    0938--0247
431.630...................................................    0938--0445
431.800...................................................    0938--0247
431.806, 431.830, 431.432, 431.834, 431.836...............    0938--0438
432.50....................................................    0938--0459
433.36, 433.37............................................    0938--0247
433.68, 433.74............................................    0938--0618
433.110, 433.112-433.114, 433.116, 433.117, 433.119-          0938--0247
 433.121, 433.123, 433.127, 433.130, 433.131, 433.135.....
433.138...................................................    0938--0502
                                                              0938--0553
                                                                     and
                                                              0938--0555
433.139...................................................    0938--0459
                                                              0938--0554
                                                                     and
                                                              0938--0555
434.27....................................................    0938--0572
434.28....................................................    0938--0610
435.1, 435.910, 435.919, 435.920, 435.940, 435.945,           0938--0247
 435.948, 435.952, 435.953, 435.955, 435.960, 435.965,
 435.1003, 441.11, 441.15, 441.20.........................
441.56, 441.58, 441.60, 441.61............................    0938--0354
441.302...................................................    0938--0449
441.303...................................................    0938--0272
                                                                     and
                                                              0938--0449
441.351, 441.352, 441.353, 441.356, 441.365...............    0938--0613
442.505...................................................    0938--0366
447.31....................................................    0938--0287
447.45, 447.50, 447.51, 447.52............................    0938--0247
447.53....................................................    0938--0429
447.55....................................................    0938--0247
447.253...................................................    0938--0366
                                                              0938--0523
                                                                     and
                                                              0938--0556
447.255...................................................    0938--0193
447.272, 447.299..........................................    0938--0618
447.302, 447.331, 447.332, 447.333........................    0938--0247
456.80....................................................    0938--0247
456.654...................................................    0938--0445
456.700, 456.705, 456.709, 456.711, 456.712...............    0938--0659
462.102, 462.103..........................................    0938--0526
466.70, 466.72, 466.74....................................    0938--0445
466.78....................................................    0938--0445
                                                                     and
                                                              0938--0665
466.80, 466.94............................................    0938--0445
473.18, 473.34, 473.36, 473.42............................    0938--0443
476.104, 476.105, 476.116, 476.134........................    0938--0426
481.61....................................................    0938--0328
482.12, 482.21, 482.22, 482.27, 482.30, 482.41, 482.43,       0938--0328
 482.53, 482.56, 482.57, 482.60, 482.62...................
483.10....................................................    0938--0610
483.410, 483.420, 483.440, 483.460, 483.470...............    0938--0366
484.1, 484.2..............................................    0938--0365
484.10....................................................    0938--0365
                                                                     and
                                                              0938--0610
484.12, 484.14, 484.16, 484.18, 484.30, 484.32, 484.34,       0938--0365
 484.36, 484.48, 484.52...................................
485.56, 485.58, 485.60, 485.64, 485.66....................    0938--0267
                                                                     and
                                                              0938--0538
485.709, 485.711, 485.717, 485.719, 485.721, 487.723,         0938--0336
 485.725, 485.727.........................................
486.104, 486.106, 486.110.................................    0938--0338
486.155, 486.161, 486.163.................................    0938--0336
488.10....................................................    0938--0646
488.18....................................................    0938--0667
488.26....................................................    0938--0646
489.20....................................................    0938--0564
                                                                     and
                                                              0938--0667
489.24....................................................    0938--0334
                                                              0938--0663
                                                                     and
                                                              0938--0667
489.102...................................................    0938--0610
491.9, 491.10.............................................    0938--0334
493.35, 493.37, 493.39, 493.43, 493.45, 493.47, 493.49,
 493.51, 493.53,..........................................
493.55, 493.60, 493.61, 493.62, 493.63....................    0938--0612
493.614, 493.633, 494.634.................................    0938--0607
493.801-493.1285, 493.1425, 493.1701, 493.1703, 493.1705,     0938--0612
 493.1707, 493.1709, 493.1711, 493.1713, 493.1715,
 493.1717, 493.1719, 493.1721, 493.1775, 493.1776,
 493.1777, 493.1780, 493.2001.............................
494.52, 494.54, 494.56, 494.58, 494.64....................    0938--0608
498.22, 498.40, 498.58, 498.82............................    0938--0508
1004.40, 1004.50, 1004.60, 1004.70........................    0938--0444
------------------------------------------------------------------------


[60 FR 50445, Sept. 29, 1995, as amended at 60 FR 63188, Dec. 8, 1995]



PART 401_GENERAL ADMINISTRATIVE REQUIREMENTS--Table of Contents




Subpart A [Reserved]

                Subpart B_Confidentiality and Disclosure

Sec.
401.101 Purpose and scope.
401.102 Definitions.
401.105 Rules for disclosure.
401.106 Publication.

[[Page 10]]

401.108 CMS rulings.
401.110 Publications for sale.
401.112 Availability of administrative staff manuals.
401.116 Availability of records upon request.
401.118 Deletion of identifying details.
401.120 Creation of records.
401.126 Information or records that are not available.
401.128 Where requests for records may be made.
401.130 Materials available at social security district offices and 
          branch offices.
401.132 Materials in field offices of the Office of Hearings and 
          Appeals, SSA.
401.133 Availability of official reports on providers and suppliers of 
          services, State agencies, intermediaries, and carriers under 
          Medicare.
401.134 Release of Medicare information to State and Federal agencies.
401.135 Release of Medicare information to the public.
401.136 Requests for information or records.
401.140 Fees and charges.
401.144 Denial of requests.
401.148 Administrative review.
401.152 Court review.

Subparts C-E [Reserved]

               Subpart F_Claims Collection and Compromise

401.601 Basis and scope.
401.603 Definitions.
401.605 Omissions not a defense.
401.607 Claims collection.
401.613 Compromise of claims.
401.615 Payment of compromise amount.
401.617 Suspension of collection action.
401.621 Termination of collection action.
401.623 Joint and several liability.
401.625 Effect of CMS claims collection decisions on appeals.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).

Subpart A [Reserved]



                Subpart B_Confidentiality and Disclosure

    Source: 46 FR 55696, Nov. 12, 1981, unless otherwise noted.



Sec. 401.101  Purpose and scope.

    (a) The regulations in this subpart:
    (1) Implement section 1106(a) of the Social Security Act as it 
applies to the Centers for Medicare & Medicaid Services (CMS). The rules 
apply to information obtained by officers or employees of CMS in the 
course of administering title XVIII of the Social Security Act 
(Medicare), information obtained by Medicare intermediaries or carriers 
in the course of carrying out agreements under sections 1816 and 1842 of 
the Social Security Act, and any other information subject to section 
1106(a) of the Social Security Act;
    (2) Relate to the availability to the public, under 5 U.S.C. 552, of 
records of CMS and its components. They set out what records are 
available and how they may be obtained; and
    (3) Supplement the regulations of the Department of Health and Human 
Services relating to availability of information under 5 U.S.C. 552, 
codified in 45 CFR part 5, and do not replace or restrict them.
    (b) Except as authorized by the rules in this subpart, no 
information described in paragraph (a)(1) of this section shall be 
disclosed. The procedural rules in this subpart (Sec. Sec. 401.106 
through 401.152) shall be applied to requests for information which is 
subject to the rules for disclosure in this subpart.
    (c) Requests for information which may not be disclosed according to 
the provisions of this subpart shall be denied under authority of 
section 1106(a) of the Social Security Act and this subpart, and 
furthermore, such requests which have been made pursuant to the Freedom 
of Information Act shall be denied under authority of an appropriate 
Freedom of Information Act exemption, 5 U.S.C. 552(b).



Sec. 401.102  Definitions.

    For purposes of this subpart:
    Act means the Social Security Act.
    Freedom of Information Act rules means the substantive mandatory 
disclosure provisions of the Freedom of Information Act, 5 U.S.C. 552 
(including the exemptions from mandatory disclosure, 5 U.S.C. 552(b), as 
implemented by the Department's public information regulation, 45 CFR 
part 5, subpart F and by Sec. Sec. 401.106 to 401.152 of this subpart.
    Person means a person as defined in the Administrative Procedure 
Act, 5 U.S.C. 551(2). This includes State or local agencies, but does 
not include Federal agencies or State or Federal courts.

[[Page 11]]

    Record has the same meaning as that provided in 45 CFR 5.5.
    Subject individual means an individual whose record is maintained by 
the Department in a system of records, as the terms ``individual,'' 
``record'', and ``system of records'' are defined in the Privacy Act of 
1974, 5 U.S.C. 552a(a).



Sec. 401.105  Rules for disclosure.

    (a) General rule. The Freedom of Information Act rules shall be 
applied to every proposed disclosure of information. If, considering the 
circumstances of the disclosure, the information would be made available 
in accordance with the Freedom of Information Act rules, then the 
information may be disclosed regardless of whether the requester or 
recipient of the information has a statutory right to request the 
information under the Freedom of Information Act, 5 U.S.C. 552, or 
whether a request has been made.
    (b) Application of the general rule. Pursuant to the general rule in 
paragraph (a) of this section,
    (1) Information shall be disclosed--
    (i) To a subject individual when required by the access provision of 
the Privacy Act, 5 U.S.C. 552a(d), as implemented by the Department 
Privacy Act regulation, 45 CFR part 5b; and
    (ii) To a person upon request when required by the Freedom of 
Information Act, 5 U.S.C. 552;
    (2) Unless prohibited by any other statute (e.g., the Privacy Act of 
1974, 5 U.S.C. 552a(b), the Tax Reform Act of 1976, 26 U.S.C. 6103, or 
section 1106(d) and (e) of the Social Security Act), information may be 
disclosed to any requester or recipient of the information, including 
another Federal agency or a State or Federal court, when the information 
would not be exempt from mandatory disclosure under Freedom of 
Information Act rules or when the information nevertheless would be made 
available under the Department's public information regulation's 
criteria for disclosures which are in the public interest and consistent 
with obligations of confidentiality and administrative necessity, 45 CFR 
part 5, subpart F, as supplemented by Sec. Sec. 401.106 to 401.152 of 
this subpart.

[42 FR 14704, Mar. 16, 1977. Redesignated at 45 FR 74913, 74914, Nov. 
13, 1980, and correctly redesignated at 46 FR 24551, May 1, 1981, as 
amended at 46 FR 55697, Nov. 12, 1981]



Sec. 401.106  Publication.

    (a) Methods of publication. Materials required to be published under 
the provisions of The Freedom of Information Act, 5 U.S.C. 552 (a)(1) 
and (2) are published in one of the following ways:
    (1) By publication in the Federal Register of CMS regulations, and 
by their subsequent inclusion in the Code of Federal Regulations;
    (2) By publication in the Federal Register of appropriate general 
notices;
    (3) By other forms of publication, when incorporated by reference in 
the Federal Register with the approval of the Director of the Federal 
Register; and
    (4) By publication of indexes of precedential orders and opinions 
issued in the adjudication of claims, statements of policy and 
interpretations which have been adopted but have not been published in 
the Federal Register, and of administrative staff manuals and 
instructions to staff that affect a member of the public.
    (b) Availability for inspection. Those materials which are published 
in the Federal Register pursuant to 5 U.S.C. 552(a)(1) shall, to the 
extent practicable and to further assist the public, be made available 
for inspection at the places specified in Sec. 401.128.

[46 FR 55696, Nov. 12, 1981, as amended at 48 FR 22924, May 23, 1983]



Sec. 401.108  CMS rulings.

    (a) After September 1981, a precedent final opinion or order or a 
statement of policy or interpretation that has not been published in the 
Federal Register as a part of a regulation or of a notice implementing 
regulations, but which has been adopted by CMS as having precedent, may 
be published in the Federal Register as a CMS Ruling and will be made 
available in the publication entitled CMS Rulings.
    (b) Precedent final opinions and orders and statements of policy and 
interpretation that were adopted by CMS

[[Page 12]]

before October, 1981, and that have not been published in the Federal 
Register are available in CMS Rulings.
    (c) CMS Rulings are published under the authority of the 
Administrator, CMS. They are binding on all CMS components, on all HHS 
components that adjudicate matters under the jurisdiction of CMS, and on 
the Social Security Administration to the extent that components of the 
Social Security Administration adjudicate matters under the jurisdiction 
of CMS.

[48 FR 22924, May 23, 1983, as amended at 70 FR 11472, Mar. 8, 2005; 70 
FR 37702, June 30, 2005]



Sec. 401.110  Publications for sale.

    The following publications containing information pertaining to the 
program, organization, functions, and procedures of CMS may be purchased 
from the Superintendent of Documents, Government Printing Office, 
Washington, DC 20402.
    (a) Titles 20, 42, and 45 of the Code of Federal Regulations.
    (b) Federal Register issues.
    (c) Compilation of the Social Security Laws.
    (d) CMS Rulings.
    (e) Social Security Handbook. The information in the Handbook is not 
of precedent or interpretative force.
    (f) Medicare/Medicaid Directory of Medical Facilities.



Sec. 401.112  Availability of administrative staff manuals.

    All CMS administrative staff manuals and instructions to staff 
personnel which contain policies, procedures, or interpretations that 
affect the public are available for inspection and copying. A complete 
listing of such materials is published in CMS Rulings. These manuals are 
generally not printed in a sufficient quantity to permit sale or other 
general distribution to the public. Selected material is maintained at 
Social Security Administration district offices and field offices and 
may be inspected there. See Sec. Sec. 401.130 and 401.132 for a listing 
of this material.



Sec. 401.116  Availability of records upon request.

    (a) General. In addition to the records made available pursuant to 
Sec. Sec. 401.106, 401.108, 401.110 and 401.112, CMS will, upon request 
made in accordance with this subpart, make identified records available 
to any person, unless they are exempt from disclosure under the 
provisions of section 552(b) of title 5, United States Code (see Sec. 
401.126), or any other provision of law.
    (b) Misappropriation, alteration, or destruction of records. No 
person may remove any record made available to him for inspection or 
copying under this part, from the place where it is made available. In 
addition, no person may steal, alter, mutilate, obliterate, or destroy 
in whole or in part, such a record. See sections 641 and 2071 of title 
18 of the United States Code.



Sec. 401.118  Deletion of identifying details.

    When CMS publishes or otherwise makes available an opinion or order, 
statement of policy, or other record which relates to a private party or 
parties, the name or names or other identifying details will be deleted.



Sec. 401.120  Creation of records.

    Records will not be created by compiling selected items from the 
files, and records will not be created to provide the requester with 
such data as ratios, proportions, percentages, per capitas, frequency 
distributions, trends, correlations, and comparisons. If such data have 
been compiled and are available in the form of a record, the record 
shall be made available as provided in this subpart.



Sec. 401.126  Information or records that are not available.

    (a) Specific exemptions from disclosure. Pursuant to paragraph (b) 
of 5 U.S.C. 552, certain classes of records are exempt from disclosure. 
For some examples of the kinds of materials which are exempt, see 
subpart F of the public information regulation of the Department of 
Health and Human Services (45 CFR part 5) and the appendix to that 
regulation.
    (b) Materials exempt from disclosure by statute. Pursuant to 
paragraph (b)(3) of

[[Page 13]]

5 U.S.C. 552, as amended, which exempts from the requirement for 
disclosure matters that are exempted from disclosure by statute, 
provided that such statute requires that the matters be withheld from 
the public in such a manner as to leave no discretion on the issue, or 
establishes particular criteria for withholding or refers to particular 
types of matter to be withheld:
    (1) Reports described in sections 1106 (d) and (e) of the Social 
Security Act shall not be disclosed, except in accordance with the 
provisions of sections 1106 (d) and (e). Sections 1106 (d) and (e) 
provide for public inspection of certain official reports dealing with 
the operation of the health programs established by titles XVIII and XIX 
of the Social Security Act (Medicare and Medicaid), but require that 
program validation survey reports and other formal evaluations of 
providers of services shall not identify individual patients, individual 
health care practitioners, or other individuals. Section 1106(e) further 
requires that none of the reports shall be made public until the 
contractor or provider whose performance is being evaluated has had a 
reasonable opportunity to review that report and to offer comments. See 
Sec. 401.133 (b) and (c);
    (2)(i) Except as specified in paragraph (b)(2)(ii) of this section, 
CMS may not disclose any accreditation survey or any information 
directly related to the survey (including corrective action plans) made 
by and released to it by the Joint Commission on Accreditation of 
Healthcare Organizations, the American Osteopathic Association or any 
other national accreditation organization that meets the requirements of 
Sec. 488.6 or Sec. 493.506 of this chapter. Materials that are 
confidential include accreditation letters and accompanying 
recommendations and comments prepared by an accreditation organization 
concerning the entities it surveys.
    (ii) Exceptions. (A) CMS may release the accreditation survey of any 
home health agency; and
    (B) CMS may release the accreditation survey and other information 
directly related to the survey (including corrective action plans) to 
the extent the survey and information relate to an enforcement action 
(for example, denial of payment for new admissions, civil money 
penalties, temporary management and termination) taken by CMS; and
    (3) Tax returns and return information defined in section 6103 of 
the Internal Revenue Code, as amended by the Tax Reform Act of 1976, 
shall not be disclosed except as authorized by the Internal Revenue 
Code.
    (c) Effect of exemption. Neither 5 U.S.C. 552 nor this regulation 
directs the withholding of any record or information, except to the 
extent of the prohibitions in paragraph (b) of this section. Except for 
material required to be withheld under the statutory provisions 
incorporated in paragraph (b) of this section or under another statute 
which meets the standards in 5 U.S.C. 552(b)(3), materials exempt from 
mandatory disclosure will nevertheless be made available when this can 
be done consistently with obligations of confidentiality and 
administrative necessity. The disclosure of materials or records under 
these circumstances in response to a specific request, however, is of no 
precedent force with respect to any other request.

[46 FR 55696, Nov. 12, 1981, as amended at 58 FR 61837, Nov. 23, 1993]



Sec. 401.128  Where requests for records may be made.

    (a) General. Any request for any record may be made to--
    (1) Any CMS component;
    (2) Director, Office of Public Affairs, CMS 313-H, Hubert H. 
Humphrey Building, 200 Independence Avenue, Washington, DC 20201; or
    (3) Director of Public Affairs in any Regional Office of the 
Department of Health and Human Services.

The locations and service areas of these offices are as follows:

Region I--John F. Kennedy Federal Building, Boston, MA 02203. 
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont.
Region II--26 Federal Plaza, New York, NY 10007. New York, New Jersey, 
Puerto Rico, Virgin Islands.
Region III--Gateway Building, 3535 Market Street, Philadelphia, PA 
19101. Delaware, Maryland, Pennsylvania, Virginia, West Virginia, 
District of Columbia.

[[Page 14]]

Region IV--101 Marietta Street, Altanta, GA 30323. Alabama, Florida, 
Georgia, Kentucky, Mississippi, North Carolina, South Carolina, 
Tennessee.
Region V--300 South Wacker Drive, Chicago, IL 60606. Illinois, Indiana, 
Michigan, Minnesota, Ohio, Wisconsin.
Region VI--1200 Main Tower Building, Dallas, TX 75202. Arkansas, 
Louisiana, New Mexico, Oklahoma, Texas.
Region VII--601 East 12th Street, Kansas City, MO 64106. Iowa, Kansas, 
Missouri, Nebraska.
Region VIII--Federal Office Building, 19th and Stout Streets, Denver, CO 
80294. Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming.
Region IX--Federal Office Building, 50 United Nations Plaza, San 
Francisco, CA 94102. Arizona, California, Hawaii, Nevada, Guam, Trust 
Territory of Pacific Islands, American Samoa.
Region X--Arcade Plaza Building, 1321 Second Avenue, Seattle, WA 98101. 
Alaska, Idaho, Oregon, Washington.

    (b) Records pertaining to individuals. CMS maintains some records 
pertaining to individuals. Disclosure of such records is generally 
prohibited by section 1106 of the Social Security Act (42 U.S.C. 1306), 
except as prescribed in Sec. 401.105 (See also Sec. 401.126(b)). 
Requests for records pertaining to individuals may be addressed to:

Director, Office of Research, Demonstrations and Statistics, CMS, 
Baltimore, Maryland 21235, when information is sought from the record of 
a person who has participated in a research survey conducted by or for 
CMS, Office of Research, Demonstrations and Statistics; or whose records 
have been included by statistical sampling techniques in research and 
statistical studies authorized by the Social Security Act in the field 
of health care financing.
    (c) Requests for materials listed in Sec. 401.130 or Sec. 401.132 
or indexed in the CMS Rulings. A request to inspect and copy materials 
listed in Sec. 401.130 or Sec. 401.132 or indexed in CMS Rulings may 
be made to any district or branch office of the Social Security 
Administration. If the specific material requested is not available in 
the office receiving the request, the material will be obtained and made 
available promptly.



Sec. 401.130  Materials available at social security district offices and 

branch offices.

    (a) Materials available for inspection. The following are available 
or will be made available for inspection at the social security district 
offices and branch offices:
    (1) Compilation of the Social Security Laws.
    (2) The Public Information Regulation of the Department of Health 
and Human Services (45 CFR part 5).
    (3) Medicare Program regulations issued by the Centers for Medicare 
& Medicaid Services. 42 CFR chapter IV .
    (4) CMS Rulings.
    (5) Social Security Handbook.
    (b) Materials available for inspection and copying. The following 
materials are available or will be made available for inspection and 
copying at the social security district offices and branch offices:
    (1) Claims Manual of the Social Security Administration.
    (2) Department Staff Manual on Organization, Department of Health 
and Human Services, Part F, CMS.
    (3) Parts 2 and 3 of the Part A

Intermediary Manual (Provider Services under Medicare CMS Pub. 13-2 and 
13-3).
    (4) Parts 2 and 3 of the Part B Intermediary Manual (Physician and 
Supplier Services).
    (5) Intermediary Letters Related to Parts 2 and 3 of the Part A and 
Part B Intermediary Manuals.
    (6) State Buy-In Handbook (State Enrollment of Eligible Individuals 
under the Supplementary Medical Insurance Program) and Letters.
    (7) Group Practice Prepayment Plan Manual (HIM-8) and Letters.
    (8) State Operations Manual (HIM-7).
    (9) CMS Letters to State Agencies on Medicare.
    (10) Skilled Nursing Facility Manual (CMS Pub. 12).
    (11) Hearing Officers Handbook (Supplementary Medical Insurance 
Program--HIM-21).
    (12) Hospital Manual (HIM-10).
    (13) Home Health Agency Manual (HIM-11).
    (14) Outpatient Physical Therapy Provider Manual (HIM-9).

[[Page 15]]

    (15) Provider Reimbursement Manual (HIM-15).
    (16) Audit Program Manuals for Hospital (HIM-16), Home Health Agency 
(HIM-17), and Extended Care Facilities (HIM-18).
    (17) Statements of deficiencies based upon survey reports of health 
care institutions or facilities prepared after January 31, 1973, by a 
State agency, and such reports (including pertinent written statements 
furnished by such institution or facility on such statements of 
deficiencies), as set forth in Sec. 401.133(a). Except as otherwise 
provided for at Sec. Sec. 401.133 and 488.325 of this chapter for SNFs, 
such statements of deficiencies, reports, and pertinent written 
statements shall be available or made available only at the social 
security district office and regional office servicing the area in which 
the institution or facility is located, except that such statements of 
deficiencies and pertinent written statements shall also be available at 
the local public assistance offices servicing such area.
    (18) Indexes to the materials listed in paragraph (a) of this 
section and in this paragraph (b) and an index to the Bureau of Hearings 
and Appeals Handbook.

[46 FR 55696, Nov. 12, 1981, as amended at 59 FR 56232, Nov. 10, 1994]



Sec. 401.132  Materials in field offices of the Office of Hearings and 

Appeals, SSA.

    (a) Materials available for inspection. The following materials are 
available for inspection in the field offices of the Office of Hearings 
and Appeals, SSA.
    (1) Title 45 of the Code of Federal Regulations (including the 
public information regulation of the Department of Health and Human 
Services).
    (2) Regulations of the Social Security Administration and CMS.
    (3) Title 5, United States Code.
    (4) Compilation of the Social Security Laws.
    (5) CMS Rulings.
    (6) Social Security Handbook.
    (b) Handbook available for inspection and copying. The Office of 
Hearings and Appeals Handbook is available for inspection and copying in 
the field offices of the Office of Hearings and Appeals.



Sec. 401.133  Availability of official reports on providers and suppliers of 

services, State agencies, intermediaries, and carriers under Medicare.

    Except as otherwise provided for in Sec. 488.325 of this chapter 
for SNFs, the following must be made available to the public under the 
conditions specified:
    (a) Statements of deficiencies and survey reports on providers of 
services prepared by State agencies. (1) Statements of deficiencies 
based upon official survey reports prepared after January 31, 1973, by a 
State agency pursuant to its agreement entered into under section 1864 
of the Social Security Act and furnished to CMS, which relate to a State 
agency's findings on the compliance of a health care institution or 
facility with the applicable provisions in section 1861 of the Act and 
with the regulations, promulgated pursuant to those provisions, dealing 
with health and safety of patients in those institutions and facilities; 
and (2) State agency survey reports. The statement of deficiencies or 
report and any pertinent written statements furnished by the institution 
or facility on the statement of deficiencies shall be disclosed within 
90 days following the completion of the survey by the State agency, but 
not to exceed 30 days following the receipt of the report by CMS. (See 
Sec. 401.130(b)(17)) for places where statements of deficiencies, 
reports, and pertinent written statements will be available.)
    (b) CMS reports on providers of services. Upon request in writing, 
official reports and other formal evaluations (including followup 
reviews), excluding references to internal tolerance rules and practices 
contained therein, internal working papers or other informal memoranda, 
prepared and completed after January 31, 1973, which relate to the 
performance of providers of services under Medicare: Provided, That no 
information identifying individual patients, physicians, or other 
practitioners, or other individuals shall be disclosed under this 
paragraph. Those reports and other evaluations shall be disclosed within 
30 days following the final preparation thereof by CMS during which time 
the providers of services shall be afforded a reasonable opportunity to 
offer comments, and there

[[Page 16]]

shall be disclosed with those reports and evaluations any pertinent 
written statements furnished CMS by those providers on those reports and 
evaluations.
    (c) Contractor performance review reports. Upon request in writing, 
official contractor performance review reports and other formal 
evaluations (including followup reviews), excluding references to 
internal tolerance rules and practices contained therein, internal 
working papers or other informal memoranda, prepared and completed after 
January 31, 1973, which relate to the evaluation of the performance of 
(1) intermediaries and carriers under their agreements entered into 
pursuant to sections 1816 and 1842 of the Social Security Act and (2) 
State agencies under their agreements entered into pursuant to section 
1864 of the Act (including comparative evaluations of the performance of 
those intermediaries, carriers, and State agencies). The latest Contract 
Performance Review Report pertaining to a particular intermediary or 
carrier, prepared prior to February 1, 1973, may also be disclosed to 
any person upon request in writing. Those reports and evaluations shall 
be disclosed within 30 days following their final preparation by CMS (or 
30 days following the request therefor, in the case of the contract 
performance review report prepared prior to February 1, 1973), during 
which time those intermediaries, carriers, and State agencies, as the 
case may be, shall be afforded a reasonable opportunity to offer 
comments, and there shall be disclosed with those reports and 
evaluations any pertinent written statements furnished CMS by those 
intermediaries, carriers, on State agencies or those reports and 
evaluations.
    (d) Accreditation surveys. Upon written request, CMS will release 
the accreditation survey and related information from an accreditation 
organization meeting the requirements of Sec. 488.5, Sec. 488.6 or 
Sec. 493.506 of this chapter to the extent the survey and information 
relate to an enforcement action taken (for example, denial of payment 
for new admission, civil money penalties, temporary management and 
termination) by CMS;
    (e) Upon written request, CMS will release the accreditation survey 
of any home health agency.

[46 FR 55696, Nov. 12, 1981; 46 FR 59249, Dec. 4, 1981, as amended at 58 
FR 61838, Nov. 23, 1993; 59 FR 56232, Nov. 10, 1994]



Sec. 401.134  Release of Medicare information to State and Federal agencies.

    (a) Except as provided in paragraph (b) of this section, the 
following information may be released to an officer or employee of an 
agency of the Federal or a State government lawfully charged with the 
administration of a program receiving grants-in-aid under title V and 
XIX of the Social Security Act for the purpose of administration of 
those titles, or to any officer or employee of the Department of Army, 
Department of Defense, solely for the administration of its Civilian 
Health and Medical Program of the Uniformed Services (CHAMPUS):
    (1) Information, including the identification number, concerning 
charges made by physicians, other practitioners, or suppliers, and 
amounts paid under Medicare for services furnished to beneficiaries by 
such physicians, other practioners, or suppliers, to enable the agency 
to determine the proper amount of benefits payable for medical services 
performed in accordance with those programs; or
    (2) Information as to physicians or other practioners that has been 
disclosed under Sec. 401.105.
    (3) Information relating to the qualifications and certification 
status of hospitals and other health care facilities obtained in the 
process of determining whether, and certifying as to whether, 
institutions or agencies meet or continue to meet the conditions of 
participation of providers of services or whether other entities meet or 
continue to meet the conditions for coverage of services they furnish.
    (b) The release of such information shall not be authorized by a 
fiscal intermediary or carrier.
    (c) The following information may be released to any officer or 
employee of an agency of the Federal or a State government lawfully 
charged with the duty of conducting an investigation or prosecution with 
respect to possible

[[Page 17]]

fraud or abuse against a program receiving grants-in-aid under Medicaid, 
but only for the purpose of conducting such an investigation or 
prosecution, or to any officer or employee of the Department of the 
Army, Department of Defense, solely for the administration of its 
Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), 
provided that the agency has filed an agreement with CMS that the 
information will be released only to the agency's enforcement branch and 
that the agency will preserve the confidentiality of the information 
received and will not disclose that information for other than program 
purposes:
    (1) The name and address of any provider of medical services, 
organization, or other person being actively investigated for possible 
fraud in connection with Medicare, and the nature of such suspected 
fraud. An active investigation exists when there is significant evidence 
supporting an initial complaint but there is need for further 
investigation.
    (2) The name and address of any provider of medical services, 
organization, or other person found, after consultation with an 
appropriate professional association or a program review team, to have 
provided unnecessary services, or of any physician or other individual 
found to have violated the assignment agreement on at least three 
occasions.
    (3) The name and address of any provider of medical services, 
organization or other person released under paragraph (c)(1) or (2) of 
this section concerning which an active investigation is concluded with 
a finding that there is no fraud or other prosecutable offense.



Sec. 401.135  Release of Medicare information to the public.

    The following shall be made available to the public under the 
conditions specified:
    (a) Information as to amounts paid to providers and other 
organizations and facilities for services to beneficiaries under title 
XVIII of the Act: Provided, That no information identifying any 
particular beneficiaries shall be disclosed under this paragraph.
    (b) The name of any provider of services or other person furnishing 
services to Medicare beneficiaries who--
    (1) Has been found by a Federal court to have been guilty of 
submitting false claims in connection with Medicare; or
    (2) Has been found by a carrier or intermediary, after consultation 
with a professional medical association functioning external to program 
administration or, if appropriate, the State medical authority, to have 
been engaged in a pattern of furnishing services to beneficiaries which 
are substantially in excess of their medical needs; except that the name 
of any provider or other person shall not be disclosed pursuant to a 
finding under this paragraph (b)(2) of this section, unless that 
provider or other person has first been afforded a reasonable 
opportunity to offer evidence on his behalf.
    (c) Upon request in writing, cost reports submitted by providers of 
services pursuant to section 1815 of the Act to enable the Secretary to 
determine amounts due the providers.



Sec. 401.136  Requests for information or records.

    (a) A request should reasonably identify the requested record by 
brief description. Requesters who have detailed information which would 
assist in identifying the records requested are urged to provide such 
information in order to expedite the handling of the request. Envelopes 
in which written requests are submitted should be clearly identified as 
Freedom of Information requests. The request should include the fee or 
request determination of the fee. When necessary, a written request will 
be promptly forwarded to the proper office, and the requester will be 
advised of the date of the receipt and identification and address of the 
proper office.
    (b) Determinations of whether records will be released or withheld 
will be made within 10 working days from date of receipt of the request 
in the office listed in Sec. 401.128 except where CMS extends this time 
and sends notice of such extension to the requester. Such extension may 
not exceed 10 additional working days and shall apply only where the 
following unusual circumstances exist:

[[Page 18]]

    (1) The need to search for and collect the requested records from 
field facilities or other establishments that are separate from the 
office processing the requests;
    (2) The need to search for, collect, and appropriately examine a 
voluminous amount of separate and distinct records which are requested 
in a single request; or
    (3) The need for consultation, which shall be conducted with all 
practicable speed, with another agency having a substantial interest in 
the request or among two or more components of CMS having a substantial 
interest in the subject matter of the request.
    (c) If an extension is made, the requester will be notified in 
writing before the expiration of 10 working days from receipt of the 
request and will be given an explanation of why the extension was 
necessary and the date on which a determination will be made.
    (d) Authority to extend the time limit with respect to any request 
for information or records is granted to the Director, Office of Public 
Affairs, CMS and to the Director of Public Affairs in any HHS Regional 
Office. Those officers and employees of CMS who are listed in Sec. 
401.144(a) as having authority to deny requests for information from 
records maintained on individuals are granted authority to extend the 
time limit for responding to requests for information from such records.



Sec. 401.140  Fees and charges.

    (a) Statement of policy. It is CMS's policy to comply with certain 
requests for information services without charge. Except as otherwise 
determined pursuant to paragraph (c) of this section, fees will be 
charged for the following services with respect to all other requests 
for information from records which are reasonably identified by the 
requesters:
    (1) Reproduction, duplication, or copying of records;
    (2) Searches for records; and
    (3) Certification or authentication of records.
    (b) Fee schedules. The fee schedule is as follows:
    (1) Search for records. Three dollars per hour: Provided, however, 
That no charge will be made for the first half hour.
    (2) Reproduction, duplication, or copying of records. Ten cents per 
page where such reproduction can be made by commonly available 
photocopying machines. The cost of reproducing records which cannot be 
so photocopied will be determined on an individual basis at actual cost.
    (3) Certification or authentication of records. Three dollars per 
certification or authentication.
    (4) Forwarding materials to destination. Any special arrangements 
for forwarding which are requested shall be charged at actual cost; 
however, no charge will be made for postage.
    (5) No charge will be made when the total amount does not exceed 
five dollars.
    (c) Waiver or reduction of fees. Waiver or reduction of the fees in 
paragraph (b) of this section may be made upon a determination that such 
waiver or reduction is in the public interest because furnishing the 
information can be considered as primarily benefiting the general 
public. Such determination may be made by the appropriate officer or 
employee identified in Sec. 401.144.
    (d) Sale of documents. On occasion, a previously printed document 
may be available for sale to the public; the cost of supplying the 
document is one cent per page unless the document is available for sale 
from the Superintendent of Documents, in which case the price shall be 
that determined by the Superintendent.



Sec. 401.144  Denial of requests.

    (a) General authority. Only the Director, Office of Public Affairs, 
CMS, and the Regional Directors of Public Affairs, HHS, are authorized 
to deny written requests to obtain, inspect or copy any CMS information 
or record.
    (b) Forms of denials. (1) Oral requests may be dealt with orally, 
but the requester should be advised that the oral response is not an 
official determination and that an official determination may be 
obtained only by submitting the request in writing. Appropriate 
available assistance will be offered.
    (2) Written Requests--Denials of written requests will be in writing 
and will contain the reasons for the denial

[[Page 19]]

including, as appropriate, a statement that a document requested is 
nonexistent or not reasonably described or is subject to one or more 
clearly described exemption(s). Denials will also provide the requester 
with appropriate information on how to exercise the right of appeal.



Sec. 401.148  Administrative review.

    (a) Review by the Administrator. A person whose request has been 
denied may initiate a review by filing a request for review with the 
Administrator of CMS, 700 East High Rise Building, 6401 Security 
Boulevard, Baltimore, Maryland 21235, within 30 days of receipt of the 
determination to deny or within 30 days of receipt of records which are 
in partial response to his request if a portion of a request is granted 
and a portion denied, whichever is later. Upon receipt of a timely 
request for review, the Administrator will review the decision in 
question and the findings upon which it was based. Upon the basis of the 
data considered in connection with the decision and whatever other 
evidence and written argument is submitted by the person requesting the 
review or which is otherwise obtained, the Administrator or his designee 
will affirm or revise in whole or in part the findings and decision in 
question. A decision to affirm the denial will be made only upon 
concurrence of the Assistant Secretary for Public Affairs, or his 
designee, after consultation with the General Counsel or his or her 
designee, and the appropriate program policy official. Written notice of 
the decision of the Administrator will be mailed to the person who 
requested the review. A written decision will be made within 20 working 
days from receipt of the request for review. Extension of the time limit 
may be granted under the circumstances listed in Sec. 401.136(b) to the 
extent that the maximum 10 days limit on extensions has not been 
exhausted on the initial determination. The decision will include the 
basis for it and will advise the requester of his right to judicial 
review.
    (b) Failure of the Administrator to comply with the time limits. 
Failure of the Administrator to comply with the time limits set forth in 
Sec. 401.136 and this section constitutes an exhaustion of the 
requester's administrative remedies.



Sec. 401.152  Court review.

    Where the Administrator upon review affirms the denial of a request 
for records, in whole or in part, the requester may seek court review in 
the district court of the United States pursuant to 5 U.S.C. 
552(a)(4)(B).

Subparts C-E [Reserved]



               Subpart F_Claims Collection and Compromise

    Source: 48 FR 39064, Aug. 29, 1983, unless otherwise noted.



Sec. 401.601  Basis and scope.

    (a) Basis. This subpart implements the following statutory 
provisions:
    (1) For CMS the Debt Collection Improvement Act of 1996 (Pub. L. 
104-134) (DCIA), 110 Stat. 1321, 1358 (April 26, 1996) (codified at 31 
U.S.C. 3711), and conforms to the regulations (31 CFR parts 900-904) 
issued jointly by the Department of the Treasury and the Department of 
Justice that generally prescribe claims collection standards and 
procedures under the DCIA for the Federal government.
    (2) Section 1893(f)(1) of the Act regarding the use of repayment 
plans.
    (b) Scope. Except as provided in paragraphs (c) through (f) of this 
section, the regulations in this subpart describe CMS's procedures and 
standards for the collection of claims in any amount, and the compromise 
of, or the suspension or termination of collection action on, all claims 
for money or property that do not exceed $100,000 or such higher amount 
as the Attorney General may from time to time prescribe, exclusive of 
interest, arising under any functions delegated to CMS by the Secretary.
    (c) Amount of claim. CMS refers all claims that exceed $100,000 or 
such higher amount as the Attorney General may from time to time 
prescribe, exclusive of interest, to the Department of Justice or the 
General Accounting Office for the compromise of claims, or the 
suspension or termination of collection action.

[[Page 20]]

    (d) Related regulations--(1) Department regulations. DHHS 
regulations applicable to CMS that generally implement the FCCA for the 
Department are located at 45 CFR part 30. These regulations apply only 
to the extent CMS regulations do not address a situation.
    (2) CMS regulations. The following regulations govern specific debt 
management situations encountered by CMS and supplement this subpart:
    (i) Claims against Medicare beneficiaries for the recovery of 
overpayments are covered in 20 CFR 404.515.
    (ii) Adjustments in Railroad Retirement or Social Security benefits 
to recover Medicare overpayments to individuals are covered in 
Sec. Sec. 405.350-405.358 of this chapter.
    (iii) Claims against providers, physicians, or other suppliers of 
services for overpayments under Medicare and for assessment of interest 
are covered in Sec. Sec. 405.377 and 405.378 of this chapter, 
respectively.
    (iv) Claims against beneficiaries for unpaid hospital insurance or 
supplementary medical insurance premiums under Medicare are covered in 
Sec. 408.110 of this chapter.
    (v) State repayment of Medicaid funds by installments is covered in 
Sec. 430.48 of this chapter.
    (e) Collection and compromise under other statutes and at common 
law. The regulations in this subpart do not--
    (1) Preclude disposition by CMS of claims under statutes, other than 
the FCCA, that provide for the collection or compromise of a claim, or 
suspension or termination of collection action.
    (2) Affect any rights that CMS may have under common law as a 
creditor.
    (f) Fraud. The regulations in this subpart do not apply to claims in 
which there is an indication of fraud, the presentation of a false 
claim, or misrepresentation on the part of a debtor or any other party 
having an interest in the claim. CMS forwards these claims to the 
Department of Justice for disposition under 4 CFR 105.1.
    (g) Enforced collection. CMS refers claims to the Department of 
Justice for enforced collection through litigation in those cases which 
cannot be compromised or on which collection action cannot be suspended 
or terminated in accordance with this subpart or the regulations issued 
jointly by the Attorney General and the Comptroller General.

[48 FR 39064, Aug. 29, 1983, as amended at 52 FR 48123, Dec. 18, 1987; 
57 FR 56998, Dec. 2, 1992; 61 FR 49271, Sept. 19, 1996; 61 FR 63748, 
Dec. 2, 1996; 73 FR 36447, June 27, 2008]



Sec. 401.603  Definitions.

    For purposes of this subpart--
    Claim means any debt owed to CMS.
    Debtor means any individual, partnership, corporation, estate, trust 
or other legal entity against which CMS has a claim.
    Extended repayment schedule means installment payments to pay back a 
debt.

[48 FR 39064, Aug. 29, 1983, as amended at 73 FR 36447, June 27, 2008]



Sec. 401.605  Omissions not a defense.

    The failure of CMS to comply with the regulations in this subpart, 
or with the related regulations listed in Sec. 401.601(d), is not 
available as a defense to a debtor against whom CMS has a claim for 
money or property.



Sec. 401.607  Claims collection.

    (a) General policy. CMS recovers amounts of claims due from debtors, 
including interest where appropriate, by--
    (1) Direct collections in lump sums or in installments; or
    (2) Offsets against monies owed to the debtor by the Federal 
government where possible.
    (b) Collection in lump sums. Whenever possible, CMS attempts to 
collect claims in full in one lump sum. However, if CMS determines that 
a debtor is unable to pay the claim in one lump sum, CMS may instead 
enter into an agreement to accept regular installment payments.
    (c) Collection in installments. Generally, CMS requires that all 
claims to be satisfied by installment payments must be liquidated in 
three years or less. If unusual circumstances exist, such as the 
possibility of debtor insolvency, an installment agreement that extends 
beyond three years may be approved.

[[Page 21]]

    (1) Debtor request. If a debtor desires to repay a claim in 
installments, the debtor must submit--
    (i) A request to CMS; and
    (ii) Any information required by CMS to make a decision regarding 
the request.
    (2) Extended repayment schedule. (i) For purposes of this paragraph 
(c)(2), the following definitions apply:
    Extreme hardship exists when a provider or supplier qualifies as 
being in ``hardship'' as defined in this paragraph and the provider's or 
supplier's request for an extended repayment schedule (ERS) is approved 
under paragraph (c)(3) of this section.
    Hardship exists when the total amount of all outstanding 
overpayments (principal and interest) not included in an approved, 
existing repayment schedule is 10 percent or greater than the total 
Medicare payments made for the cost reporting period covered by the most 
recently submitted cost report for a provider filing a cost report, or 
for the previous calendar year for a supplier or non cost-report 
provider.
    (ii) CMS or its contractor reviews a provider's or supplier's 
request for an ERS. For a provider or a supplier not paid by Medicare 
during the previous year or paid only during a portion of that year, the 
contractor or CMS will use the last 12 months of Medicare payments. If 
less than a 12-month payment history exists, the number of months 
available is annualized to equal an approximate yearly Medicare payment 
level for the provider or supplier.
    (iii) For a provider or supplier requesting an ERS, CMS or its 
contractor evaluates the request based on the definitions and 
information submitted under this paragraph (c)(2). For a provider or 
supplier whose situation does not meet the definitions in paragraph 
(c)(2)(i) of this section, CMS or its contractor evaluates the ERS 
request using the information in paragraph (c)(3) of this section in 
deciding to grant an ERS.
    (iv) CMS or its contractor is prohibited from granting an ERS to a 
provider or supplier if there is reason to suspect the provider or 
supplier may file for bankruptcy, cease to do business, discontinue 
participation in the Medicare program, or there is an indication of 
fraud or abuse committed against the Medicare program.
    (v) CMS or its contractor may grant a provider or a supplier an ERS 
of at least 6 months if repaying an overpayment within 30 days will 
constitute a ``hardship'' as defined in paragraph (c)(2)(i) of this 
section. If a provider or supplier is granted an ERS under this 
paragraph, missing one installment payment constitutes a default and the 
total balance of the overpayment will be recovered immediately.
    (vi) CMS or its contractor may grant a provider or a supplier an ERS 
of 36 months and up to 60 months if repaying an overpayment will 
constitute an ``extreme hardship'' as defined in paragraph (c)(2)(i) of 
this section.
    (3) CMS decision. CMS will determine the number, amount and 
frequency of installment payments based on the information submitted by 
the debtor and on other factors such as--
    (i) Total amount of the claim;
    (ii) Debtor's ability to pay; and
    (iii) Cost to CMS of administering an installment agreement.
    (d) Collection by offset. (1) CMS may offset, where possible, the 
amount of a claim against the amount of pay, compensation, benefits or 
other monies that a debtor is receiving or is due from the Federal 
government.
    (2) Under regulations at Sec. 405.350-405.358 of this chapter, CMS 
may initiate adjustments in program payments to which an individual is 
entitled under title II of the Act (Federal Old Age, Survivors, and 
Disability Insurance Benefits) or under the Railroad Retirement Act of 
1974 (45 U.S.C. 231) to recover Medicare overpayments.

[48 FR 39064, Aug. 29, 1983, as amended at 61 FR 49271, Sept. 19, 1996; 
61 FR 63748, Dec. 2, 1996; 73 FR 36447, June 27, 2008]



Sec. 401.613  Compromise of claims.

    (a) Amount of compromise. HFCA requires that the amount to be 
recovered through a compromise of a claim must--
    (1) Bear a reasonable relation to the amount of the claim; and
    (2) Be recoverable through enforced collection procedures.
    (b) General factors. After considering the bases for a decision to 
compromise

[[Page 22]]

a claim under paragraph (c) of this section, CMS may further consider 
factors such as--
    (1) The age and health of the debtor if the debtor is an individual;
    (2) Present and potential income of the debtor; and
    (3) Whether assets have been concealed or improperly transferred by 
the debtor.
    (c) Basis for compromise. Bases on which CMS may compromise a claim 
include the following--
    (1) Inability to pay. CMS may compromise a claim if it determines 
that the debtor, or the estate of a deceased debtor, does not have the 
present or prospective ability to pay the full amount of the claim 
within a reasonable time.
    (2) Litigative probabilities. CMS may compromise a claim if it 
determines that it would be difficult to prevail in a case before a 
court of law as a result of the legal issues involved or inability of 
the parties to agree to the facts of the case. The amount that CMS 
accepts in compromise under this provision will reflect--
    (i) The likelihood that CMS would have prevailed on the legal 
question(s) involved;
    (ii) Whether and to what extent CMS would have obtained a full or 
partial recovery of a judgment, depending on the availability of 
witnesses, or other evidentiary support for CMS's claim; and
    (iii) The amount of court costs that would be assessed to CMS.
    (3) Cost of collecting the claim. CMS may compromise a claim if it 
determines that the cost of collecting the claim does not justify the 
enforced collection of the full amount. In this case, CMS may adjust the 
amount it accepts as a compromise to allow an appropriate discount for 
the costs of collection it would have incurred but for the compromise.
    (d) Enforcement policy. CMS may compromise statutory penalties, 
forfeitures, or debts established as an aid to enforcement or to compel 
compliance, if it determines that its enforcement policy, in terms of 
deterrence and securing compliance both present and future, is 
adequately served by acceptance of the compromise amount.



Sec. 401.615  Payment of compromise amount.

    (a) Time and manner of compromise. Payment by the debtor of the 
amount that CMS has agreed to accept as a compromise in full settlement 
of a claim must be made within the time and in the manner prescribed by 
CMS. Accordingly, CMS will not settle a claim until the full payment of 
the compromise amount has been made.
    (b) Effect of failure to pay compromise amount. Failure of the 
debtor to make payment, as provided by the compromise agreement, 
reinstates the full amount of the claim, less any amounts paid prior to 
the default.
    (c) Prohibition against grace periods. CMS will not agree to 
inclusion of a provision in an installment agreement that would permit 
grace periods for payments that are late under the terms of the 
agreement.



Sec. 401.617  Suspension of collection action.

    (a) General conditions. CMS may temporarily suspend collection 
action on a claim if the following general conditions are met--
    (1) Amount of future recovery. CMS determines that future collection 
action may result in a recovery of an amount sufficient to justify 
periodic review and action on the claim by CMS during the period of 
suspension.
    (2) Statute of limitations. CMS determines that--
    (i) The applicable statute of limitations has been tolled, waived or 
has started running anew; or
    (ii) Future collections may be made by CMS through offset despite an 
applicable statute of limitations.
    (b) Basis for suspension. Bases on which CMS may suspend collection 
action on a particular claim include the following--
    (1) A debtor cannot be located; or
    (2) A debtor--
    (i) Owns no substantial equity in property;
    (ii) Is unable to make payment on CMS's claim or is unable to effect 
a compromise; and
    (iii) Has future prospects that justify retention of the claim.

[[Page 23]]

    (c) Locating debtors. CMS will make every reasonable effort to 
locate missing debtors sufficiently in advance of the bar of an 
applicable statute of limitations to permit timely filing of a lawsuit 
to recover the amount of the claim.
    (d) Effect of suspension on liquidation of security. CMS will 
liquidate security, obtained in partial recovery of a claim, despite a 
decision under this section to suspend collection action against the 
debtor for the remainder of the claim.



Sec. 401.621  Termination of collection action.

    (a) General factors. After considering the bases for a decision to 
terminate collection action under paragraph (b) of this section, CMS may 
further consider factors such as--
    (1) The age and health of the debtor if the debtor is an individual;
    (2) Present and potential income of the debtor; and
    (3) Whether assets have been concealed or improperly transferred by 
the debtor.
    (b) Basis for termination of collection action. Bases on which CMS 
may terminate collection action on a claim include the following--
    (1) Inability to collect a substantial amount of the claim. CMS may 
terminate collection action if it determines that it is unable to 
collect, or to enforce collection, of a significant amount of the claim. 
In making this determination, CMS will consider factors such as--
    (i) Judicial remedies available;
    (ii) The debtor's future financial prospects; and
    (iii) Exemptions available to the debtor under State or Federal law.
    (2) Inability to locate debtor. In cases involving missing debtors, 
CMS may terminate collection action if--
    (i) There is no security remaining to be liquidated;
    (ii) The applicable statute of limitations has run; or
    (iii) The prospects of collecting by offset, whether or not an 
applicable statute of limitations has run, are considered by CMS to be 
too remote to justify retention of the claim.
    (3) Cost of collection exceeds recovery. CMS may terminate 
collection action if it determines that the cost of further collection 
action will exceed the amount recoverable.
    (4) Legal insufficiency. CMS may terminate collection action if it 
determines that the claim is legally without merit.
    (5) Evidence unavailable. CMS may terminate collection action if--
    (i) Efforts to obtain voluntary payment are unsuccessful; and
    (ii) Evidence or witnesses necessary to prove the claim are 
unavailable.



Sec. 401.623  Joint and several liability.

    (a) Collection action. CMS will liquidate claims as quickly as 
possible. In cases of joint and several liability among two or more 
debtors, CMS will not allocate the burden of claims payment among the 
debtors. CMS will proceed with collection action against one debtor even 
if other liable debtors have not paid their proportionate shares.
    (b) Compromise. Compromise with one debtor does not release a claim 
against remaining debtors. Furthermore, CMS will not consider the amount 
of a compromise with one debtor to be a binding precedent concerning the 
amounts due from other debtors who are jointly and severally liable on 
the claim.



Sec. 401.625  Effect of CMS claims collection decisions on appeals.

    Any action taken under this subpart regarding the compromise of a 
claim, or suspension or termination of collection action on a claim, is 
not an initial determination for purposes of CMS appeal procedures.



PART 402_CIVIL MONEY PENALTIES, ASSESSMENTS, AND EXCLUSIONS--Table of Contents




                      Subpart A_General Provisions

Sec.
402.1 Basis and scope.
402.3 Definitions.
402.5 Right to a hearing before the final determination.
402.7 Notice of proposed determination.
402.9 Failure to request a hearing.
402.11 Notice to other agencies and other entities.
402.13 Penalty, assessment, and exclusion not exclusive.
402.15 Collateral estoppel.
402.17 Settlement.

[[Page 24]]

402.19 Hearings and appeals.
402.21 Judicial review.

             Subpart B_Civil Money Penalties and Assessments

402.105 Amount of penalty.
402.107 Amount of assessment.
402.109 Statistical sampling.
402.111 Factors considered determinations regarding the amount of 
          penalties and assessments.
402.113 When a penalty and assessment are collectible.
402.115 Collection of penalty or assessment.

                          Subpart C_Exclusions

402.200 Basis and purpose.
402.205 Length of exclusion.
402.208 Factors considered in determining whether to exclude, and the 
          length of exclusion.
402.209 Scope and effect of exclusion.
402.210 Notices.
402.212 Response to notice of proposed determination to exclude.
402.214 Appeal of exclusion.
402.300 Request for reinstatement.
402.302 Basis for reinstatement.
402.304 Approval of request for reinstatement.
402.306 Denial of request for reinstatement.
402.308 Waivers of exclusions.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).

    Source: 63 FR 68690, Dec. 14, 1998, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 402.1  Basis and scope.

    (a) Basis. This part is based on the sections of the Act that are 
specified in paragraph (c) of this section.
    (b) Scope. This part--
    (1) Provides for the imposition of civil money penalties, 
assessments, and exclusions against persons that violate the provisions 
of the Act specified in paragraph (c), (d), or (e) of this section; and
    (2) Sets forth the appeal rights of persons subject to penalties, 
assessments, or exclusion and the procedures for reinstatement following 
exclusion.
    (c) Civil money penalties. CMS or OIG may impose civil money 
penalties against any person or other entity specified in paragraphs 
(c)(1) through (c)(33) of this section under the identified section of 
the Act. (The authorities that also permit imposition of an assessment 
or exclusion are noted in the applicable paragraphs.)
    (1) Sections 1833(h)(5)(D) and 1842(j)(2)--Any person that knowingly 
and willfully, and on a repeated basis, bills for a clinical diagnostic 
laboratory test, other than on an assignment-related basis. This 
provision includes tests performed in a physician's office but excludes 
tests performed in a rural health clinic. (This violation may also 
include an assessment and cause exclusion.)
    (2) Section 1833(i)(6)--Any person that knowingly and willfully 
presents, or causes to be presented, a bill or request for payment for 
an intraocular lens inserted during or after cataract surgery for which 
the Medicare payment rate includes the cost of acquiring the class of 
lens involved.
    (3) Section 1833(q)(2)(B)--Any entity that knowingly and willfully 
fails to provide information about a referring physician, including the 
physician's name and unique physician identification number for the 
referring physician, when seeking payment on an unassigned basis. (This 
violation, if it occurs in repeated cases, may also cause an exclusion.)
    (4) Sections 1834(a)(11)(A) and 1842(j)(2)--Any durable medical 
equipment supplier that knowingly and willfully charges for a covered 
service that is furnished on a rental basis after the rental payments 
may no longer be made (except for maintenance and servicing) as provided 
in section 1834(a)(7)(A). (This violation may also include an assessment 
and cause exclusion.)
    (5) Sections 1834(a)(18)(B) and 1842(j)(2)--Any nonparticipating 
durable medical equipment supplier that knowingly and willfully, in 
violation of section 1834(a)(18)(A), fails to make a refund to Medicare 
beneficiaries for a covered service for which payment is precluded due 
to an unsolicited telephone contact from the supplier. (This violation 
may also include an assessment and cause exclusion.)
    (6) Sections 1834(b)(5)(C) and 1842(j)(2)--Any nonparticipating 
physician or supplier that knowingly and willfully charges a Medicare 
beneficiary more than the limiting charge, as specified in section 
1834(b)(5)(B), for

[[Page 25]]

radiologist services. (This violation may also include an assessment and 
cause exclusion.)
    (7) Sections 1834(c)(4)(C) and 1842(j)(2)--Any nonparticipating 
physician or supplier that knowingly and willfully charges a Medicare 
beneficiary more than the limiting charge, as specified in section 
1834(c)(4)(B), for mammography screening. (This violation may also 
include an assessment and cause exclusion.)
    (8) Sections 1834(h)(3) and 1842(j)(2)--Any supplier of prosthetic 
devices, orthotics, and prosthetics that knowingly and willfully charges 
for a covered prosthetic device, orthotic, or prosthetic that is 
furnished on a rental basis after the rental payment may no longer be 
made (except for maintenance and servicing). (This violation may also 
include an assessment and cause exclusion.)
    (9) Section 1834(j)(2)(A)(iii)--Any supplier of durable medical 
equipment, including a supplier of prosthetic devices, prosthetics, 
orthotics, or supplies, that knowingly and willfully distributes a 
certificate of medical necessity in violation of section 
1834(j)(2)(A)(i) or fails to provide the information required under 
section 1834(j)(2)(A)(ii).
    (10) Sections 1834(j)(4) and 1842(j)(2)--
    (i) Any supplier of durable medical equipment, including a supplier 
of prosthetic devices, prosthetics, orthotics, or supplies, that 
knowingly and willfully fails to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assignment-
related basis if--
    (A) The supplier does not possess a Medicare supplier number;
    (B) The service is denied in advance under section 1834(a)(15); or
    (C) The service is determined not to be medically necessary or 
reasonable.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (11) Sections 1842(b)(18)(B) and 1842(j)(2)--Any practitioner 
specified in section 1842(b)(18)(C) (physician assistants, nurse 
practitioners, clinical nurse specialists, certified registered nurse 
anesthetists, certified nurse-midwives, clinical social workers, and 
clinical psychologists) or other person that knowingly and willfully 
bills or collects for any services by the practitioners on other than an 
assignment-related basis. (This violation may also include an assessment 
and cause exclusion.)
    (12) Sections 1842(k) and 1842(j)(2)--Any physician who knowingly 
and willfully presents, or causes to be presented, a claim or bill for 
an assistant at cataract surgery performed on or after March 1, 1987 for 
which payment may not be made because of section 1862(a)(15). (This 
violation may also include an assessment and cause exclusion.)
    (13) Sections 1842(l)(3) and 1842(j)(2)--Any nonparticipating 
physician who does not accept payment on an assignment-related basis and 
who knowingly and willfully fails to refund on a timely basis any 
amounts collected for services that are not reasonable or medically 
necessary or are of poor quality, in accordance with section 
1842(l)(1)(A). (This violation may also include an assessment and cause 
exclusion.)
    (14) Sections 1842(m)(3) and 1842(j)(2)--(i) Any nonparticipating 
physician, who does not accept payment for an elective surgical 
procedure on an assignment-related basis and whose charge is at least 
$500, who knowingly and willfully fails to--
    (A) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (B) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare 
program.
    (ii) This violation may also include an assessment and cause 
exclusion.
    (15) Sections 1842(n)(3) and 1842(j)(2)--Any physician who knowingly 
and willfully, in repeated cases, bills one or more beneficiaries, for 
purchased diagnostic tests, any amount other than the payment amount 
specified in section 1842(n)(1)(A) or section 1842(n)(1)(B). (This 
violation may also include an assessment and cause exclusion.)
    (16) Section 1842(p)(3)(A)--Any physician or practitioner who 
knowingly and willfully fails promptly to provide the appropriate 
diagnosis code or codes upon request by CMS or a carrier on any request 
for payment or bill not submitted on an assignment-related

[[Page 26]]

basis for any service furnished by the physician. (This violation, if it 
occurs in repeated cases, may also cause exclusion.)
    (17) Sections 1848(g)(1)(B) and 1842(j)(2)--
    (i) Any nonparticipating physician, supplier, or other person that 
furnishes physicians' services and does not accept payment on an 
assignment-related basis, that--
    (A) Knowingly and willfully bills or collects in excess of the 
limiting charge (as defined in section 1848(g)(2)) on a repeated basis; 
or
    (B) Fails to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A)(iii) or (iv).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (18) Section 1848(g)(3)(B) and 1842(j)(2)--Any person that knowingly 
and willfully bills for State plan approved physicians' services, as 
defined in section 1848(j)(3), on other than an assignment-related basis 
for a Medicare beneficiary who is also eligible for Medicaid (these 
individuals include qualified Medicare beneficiaries). This provision 
applies to services furnished on or after April 1, 1990. (This violation 
may also include an assessment and cause exclusion.)
    (19) Section 1848(g)(4)(B)(ii), 1842(p)(3), and 1842(j)(2)(A)--
    (i) Any physician, supplier, or other person (except any person that 
has been excluded from the Medicare program) that, for services 
furnished after September 1, 1990, knowingly and willfully--
    (A) Fails to submit a claim on a standard claim form for services 
provided for which payment is made under Part B on a reasonable charge 
or fee schedule basis; or
    (B) Imposes a charge for completing and submitting the standard 
claims form.
    (ii) These violations, if they occur in repeated cases, may also 
cause exclusion.
    (20) Section 1862(b)(5)(C)--Any employer (other than a Federal or 
other governmental agency) that, before October 1, 1998, willfully or 
repeatedly fails to provide timely and accurate information requested 
relating to an employee's group health insurance coverage.
    (21) Section 1862(b)(6)(B)--Any entity that knowingly, willfully, 
and repeatedly--
    (i) Fails to complete a claim form relating to the availability of 
other health benefit plans in accordance with section 1862(b)(6)(A); or
    (ii) Provides inaccurate information relating to the availability of 
other health benefit plans on the claim form.
    (22) Section 1877(g)(5)--Any person that fails to report information 
required by HHS under section 1877(f) concerning ownership, investment, 
and compensation arrangements. (This violation may also include an 
assessment and cause exclusion.)
    (23) Sections 1879(h), 1834(a)(18), and 1842(j)(2)--
    (i) Any durable medical equipment supplier, including a supplier of 
prosthetic devices, prosthetics, orthotics, or supplies, that knowingly 
and willfully fails to make refunds in a timely manner to Medicare 
beneficiaries for services billed on an assignment-related basis if--
    (A) The supplier did not possess a Medicare supplier number;
    (B) The service is denied in advance under section 1834(a)(15) of 
the Act; or
    (C) The service is determined not to be payable under section 
1834(a)(17)(b) because of unsolicited telephone contacts.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (24) Section 1882(a)(2)--Any person that issues a Medicare 
supplemental policy that has not been approved by the State regulatory 
program or does not meet Federal standards on and after the effective 
date in section 1882(p)(1)(C). (This violation may also include an 
assessment and cause exclusion.)
    (25) Section 1882(p)(8)--Any person that sells or issues Medicare 
supplemental policies, on or after July 30, 1992, that fail to conform 
to the NAIC or Federal standards established under section 1882(p). 
(This violation may also include an assessment and cause exclusion.)
    (26) Section 1882(p)(9)(C)--
    (i) Any person that sells a Medicare supplemental policy and--

[[Page 27]]

    (A) Fails to make available for sale the core group of basic 
benefits when selling other Medicare supplemental policies with 
additional benefits; or
    (B) Fails to provide the individual, before the sale of the policy, 
an outline of coverage describing the benefits provided by the policy.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (27) Section 1882(q)(5)(C)--
    (i) Any person that fails to--
    (A) Suspend a Medicare supplemental policy at the policyholder's 
request, if the policyholder applies for and is determined eligible for 
medical assistance, and the policyholder provides notice within 90 days 
of the eligibility determination; or
    (B) Automatically reinstate the policy as of the date of termination 
of medical assistance if the policyholder loses eligibility for medical 
assistance and the policyholder provides notice within 90 days of loss 
of eligibility.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (28) Section 1882(r)(6)(A)--Any person that fails to provide refunds 
or credits as required by section 1882(r)(1)(B). (This violation may 
also include an assessment and cause exclusion.)
    (29) Section 1882(s)(4)--
    (i) Any issuer of a Medicare supplemental policy that--
    (A) Does not waive any time periods applicable to preexisting 
conditions, waiting periods, elimination periods, or probationary 
periods if the time periods were already satisfied under a preceding 
Medicare supplemental policy; or
    (B) Denies a policy, conditions the issuance or effectiveness of the 
policy, or discriminates in the pricing of the policy based on health 
status or other criteria as specified in section 1882(s)(2)(A).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (30) Section 1882(t)(2)--
    (i) Any issuer of a Medicare supplemental policy that--
    (A) Fails substantially to provide medically necessary services to 
enrollees seeking the services through the issuer's network of entities;
    (B) Imposes premiums on enrollees in excess of the premiums approved 
by the State;
    (C) Acts to expel an enrollee for reasons other than nonpayment of 
premiums; or
    (D) Does not provide each enrollee at the time of enrollment with 
the specific information provided in section 1882(t)(1)(E)(i) or fails 
to obtain a written acknowledgment from the enrollee of receipt of the 
information (as required by section 1882(t)(1)(E)(ii)).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (31) Sections 1834(k)(6) and 1842(j)(2)--Any person or entity who 
knowingly and willfully bills or collects for any outpatient therapy 
services or comprehensive outpatient rehabilitation services on other 
than an assignment-related basis. (This violation may also include an 
assessment and cause exclusion.)
    (32) Sections 1834(l)(6) and 1842(j)(2)--Any supplier of ambulance 
services who knowingly and willfully bills or collects for any services 
on other than an assignment-related basis. (This violation may also 
include an assessment and cause exclusion.)
    (33) Section 1806(b)(2)(B)--Any person who knowingly and willfully 
fails to furnish a beneficiary with an itemized statement of items or 
services within 30 days of the beneficiary's request.
    (d) Assessments. CMS or OIG may impose assessments in addition to 
civil money penalties for violations of the following statutory 
sections:
    (1) Section 1833: Paragraph (h)(5)(D).
    (2) Section 1834: Paragraphs (a)(11)(A), (a)(18)(B), (b)(5)(C), 
(c)(4)(C), (h)(3), (j)(4), (k)(6), and (l)(6).
    (3) Section 1842: Paragraphs (k), (l)(3), (m)(3), and (n)(3).
    (4) Section 1848: Paragraph (g)(1)(B).
    (5) Section 1877: Paragraph (g)(5).
    (6) Section 1879: Paragraph (h).
    (7) Section 1882: Paragraphs (a)(2), (p)(8), (p)(9)(C), (q)(5)(C), 
(r)(6)(A), (s)(3), and (t)(2).
    (e) Exclusions. (1) CMS or OIG may exclude any person from 
participation in the Medicare program on the basis of any of the 
following violations of the statute:
    (i) Section 1833: Paragraphs (h)(5)(D) and, in repeated cases, 
(q)(2)(B).

[[Page 28]]

    (ii) Section 1834: Paragraphs (a)(11)(A), (a)(18)(B), (b)(5)(C), 
(c)(4)(C), (h)(3), (j)(4), (k)(6), and (l)(6).
    (iii) Section 1842: Paragraphs (b)(18)(B), (k), (l)(3), (m)(3), 
(n)(3), and, in repeated cases, (p)(3)(B).
    (iv) Section 1848: Paragraphs (g)(1)(B), (g)(3)(B), and, in repeated 
cases, (g)(4)(B)(ii).
    (v) Section 1877: Paragraph (g)(5).
    (vi) Section 1879: Paragraph (h).
    (vii) Section 1882: Paragraphs (a)(2), (p)(8), (p)(9)(C), (q)(5)(C), 
(r)(6)(A), (s)(4), and (t)(2).
    (2) CMS or OIG must exclude from participation in the Medicare 
program any of the following, under the identified section of the Act:
    (i) Section 1834(a)(17)(C)--Any supplier of durable medical 
equipment and supplies that are covered under section 1834(a)(13) that 
knowingly contacts Medicare beneficiaries by telephone regarding the 
furnishing of covered services in violation of section 1834(a)(17)(A) 
and whose conduct establishes a pattern of prohibited contacts as 
described under section 1834(a)(17)(A).
    (ii) Section 1834(h)(3)--Any supplier of prosthetic devices, 
orthotics, and prosthetics that knowingly contacts Medicare 
beneficiaries by telephone regarding the furnishing of prosthetic 
devices, orthotics, or prosthetics in the same manner as in the 
violation under section 1834(a)(17)(A) and whose conduct establishes a 
pattern of prohibited contacts in the same manner as described in 
section 1834(a)(17)(C).
    (f) Responsible persons. (1) If CMS or OIG determines that more than 
one person is responsible for any of the violations described in 
paragraph (c) or paragraph (d) of this section, it may impose a civil 
money penalty or a civil money penalty and assessment against any one of 
those persons or jointly and severally against two or more of those 
persons. However, the aggregate amount of the assessments collected may 
not exceed the amount that could be assessed if only one person were 
responsible.
    (2) A principal is liable for penalties and assessments for the 
actions of his or her agent acting within the scope of the agency.
    (g) Time limits. Neither CMS nor OIG initiates an action to impose a 
civil money penalty, assessment, or proceeding to exclude a person from 
participation in the Medicare program unless it begins the action within 
6 years from the date on which the claim was presented, the request for 
payment was made, or the incident occurred.

[63 FR 68690, Dec. 14, 1998, as amended at 66 FR 49546, Sept. 28, 2001]



Sec. 402.3  Definitions.

    For purposes of this part:
    Assessment means the amount described in Sec. 402.107 and includes 
the plural of that term.
    Assignment-related basis means that the claim submitted by a 
physician, supplier or other person is paid on the basis of an 
assignment, whereby the physician, supplier or other person agrees to 
accept the Medicare payment as payment in full for the services 
furnished to the beneficiary and is precluded from charging the 
beneficiary more than the deductible and coinsurance based upon the 
approved Medicare fee amount. Additional obligations, including 
obligations to make refunds in certain circumstances, are established at 
section 1842(b)(3) of the Act.
    Claim means an application for payment for a service for which the 
Medicare or Medicaid program may pay.
    Covered means that a service is described as reasonable and 
necessary for the diagnosis or treatment of illness or injury or to 
improve the functioning of a malformed body member. A service is not 
covered if it is specifically identified as excluded from Medicare Part 
B coverage or is not a defined Medicare Part B benefit.
    Exclusion means the temporary or permanent barring of a person or 
other entity from participation in the Medicare or State health care 
program and that services furnished or ordered by that person are not 
paid for under either program.
    General Counsel means the General Counsel of HHS or his or her 
designees.
    Initiating agency means whichever agency (CMS or the OIG) initiates 
the interaction with the person.
    Knowingly or knowingly and willfully means that a person, with 
respect to information--

[[Page 29]]

    (1) Has actual knowledge of the information;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
information; or
    (3) Acts in reckless disregard of the truth or falsity of the 
information; and
    (4) No proof of specific intent is required.
    Medicare supplemental policy means a policy guaranteeing that a 
health plan will pay a policyholder's coinsurance and deductible and 
will cover other limitations on payment imposed under title XVIII of the 
Act and will provide additional health plan or non-Medicare coverage for 
services up to a predefined benefit limit.
    NAIC stands for the National Association of Insurance Commissioners.
    Nonparticipating describes a physician, supplier, or other person 
(excluding any provider of services) that, at the time of furnishing the 
services to Medicare Part B beneficiaries, is not a participating 
physician or supplier.
    Participating describes a physician or supplier (excluding any 
provider of services) that, before the beginning of any given year, 
enters into an agreement with HHS that provides that the physician or 
supplier will accept payment under the Medicare program on an 
assignment-related basis for all services furnished to Medicare Part B 
beneficiaries.
    Penalty means the amount described in Sec. 402.105 and includes the 
plural of that term.
    Person means an individual, trust or estate, partnership, 
corporation, professional association or corporation, or other entity, 
public or private.
    Physicians' services means the following Medicare covered 
professional services:
    (1) Surgery, consultation, home, office and institutional calls, and 
other professional services performed by physicians.
    (2) Services and supplies furnished ``incident to'' a physician's 
professional services.
    (3) Outpatient physical and occupational therapy services.
    (4) Diagnostic x-ray tests and other diagnostic tests (excluding 
clinical diagnostic laboratory tests).
    (5) X-ray, radium, and radioactive isotope therapy, including 
materials and services of technicians.
    (6) Antigens prepared by a physician.
    Radiologist service means radiology services performed only by, or 
under the direction of, a physician who is certified, or eligible to be 
certified, by the American Board of Radiology or for whom radiology 
services account for at least 50 percent of the total amount of charges 
made under part B of title XVIII of the Act.
    Request for payment means an application submitted by a person to 
any person for payment for a service.
    Respondent means the person upon which CMS or OIG has imposed, or 
proposes to impose, a civil money penalty, assessment, or exclusion.
    Service includes--
    (1) Any item, device, medical supply, or service claimed to have 
been furnished to a patient and listed in an itemized claim for program 
payment; or
    (2) In the case of a claim based on costs, any entry or omission in 
a cost report, books of account or other documents supporting the claim.
    State includes the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, the Northern Mariana Islands, and the 
Trust Territory of the Pacific Islands.
    Timely basis means that the adjustment to a bill or a refund is 
considered ``on a timely basis'' if the physician, supplier, or other 
person makes the adjustment or refund to the appropriate party no later 
than 30 days after the date the physician, supplier, or other person is 
notified by the Medicare Part B contractor of the violation and the 
requirement to refund any excess collections.

[63 FR 68690, Dec. 14, 1998, as amended at 72 FR 39752, July 20, 2007]



Sec. 402.5  Right to a hearing before the final determination.

    CMS or OIG does not make a determination adverse to any person under 
this part until the person has been given a written notice and 
opportunity for the determination to be made on the record after a 
hearing at which the person is entitled to be represented by counsel, to 
present witnesses, and to

[[Page 30]]

cross-examine witnesses against the person.



Sec. 402.7  Notice of proposed determination.

    (a) If CMS or OIG proposes a penalty and, as applicable, an 
assessment, or proposes to exclude a respondent from participation in 
Medicare in accordance with this part, it sends the respondent written 
notice of its intent by certified mail, return receipt requested. The 
notice includes the following information:
    (1) Reference to the statutory basis or bases for the penalty, 
assessment, exclusion, or any combination, as applicable.
    (2)(i) A description of the claims, requests for payment, or 
incidents with respect to which the penalty, assessment, and exclusion 
are proposed; or
    (ii) If CMS or OIG is relying upon statistical sampling to project 
the number and types of claims or requests for payment and the dollar 
amount, a description of the claims and requests for payment comprising 
the sample and a brief description of the statistical sampling technique 
CMS or OIG used.
    (3) The reason why the claims, requests for payment, or incidents 
are subject to a penalty and assessment.
    (4) The amount of the proposed penalty and of any proposed 
assessment.
    (5) Any mitigating or aggravating circumstances that CMS or OIG 
considered when it determined the amount of the proposed penalty and any 
applicable assessment.
    (6) Information concerning response to the notice, including--
    (i) A specific statement of the respondent's right to a hearing; and
    (ii) A statement that failure to request a hearing within 60 days 
renders the proposed determination final and permits the imposition of 
the proposed penalty and any assessment.
    (iii) A statement that the debt may be collected through an 
administrative offset.
    (7) In the case of a respondent that has an agreement under section 
1866 of the Act, notice that imposition of an exclusion may result in 
termination of the provider's agreement in accordance with section 
1866(b)(2)(C) of the Act.



Sec. 402.9  Failure to request a hearing.

    (a) If the respondent does not request a hearing within 60 days of 
receipt of the notice of proposed determination specified in Sec. 
402.7, any civil money penalty, assessment, or exclusion becomes final 
and CMS or OIG may impose the proposed penalty, assessment, or 
exclusion, or any less severe penalty, assessment, or suspension.
    (b) CMS or OIG notifies the respondent by certified mail, return 
receipt requested, of any penalty, assessment, or exclusion that has 
been imposed and of the means by which the respondent may satisfy the 
judgment.
    (c) The respondent has no right to appeal a penalty, assessment, or 
exclusion for which he or she has not requested a hearing.



Sec. 402.11  Notice to other agencies and other entities.

    (a) Whenever a penalty, assessment, or exclusion becomes final, CMS 
or OIG notifies the following organizations and entities about the 
action and the reasons for it:
    (1) The appropriate State or local medical or professional 
association.
    (2) The appropriate quality improvement organization.
    (3) As appropriate, the State agency responsible for the 
administration of each State health care program (Medicaid, the Maternal 
and Child Health Services Block Grant Program, and the Social Services 
Block Grant Program).
    (4) The appropriate Medicare carrier or fiscal intermediary.
    (5) The appropriate State or local licensing agency or organization 
(including the Medicare and Medicaid State survey agencies).
    (6) The long-term care ombudsman.
    (b) For exclusions, CMS or OIG also notifies the public and 
specifies the effective date.



Sec. 402.13  Penalty, assessment, and exclusion not exclusive.

    Penalties, assessments, and exclusions imposed under this part are 
in addition to any other penalties prescribed by law.



Sec. 402.15  Collateral estoppel.

    (a) When a final determination that the respondent presented or 
caused to

[[Page 31]]

be presented a claim or request for payment falling within the scope of 
Sec. 402.1 has been rendered in any proceeding in which the respondent 
was a party and had an opportunity to be heard, the respondent is bound 
by that determination in any proceeding under this part.
    (b) A person who has been convicted (whether upon a verdict after 
trial or upon a plea of guilty or nolo contendere) of a Federal crime 
charging fraud or false statements is barred from denying the essential 
elements of the criminal offense if the proceedings under this part 
involve the same transactions.



Sec. 402.17  Settlement.

    CMS or OIG has exclusive authority to settle any issues or case, 
without the consent of the ALJ or the Secretary, at any time before a 
final decision by the Secretary. Thereafter, the General Counsel has the 
exclusive authority.



Sec. 402.19  Hearings and appeals.

    The hearings and appeals procedures set forth in part 1005 of 
chapter V of this title are available to any person that receives an 
adverse determination under this part. For an appeal of a civil money 
penalty, assessment, or exclusion imposed under this part, either CMS or 
OIG may represent the government in the hearing and appeals process.



Sec. 402.21  Judicial review.

    After exhausting all available administrative remedies, a respondent 
may seek judicial review of a penalty, assessment, or exclusion that has 
become final. The respondent may seek review only with respect to a 
penalty, assessment, or exclusion with respect to which the respondent 
filed an exception under Sec. 1005.21(c) of this title unless the court 
excuses the failure or neglect to urge the exception in accordance with 
section 1128A(e) of the Act because of extraordinary circumstances.



             Subpart B_Civil Money Penalties and Assessments



Sec. 402.105  Amount of penalty.

    (a) $2,000. Except as provided in paragraphs (b) through (g) of this 
section, CMS or OIG may impose a penalty of not more than $2,000 for 
each service, bill, or refusal to issue a timely refund that is subject 
to a determination under this part and for each incident involving the 
knowing, willful, and repeated failure of an entity furnishing a service 
to submit a properly completed claim form or to include on the claim 
form accurate information regarding the availability of other health 
insurance benefit plans (Sec. 402.1(c)(21)).
    (b) $1,000. CMS or OIG may impose a penalty of not more than $1,000 
for the following:
    (1) Per certificate of medical necessity knowingly and willfully 
distributed to physicians on or after December 31, 1994 that--
    (i) Contains information concerning the medical condition of the 
patient; or
    (ii) Fails to include cost information.
    (2) Per individual about whom information is requested, for willful 
or repeated failure of an employer to respond to an intermediary or 
carrier about coverage of an employee or spouse under the employer's 
group health plan (Sec. 402.1(c)(20)).
    (c) $5,000. CMS or OIG may impose a penalty of not more than $5,000 
for each violation resulting from the following:
    (1) The failure of a Medicare supplemental policy issuer, on a 
replacement policy, to waive any time periods applicable to pre-existing 
conditions, waiting periods, elimination periods, or probationary 
periods that were satisfied under a preceding policy (Sec. 
402.1(c)(29)); and
    (2) Any issuer of any Medicare supplemental policy denying a policy, 
conditioning the issuance or effectiveness of the policy, or 
discriminating in the pricing of the policy based on health status or 
other criteria as specified in section 1882(s)(2)(A). (Sec. 
402.1(c)(29)).
    (d) $10,000. (1) CMS or OIG may impose a penalty of not more than 
$10,000 for each day that reporting entity ownership arrangements is 
late (Sec. 402.1(c)(22)).

[[Page 32]]

    (2) CMS or OIG may impose a penalty of not more than $10,000 for the 
following violations that occur on or after January 1, 1997:
    (i) Knowingly and willfully, and on a repeated basis, billing for a 
clinical diagnostic laboratory test, other than on an assignment-related 
basis (Sec. 402.1(c)(1)).
    (ii) By any durable medical equipment supplier, knowingly and 
willfully charging for a covered service that is furnished on a rental 
basis after the rental payments may no longer be made (except for 
maintenance and servicing) as provided in section 1834(a)(7)(A) (Sec. 
402.1(c)(4)).
    (iii) By any durable medical equipment supplier, knowingly and 
willfully, in violation of section 1834(a)(18)(A), failing to make a 
refund to Medicare beneficiaries for a covered service for which payment 
is precluded due to an unsolicited telephone contact from the supplier 
(Sec. 402.1(c)(5)).
    (iv) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge, 
as specified in section 1834(b)(5)(B), for radiologist services (Sec. 
402.1(c)(6)).
    (v) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge, 
as specified in section 1834(c)(3), for mammography screening (Sec. 
402.1(c)(7)).
    (vi) By any supplier of prosthetic devices, orthotics, and 
prosthetics, knowingly and willfully charging for a covered prosthetic 
device, orthotic, or prosthetic that is furnished on a rental basis 
after the rental payment may no longer be made (except for maintenance 
and servicing) (Sec. 401.2(c)(8)).
    (vii) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assigned-
related basis if--
    (A) The supplier does not possess a Medicare supplier number;
    (B) The service is denied in advance; or
    (C) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(10)).
    (viii) Knowingly and willfully billing or collecting for any 
services on other than an assignment-related basis for practitioners 
specified in section 1842(b)(18)(B) (Sec. 402.1(c)(11)).
    (ix) By any physician, knowingly and willfully presenting, or 
causing to be presented, a claim or bill for an assistant at cataract 
surgery performed on or after March 1, 1987 for which payment may not be 
made because of section 1862(a)(15) (Sec. 402.1(c)(12)).
    (x) By any nonparticipating physician who does not accept payment on 
an assignment-related basis, knowingly and willfully failing to refund 
on a timely basis any amounts collected for services that are not 
reasonable or medically necessary or are of poor quality, in accordance 
with section 1842(l)(1)(A) (Sec. 402.1(c)(13)).
    (xi) By any nonparticipating physician, who does not accept payment 
for an elective surgical procedure on an assignment-related basis and 
whose charge is at least $500, knowingly and willfully failing to--
    (A) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (B) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare program 
(Sec. 402.1(c)(14)).
    (xii) By any physician, in repeated cases, knowingly and willfully 
billing one or more beneficiaries, for purchased diagnostic tests, any 
amount other than the payment amount specified in section 1842(n)(1)(A) 
or section 1842(n)(1)(B) (Sec. 402.1(c)(15)).
    (xiii) By any nonparticipating physician, supplier, or other person 
that furnishes physicians' services and does not accept payment on an 
assignment-related basis--
    (A) Knowingly and willfully billing or collecting in excess of the 
limiting charge (as defined in section 1843(g)(2)) on a repeated basis; 
or
    (B) Failing to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A)(iii) or (iv) (Sec. 402.1(c)(17)).

[[Page 33]]

    (xiv) Knowingly and willfully billing for State plan approved 
physicians' services on other than an assignment-related basis for a 
Medicare beneficiary who is also eligible for Medicaid (Sec. 
402.1(c)(18)).
    (xv) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed on an assignment-related 
basis if--
    (A) The supplier did not possess a Medicare supplier number;
    (B) The service is denied in advance; or
    (C) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(23)).
    (3) CMS or OIG may impose a penalty of not more than $10,000 for 
each violation, if a person or entity knowingly and willfully bills or 
collects for outpatient therapy or comprehensive rehabilitation services 
other than on an assignment-related basis.
    (4) CMS or OIG may impose a penalty of not more than $10,000 for 
each violation, if a person or entity knowingly and willfully bills or 
collects for outpatient ambulance services other than on an assignment-
related basis.
    (e) $15,000. CMS or OIG may impose a penalty of not more than 
$15,000 if the seller of a Medicare supplemental policy is not the 
issuer, for each violation described in paragraphs (f)(2) and (f)(3) of 
this section (Sec. 402.1 (c)(25) and (c)(26)).
    (f) $25,000. CMS or OIG may impose a penalty of not more than 
$25,000 for each of the following violations:
    (1) Issuance of a Medicare supplemental policy that has not been 
approved by an approved State regulatory program or does not meet 
Federal standards on and after the effective date in section 
1882(p)(1)(C) of the Act (Sec. 402.1(c)(23)).
    (2) Sale or issuance after July 30, 1992, of a Medicare supplemental 
policy that fails to conform with the NAIC or Federal standards 
established under section 1882(p) of the Act (Sec. 402.1(c)(25)).
    (3) Failure to make the core group of basic benefits available for 
sale when selling other Medicare supplemental plans with additional 
benefits (Sec. 402.1(c)(26)).
    (4) Failure to provide, before sale of a Medicare supplemental 
policy, an outline of coverage describing the benefits provided by the 
policy (Sec. 402.1(c)(26)).
    (5) Failure of an issuer of a policy to suspend or reinstate a 
policy, based on the policy holder's request, during entitlement to or 
upon loss of eligibility for medical assistance (Sec. 402.1(c)(27)).
    (6) Failure to provide refunds or credits for Medicare supplemental 
policies as required by section 1882(r)(1)(B) (Sec. 402.1(c)(28)).
    (7) By an issuer of a Medicare supplemental policy--
    (i) Substantial failure to provide medically necessary services to 
enrollees seeking the services through the issuer's network of entities;
    (ii) Imposition of premiums on enrollees in excess of the premiums 
approved by the State;
    (iii) Action to expel an enrollee for reasons other than nonpayment 
of premiums; or
    (iv) Failure to provide each enrollee, at the time of enrollment, 
with the specific information provided in section 1882(t)(1)(E)(i) or 
failure to obtain a written acknowledgment from the enrollee of receipt 
of the information (as required by section 1882(t)(1)(E)(ii)) (section 
1882(t)(2)).
    (g) $100. CMS or OIG may impose a penalty of not more than $100 for 
each violation if the person or entity does not furnish an itemized 
statement to a Medicare beneficiary within 30 days of the beneficiary's 
request.

[63 FR 68690, Dec. 14, 1998, as amended at 66 FR 49546, Sept. 28, 2001; 
72 FR 39752, July 20, 2007; 72 FR 46175, Aug. 17, 2007]



Sec. 402.107  Amount of assessment.

    A person subject to civil money penalties specified in Sec. 
402.1(c) may be subject, in addition, to an assessment. An assessment is 
a monetary payment in lieu of damages sustained by HHS or a State 
agency.
    (a) The assessment may not be more than twice the amount claimed for 
each service that was a basis for the civil money penalty, except for 
the violations specified in paragraph (b) of this section that occur 
before January 1, 1997.

[[Page 34]]

    (b) For the violations specified in this paragraph occurring after 
January 1, 1997, the assessment may not be more than three times the 
amount claimed for each service that was the basis for a civil money 
penalty. The violations are the following:
    (1) Knowingly and willfully billing, and on a repeated basis, for a 
clinical diagnostic laboratory test, other than on an assignment-related 
basis (Sec. 402.1(c)(1)).
    (2) By any durable medical equipment supplier, knowingly and 
willfully charging for a covered service that is furnished on a rental 
basis after the rental payments may no longer be made (except for 
maintenance and servicing) as provided in section 1834(a)(7)(A) (Sec. 
402.1(c)(4)).
    (3) By any durable medical equipment supplier, knowingly and 
willfully failing, in violation of section 1834(a)(18)(A), to make a 
refund to Medicare beneficiaries for a covered service for which payment 
is precluded due to an unsolicited telephone contact from the supplier 
(Sec. 402.1(c)(5)).
    (4) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge, 
as specified in section 1834(b)(5)(B), for radiologist services (Sec. 
402.1(c)(6)).
    (5) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge 
as specified in section 1834(c)(3), for mammography screening (Sec. 
402.1(c)(7)).
    (6) By any supplier of prosthetic devices, orthotics, and 
prosthetics, knowingly and willfully charging for a covered prosthetic 
device, orthotic, or prosthetic that is furnished on a rental basis 
after the rental payment may no longer be made (except for maintenance 
and servicing) (Sec. 401.2(c)(8)).
    (7) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assignment-
related basis if--
    (i) The supplier does not possess a Medicare supplier number;
    (ii) The service is denied in advance; or
    (iii) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(10)).
    (8) Knowingly and willfully billing or collecting for any services 
on other than an assignment-related basis for a person or entity 
specified in sections 1834(k)(6), 1834(l)(6), or 1842(b)(18)(B) (Sec. 
402.1(c)(11), (c)(31), or (c)(32)).
    (9) By any physician, knowingly and willfully presenting, or causing 
to be presented, a claim or bill for an assistant at cataract surgery 
performed on or after March 1, 1987 for which payment may not be made 
because of section 1862(a)(15) (Sec. 402.1(c)(12)).
    (10) By any nonparticipating physician who does not accept payment 
on an assignment-related basis, knowingly and willfully failing to 
refund on a timely basis any amounts collected for services that are not 
reasonable or medically necessary or are of poor quality, in accordance 
with section 1842(l)(1)(A) (Sec. 402.1(c)(13)).
    (11) By any nonparticipating physician, who does not accept payment 
for an elective surgical procedure on an assignment-related basis and 
whose charge is at least $500, knowingly and willfully failing to--
    (i) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (ii) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare program 
(Sec. 402.1(c)(14)).
    (12) By any physician, in repeated cases, knowingly and willfully 
billing one or more beneficiaries, for purchased diagnostic tests, any 
amount other than the payment amount specified in section 1842(n)(1)(A) 
or section 1842(n)(1)(B) (Sec. 402.1(c)(15)).
    (13) By any nonparticipating physician, supplier, or other person 
that furnishes physicians' services and does not accept payment on an 
assignment-related basis--
    (i) Knowingly and willfully billing or collecting in excess of the 
limiting charge (as defined in section 1843(g)(2)) on a repeated basis; 
or
    (ii) Failing to make an adjustment or refund on a timely basis as 
required by

[[Page 35]]

section 1848(g)(1)(A) (iii) or (iv) (Sec. 402.1(c)(17)).
    (14) Knowingly and willfully billing for State plan approved 
physicians' services on other than an assignment-related basis for a 
Medicare beneficiary who is also eligible for Medicaid (Sec. 
402.1(c)(18)).
    (15) By any supplier of durable medical equipment, including 
suppliers of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed on an assignment-related 
basis if--
    (i) The supplier did not possess a Medicare supplier number;
    (ii) The service is denied in advance; or
    (iii) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(23)).

[63 FR 68690, Dec. 14, 1998, as amended at 66 FR 49546, Sept. 28, 2001]



Sec. 402.109  Statistical sampling.

    (a) Purpose. CMS or OIG may introduce the results of a statistical 
sampling study to show the number and amount of claims subject to 
sanction under this part that the respondent presented or caused to be 
presented.
    (b) Prima facie evidence. The results of the statistical sampling 
study, if based upon an appropriate sampling and computed by valid 
statistical methods, constitute prima facie evidence of the number and 
amount of claims or requests for payment subject to sanction under Sec. 
402.1.
    (c) Burden of proof. Once CMS or OIG has made a prima facie case, 
the burden is on the respondent to produce evidence reasonably 
calculated to rebut the findings of the statistical sampling study. CMS 
or OIG then has the opportunity to rebut this evidence.



Sec. 402.111  Factors considered in determinations regarding the amount of 

penalties and assessments.

    (a) Basic factors. In determining the amount of any penalty or 
assessment, CMS or OIG takes into account the following:
    (1) The nature of the claim, request for payment, or information 
given and the circumstances under which it was presented or given.
    (2) The degree of culpability, history of prior offenses, and 
financial condition of the person submitting the claim or request for 
payment or giving the information.
    (3) The resources available to the person submitting the claim or 
request for payment or giving the information.
    (4) Such other matters as justice may require.
    (b) Criteria to be considered. As guidelines for taking into account 
the factors listed in paragraph (a) of this section, CMS or OIG 
considers the following circumstances:
    (1) Aggravating circumstances of the incident. An aggravating 
circumstance is any of the following:
    (i) The services or incidents were of several types, occurring over 
a lengthy period of time.
    (ii) There were many of these services or incidents or the nature 
and circumstances indicate a pattern of claims or requests for payment 
for these services or a pattern of incidents.
    (iii) The amount claimed or requested for these services was 
substantial.
    (iv) Before the incident or presentation of any claim or request for 
payment subject to imposition of a civil money penalty, the respondent 
was held liable for criminal, civil, or administrative sanctions in 
connection with a program covered by this part or any other public or 
private program of payment for medical services.
    (v) There is proof that a respondent engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to government programs or in connection with the delivery of a health 
care service. (The statute of limitations governing civil money penalty 
proceedings does not apply to proof of other wrongful conduct as an 
aggravating circumstance.)
    (2) Mitigating circumstances. The following circumstances are 
mitigating circumstances:
    (i) All the services or incidents subject to a civil money penalty 
were few in number and of the same type, occurred within a short period 
of time,

[[Page 36]]

and the total amount claimed or requested for the services was less than 
$1,000.
    (ii) The claim or request for payment for the service was the result 
of an unintentional and unrecognized error in the process of presenting 
claims or requesting payment and the respondent took corrective steps 
promptly after discovering the error.
    (iii) Imposition of the penalty or assessment without reduction 
would jeopardize the ability of the respondent to continue as a health 
care provider.
    (3) Other matters as justice may require. Other circumstances of an 
aggravating or mitigating nature are taken into account if, in the 
interests of justice, they require either a reduction of the penalty or 
assessment or an increase in order to ensure the achievement of the 
purposes of this part.
    (c) Effect of aggravating or mitigating circumstances. In 
determining the amount of the penalty and assessment to be imposed for 
every service or incident subject to a determination under Sec. 
402.1(c)--
    (1) If there are substantial or several mitigating circumstances, 
the aggregate amount of the penalty and assessment is set at an amount 
sufficiently below the maximum permitted by Sec. Sec. 402.105(a) and 
402.107 to reflect that fact.
    (2) If there are substantial or several aggravating circumstances, 
the aggregate amount of the penalty and assessment is set at an amount 
at or sufficiently close to the maximum permitted by Sec. Sec. 
402.105(a) and 402.107 to reflect that fact.
    (d)(1) The standards set forth in this section are binding, except 
to the extent that their application would result in imposition of an 
amount that would exceed limits imposed by the United States 
Constitution.
    (2) The amount imposed is not less than the approximate amount 
required to fully compensate the United States, or any State, for its 
damages and costs, tangible and intangible, including but not limited to 
the costs attributable to the investigation, prosecution, and 
administrative review of the case.
    (3) Nothing in this section limits the authority of CMS or OIG to 
settle any issue or case as provided by Sec. 402.19 or to compromise 
any penalty and assessment as provided by Sec. 402.115.



Sec. 402.113  When a penalty and assessment are collectible.

    A civil money penalty and assessment become collectible after the 
earliest of the following:
    (a) Sixty days after the respondent receives CMS's or OIG's notice 
of proposed determination under Sec. 402.7, if the respondent has not 
requested a hearing before an ALJ.
    (b) Immediately after the respondent abandons or waives his or her 
appeal right at any administrative level.
    (c) Thirty days after the respondent receives the ALJ's decision 
imposing a civil money penalty or assessment under Sec. 1005.20(d) of 
this title, if the respondent has not requested a review before the DAB.
    (d) If the DAB grants an extension of the period for requesting the 
DAB's review, the day after the extension expires if the respondent has 
not requested the review.
    (e) Immediately after the ALJ's decision denying a request for a 
stay of the effective date under Sec. 1005.22(b) of this title.
    (f) If the ALJ grants a stay under Sec. 1005.22(b) of this title, 
immediately after the judicial ruling is completed.
    (g) Sixty days after the respondent receives the DAB's decision 
imposing a civil money penalty if the respondent has not requested a 
stay of the decision under Sec. 1005.22(b) of this title.



Sec. 402.115  Collection of penalty or assessment.

    (a) Once a determination by HHS has become final, CMS is responsible 
for the collection of any penalty or assessment.
    (b) The General Counsel may compromise a penalty or assessment 
imposed under this part, after consultation with CMS or OIG, and the 
Federal government may recover the penalty or assessment in a civil 
action brought in the United States district court for the district 
where the claim was presented or where the respondent resides.
    (c) The United States or a State agency may deduct the amount of a 
penalty and assessment when finally determined, or the amount agreed 
upon

[[Page 37]]

in compromise, from any sum then or later owing to the respondent.
    (d) Matters that were raised or that could have been raised in a 
hearing before an ALJ or in an appeal under section 1128A(e) of the Act 
may not be raised as a defense in a civil action by the United States to 
collect a penalty under this part.



                          Subpart C_Exclusions

    Source: 72 FR 39752, July 20, 2007, unless otherwise noted.



Sec. 402.200  Basis and purpose.

    (a) Basis. This subpart is based on the sections of the Act that are 
specified in Sec. 402.1(e).
    (b) Purpose. This subpart--
    (1) Provides for the imposition of an exclusion from the Medicare 
and Medicaid programs (and, where applicable, other Federal health care 
programs) against persons that violate the provisions of the Act 
provided in Sec. 402.1(e) (and further described in Sec. 402.1(c)); 
and
    (2) Sets forth the appeal rights of persons subject to exclusion and 
the procedures for reinstatement following exclusion.



Sec. 402.205  Length of exclusion.

    The length of exclusion from participation in Medicare, Medicaid, 
and, where applicable, other Federal health care programs, is contingent 
upon the specific violation of the Medicare statute. A full description 
of the specific violations identified in the sections of the Act are 
cross-referenced in the regulatory sections listed in the table in 
paragraph (a) of this section.
    (a) In no event will the period of exclusion exceed 5 years for 
violation of the following sections of the Act:

------------------------------------------------------------------------
                                           Code of Federal Regulations
     Social Security Act  paragraph                  section
------------------------------------------------------------------------
1833(h)(5)(D) in repeated cases........  Sec.  402.1(c)(1)
1833(q)(2)(B) in repeated cases........  Sec.  402.1(c)(3)
1834(a)(11)(A).........................  Sec.  402.1(c)(4)
1834(a)(18)(B).........................  Sec.  402.1(c)(5)
1834(b)(5)(C)..........................  Sec.  402.1(c)(6)
1834(c)(4)(C)..........................  Sec.  402.1(c)(7)
1834(h)(3).............................  Sec.  402.1(c)(8)
1834(j)(4).............................  Sec.  402.1(c)(10)
1834(k)(6).............................  Sec.  402.1(c)(31)
1834(l)(6).............................  Sec.  402.1(c)(32)
1842(b)(18)(B).........................  Sec.  402.1(c)(11)
1842(k)................................  Sec.  402.1(c)(12)
1842(l)(3).............................  Sec.  402.1(c)(13)
1842(m)(3).............................  Sec.  402.1(c)(14)
1842(n)(3).............................  Sec.  402.1(c)(15)
1842(p)(3)(B) in repeated cases........  Sec.  402.1(c)(16)
1848(g)(1)(B) in repeated cases........  Sec.  402.1(c)(17)
1848(g)(3)(B)..........................  Sec.  402.1(c)(18)
1848(g)(4)(B)(ii) in repeated cases....  Sec.  402.1(c)(19)
1879(h)................................  Sec.  402.1(c)(23)
------------------------------------------------------------------------

    (b) For violation of the following sections, there is no maximum 
time limit for the period of exclusion.

------------------------------------------------------------------------
                                           Code of Federal Regulations
     Social Security Act  paragraph                  section
------------------------------------------------------------------------
1834(a)(17)(c) for a pattern of          Sec.  402.1(e)(2)(i)
 contacts.
1834(h)(3) for a pattern of contacts...  Sec.  402.1(e)(2)(ii)
1877(g)(5).............................  Sec.  402.1(c)(22)
1882(a)(2).............................  Sec.  402.1(c)(24)
1882(p)(8).............................  Sec.  402.1(c)(25)
1882(p)(9)(C)..........................  Sec.  402.1(c)(26)
1882(q)(5)(C)..........................  Sec.  402.1(c)(27)
1882(r)(6)(A)..........................  Sec.  402.1(c)(28)
1882(s)(4).............................  Sec.  402.1(c)(29)
1882(t)(2).............................  Sec.  402.1(c)(30)
------------------------------------------------------------------------

    (c) For a person excluded under any of the grounds specified in 
paragraph (a) of this section, notwithstanding any other requirements in 
this section, reinstatement occurs--
    (1) At the expiration of the period of exclusion, if the exclusion 
was imposed for a period of 5 years; or
    (2) At the expiration of 5 years from the effective date of the 
exclusion, if the exclusion was imposed for a period of less than 5 
years and the initiating agency did not receive the appropriate written 
request for reinstatement as specified in Sec. 402.300.



Sec. 402.208  Factors considered in determining whether to exclude, and the 

length of exclusion.

    (a) General factors. In determining whether to exclude a person and 
the length of exclusion, the initiating agency considers the following:
    (1) The nature of the claims and the circumstances under which they 
were presented.
    (2) The degree of culpability, the history of prior offenses, and 
the financial condition of the person presenting the claims.
    (3) The total number of acts in which the violation occurred.

[[Page 38]]

    (4) The dollar amount at issue (Medicare Trust Fund dollars or 
beneficiary out-of-pocket expenses).
    (5) The prior history of the person insofar as its willingness or 
refusal to comply with requests to correct said violations.
    (6) Any other facts bearing on the nature and seriousness of the 
person's misconduct.
    (7) Any other matters that justice may require.
    (b) Criteria to be considered. As a guideline for taking into 
account the general factors listed in paragraph (a) of this section, the 
initiating agency may consider any one or more of the circumstances 
listed in paragraphs (b)(1) and (b)(2) of this section, as applicable. 
The respondent, in his or her written response to the notice of intent 
to exclude (that is, the proposed exclusion), may provide information 
concerning potential mitigating circumstances.
    (1) Aggravating circumstances. An aggravating circumstance may be 
any of the following:
    (i) The services or incidents were of several types and occurred 
over an extended period of time.
    (ii) There were numerous services or incidents, or the nature and 
circumstances indicate a pattern of claims or requests for payment or a 
pattern of incidents, or whether a specific segment of the population 
was targeted.
    (iii) Whether the person was held liable for criminal, civil, or 
administrative sanctions in connection with a program covered by this 
part or any other public or private program of payment for health care 
items or services at any time before the incident or whether the person 
presented any claim or made any request for payment that included an 
item or service subject to a determination under Sec. 402.1.
    (iv) There is proof that the person engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to government programs and in connection with the delivery of a health 
care item or service. The statute of limitations governing civil money 
penalty proceedings at section 1128A(c)(1) of the Act does not apply to 
proof of other wrongful conducts as an aggravating circumstance.
    (v) The wrongful conduct had an adverse impact on the financial 
integrity of the Medicare program or its beneficiaries.
    (vi) The person was the subject of an adverse action by any other 
Federal, State, or local government agency or board, and the adverse 
action is based on the same set of circumstances that serves as a basis 
for the imposition of the exclusion.
    (vii) The noncompliance resulted in a financial loss to the Medicare 
program of at least $5,000.
    (viii) The number of instances for which full, accurate, and 
complete disclosure was not made as required, or provided as requested, 
and the significance of the undisclosed information.
    (2) Mitigating circumstances. A mitigating circumstance may be any 
of the following:
    (i) All incidents of noncompliance were few in nature and of the 
same type, occurred within a short period of time, and the total amount 
claimed or requested for the items or services provided was less than 
$1,500.
    (ii) The claim(s) or request(s) for payment for the item(s) or 
service(s) provided by the person were the result of an unintentional 
and unrecognized error in the person's process for presenting claims or 
requesting payment, and the person took corrective steps promptly after 
the error was discovered.
    (iii) Previous cooperation with a law enforcement or regulatory 
entity resulted in convictions, exclusions, investigations, reports for 
weaknesses, or civil money penalties against other persons.
    (iv) Alternative sources of the type of health care items or 
services furnished by the person are not available to the Medicare 
population in the person's immediate area.
    (v) The person took corrective action promptly upon learning of the 
noncompliance from the person's employee or contractor, or by the 
Medicare contractor.
    (vi) The person had a documented mental, emotional, or physical 
condition before or during the commission of

[[Page 39]]

the noncompliant act(s) and that condition reduces the person's 
culpability for the acts in question.
    (vii) The completeness and timeliness of refunding to the Medicare 
Trust Fund or Medicare beneficiaries any inappropriate payments.
    (viii) The degree of culpability of the person in failing to provide 
timely and complete refunds.
    (3) Other matters as justice may require. Other circumstances of an 
aggravating or mitigating nature are taken into account if, in the 
interest of justice, those circumstances require either a reduction or 
increase in the sanction to ensure achievement for the purposes of this 
subpart.
    (4) Initiating agency authority. Nothing in this section limits the 
authority of the initiating agency to settle any issue or case as 
provided by Sec. 402.17, or to compromise any penalty and assessment as 
provided by Sec. 402.115.



Sec. 402.209  Scope and effect of exclusion.

    (a) Scope of exclusion. Under this title, persons may be excluded 
from the Medicare, Medicaid, and, where applicable, any other Federal 
health care programs.
    (b) Effect of exclusion on a person(s). (1) Unless and until an 
excluded person is reinstated into the Medicare program, no payment is 
made by Medicare, Medicaid, and, where applicable, any other Federal 
health care programs for any item or service furnished by the excluded 
person or at the direction or request of the excluded person when the 
person furnishing the item or service knew or had reason to know of the 
exclusion, on or after the effective date of the exclusion as specified 
in the notice of exclusion.
    (2) An excluded person may not take assignment of a Medicare 
beneficiary's claim on or after the effective date of the exclusion.
    (3) An excluded person that submits, or causes to be submitted, 
claims for items or services furnished during the exclusion period is 
subject to civil money penalty liability under section 1128A(a)(1)(D) of 
the Act, and criminal liability under section 1128B(a)(3) of the Act. In 
addition, submission of claims, or the causing of claims to be submitted 
for items or services furnished, ordered, or prescribed, by an excluded 
person may serve as the basis for denying reinstatement to the Medicare 
program.
    (c) Exceptions. (1) If a Medicare beneficiary or other person 
(including a supplier) submits an otherwise payable claim for items or 
services furnished by an excluded person, or under the medical direction 
or on the request of an excluded person after the effective date of the 
exclusion, CMS pays the first claim submitted by the beneficiary or 
other person and immediately notifies the claimant of the exclusion. CMS 
does not pay a beneficiary or other person (including a supplier) for 
items or services furnished by, or under, the medical direction of an 
excluded person more than 15 days after the date on the notice to the 
beneficiary or other person (including a supplier), or after the 
effective date of the exclusion, whichever is later.
    (2) Notwithstanding the other provisions of this section, payment 
may be made for certain emergency items or services furnished by an 
excluded person, or under the medical direction or on the request of an 
excluded person during the period of exclusion. To be payable, a claim 
for the emergency items or services must be accompanied by a sworn 
statement of the person furnishing the items or services, specifying the 
nature of the emergency and the reason that the items or services were 
not furnished by a person eligible to furnish or order the items or 
services. No claim for emergency items or services is payable if those 
items or services were provided by an excluded person that, through 
employment, contractual, or under any other arrangement, routinely 
provides emergency health care items or services.



Sec. 402.210  Notices.

    (a) Notice of proposed determination to exclude. When the initiating 
agency proposes to exclude a person from participation in a Federal 
health care program in accordance with this part, notice of the proposed 
determination to exclude must be given in writing, and delivered or sent 
by certified mail, return receipt requested. The written notice must 
include, at a minimum--

[[Page 40]]

    (1) Reference to the statutory basis for the exclusion.
    (2) A description of the claims, requests for payment, or incidents 
for which the exclusion is proposed.
    (3) The reason why those claims, requests for payments, or incidents 
subject the person to an exclusion.
    (4) The length of the proposed exclusion.
    (5) A description of the circumstances that were considered when 
determining the period of exclusion.
    (6) Instructions for responding to the notice, including a specific 
statement of the person's right to submit documentary evidence and a 
written response concerning whether the exclusion is warranted, and any 
related issues such as potential mitigating circumstances. The notice 
must specify that--
    (i) The person has the right to request an opportunity to meet with 
an official of the initiating agency to make an oral presentation; and
    (ii) The request to make an oral presentation must be submitted 
within 30 days of the receipt of the notice of intent to exclude.
    (7) If a person fails, within the time permitted under Sec. 
402.212, to exercise the right to respond to the notice of proposed 
determination to exclude, the initiating agency may initiate actions for 
the imposition of the exclusion.
    (b) Notice of exclusion. Once the initiating agency determines that 
the exclusion is warranted, a written notice of exclusion is sent to the 
person in the same manner as described in paragraph (a) of this section. 
The exclusion is effective 20 days from the date of the notice. The 
written notice must include, at a minimum, the following:
    (1) The basis for the exclusion.
    (2) The length of the exclusion and, when applicable, the factors 
considered in setting the length.
    (3) The effect of exclusion.
    (4) The earliest date on which the initiating agency considers a 
request for reinstatement.
    (5) The requirements and procedures for reinstatement.
    (6) The appeal rights available to the excluded person under part 
1005 of this title.
    (c) Amendment to the notice of exclusion. No later than 15 days 
before the final exhibit exchanges required under Sec. 1005.8 of this 
title, the initiating agency may amend the notice of exclusion if 
information becomes available that justifies the imposition of a period 
of exclusion other than the one proposed in the original written notice.



Sec. 402.212  Response to notice of proposed determination to exclude.

    (a) A person that receives a notice of intent to exclude (that is, 
the proposed determination) as described in Sec. 402.210, may present 
to the initiating agency a written response stating whether the proposed 
exclusion is warranted, and may present additional supportive 
documentation. The person must submit this response within 60 days of 
the receipt of notice. The initiating agency reviews the materials 
presented and initiates a response to the person regarding the argument 
presented, and any changes to the determination, if appropriate.
    (b) The person is also afforded an opportunity to make an oral 
presentation to the initiating agency concerning whether the proposed 
exclusion is warranted and any related matters. The person must submit 
this request within 30 days of the receipt of notice. Within 15 days of 
receipt of the person's request, the initiating agency initiates 
communication with the person to establish a mutually agreed upon time 
and place for the oral presentation and discussion.



Sec. 402.214  Appeal of exclusion.

    (a) The procedures in part 1005 of this title apply to all appeals 
of exclusions. References to the Inspector General in that part apply to 
the initiating agency.
    (b) A person excluded under this subpart may file a request for a 
hearing before an administrative law judge (ALJ) only on the issues of 
whether--
    (1) The basis for the imposition of the exclusion exists; and
    (2) The duration of the exclusion is unreasonable.
    (c) When the initiating agency imposes an exclusion for a period of 
1 year or less, paragraph (b)(2) of this section does not apply.

[[Page 41]]

    (d) The excluded person must file a request for a hearing within 60 
days from the receipt of notice of exclusion. The effective date of an 
exclusion is not delayed beyond the date stated in the notice of 
exclusion simply because a request for a hearing is timely filed (see 
paragraph (g) of this section).
    (e) A timely filed written request for a hearing must include--
    (1) A statement as to the specific issues or findings of fact and 
conclusions of law in the notice of exclusion with which the person 
disagrees.
    (2) Basis for the disagreement.
    (3) The general basis for the defenses that the person intends to 
assert.
    (4) Reasons why the proposed length of exclusion should be modified.
    (5) Reasons, if applicable, why the health or safety of Medicare 
beneficiaries receiving items or services does not warrant the exclusion 
going into or remaining in effect before the completion of an ALJ 
proceeding in accordance with part 1005 of this title.
    (f) If the excluded person does not file a written request for a 
hearing as provided in paragraph (d) of this section, the initiating 
agency notifies the excluded person, by certified mail, return receipt 
requested, that the exclusion goes into effect or continues in 
accordance with the notice of exclusion. The excluded person has no 
right to appeal the exclusion other than as described in this section.
    (g) If the excluded person files a written request for a hearing, 
and asserts in the request that the health or safety of Medicare 
beneficiaries does not warrant the exclusion going into or remaining in 
effect before completion of an ALJ hearing, then the initiating agency 
may make a determination as to whether the exclusion goes into effect or 
continues pending the outcome of the ALJ hearing.



Sec. 402.300  Request for reinstatement.

    (a) An excluded person may submit a written request for 
reinstatement to the initiating agency no sooner than 120 days prior to 
the terminal date of exclusion as specified in the notice of exclusion. 
The written request for reinstatement must include documentation 
demonstrating that the person has met the standards set forth in Sec. 
402.302. Obtaining or reactivating a Medicare provider number (or 
equivalent) does not constitute reinstatement.
    (b) Upon receipt of a written request for reinstatement, the 
initiating agency may require the person to furnish additional, specific 
information, and authorization to obtain information from private health 
insurers, peer review organizations, and others as necessary to 
determine whether reinstatement is granted.
    (c) Failure to submit a written request for reinstatement or to 
furnish the required information or authorization results in the 
continuation of the exclusion, unless the exclusion has been in effect 
for 5 years. In this case, reinstatement is automatic.
    (d) If a period of exclusion is reduced on appeal (regardless of 
whether further appeal is pending), the excluded person may request and 
apply for reinstatement within 120 days of the expiration of the reduced 
exclusion period. A written request for the reinstatement includes the 
same standards as noted in paragraph (b) of this section.



Sec. 402.302  Basis for reinstatement.

    (a) The initiating agency authorizes reinstatement if it determines 
that--
    (1) The period of exclusion has expired;
    (2) There are reasonable assurances that the types of actions that 
formed the basis for the original exclusion did not recur and will not 
recur; and
    (3) There is no additional basis under title XVIII of the Act that 
justifies the continuation of the exclusion.
    (b) The initiating agency does not authorize reinstatement if it 
determines that submitting claims or causing claims to be submitted or 
payments to be made by the Medicare program for items or services 
furnished, ordered, or prescribed, may serve as a basis for denying 
reinstatement. This section applies regardless of whether the excluded 
person has obtained a Medicare provider number (or equivalent), either 
as an individual or as a member of a group, before being reinstated.
    (c) In making a determination regarding reinstatement, the 
initiating agency considers the following:
    (1) Conduct of the excluded person occurring before the date of the 
notice of

[[Page 42]]

the exclusion, if that conduct was not known to the initiating agency at 
the time of the exclusion;
    (2) Conduct of the excluded person after the date of the exclusion;
    (3) Whether all fines and all debts due and owing (including 
overpayments) to any Federal, State, or local government that relate to 
Medicare, Medicaid, or, where applicable, any Federal, State, or local 
health care program are paid in full, or satisfactory arrangements are 
made to fulfill these obligations;
    (4) Whether the excluded person complies with, or has made 
satisfactory arrangements to fulfill, all of the applicable conditions 
of participation or conditions of coverage under the Medicare statutes 
and regulations; and
    (5) Whether the excluded person has, during the period of exclusion, 
submitted claims, or caused claims to be submitted or payment to be made 
by Medicare, Medicaid, and, where applicable, any other Federal health 
care program, for items or services furnished, ordered, or prescribed, 
and the conditions under which these actions occurred.
    (d) Reinstatement is not effective until the initiating agency 
grants the request and provides notices under Sec. 402.304. 
Reinstatement is effective as provided in the notice.
    (e) A determination for a denial of reinstatement is not appealable 
or reviewable except as provided in Sec. 402.306.
    (f) An ALJ may not require reinstatement of an excluded person in 
accordance with this chapter.



Sec. 402.304  Approval of request for reinstatement.

    (a) If the initiating agency grants a request for reinstatement, the 
initiating agency--
    (1) Gives written notice to the excluded person specifying the date 
of reinstatement; and
    (2) Notifies appropriate Federal and State agencies, and, to the 
extent possible, all others that were originally notified of the 
exclusion, that the person is reinstated into the Medicare program.
    (b) A determination by the initiating agency to reinstate an 
excluded person has no effect if Medicare, Medicaid, or, where 
applicable, any other Federal health care program has imposed a longer 
period of exclusion under its own authorities.



Sec. 402.306  Denial of request for reinstatement.

    (a) If a request for reinstatement is denied, the initiating agency 
provides written notice to the excluded person. Within 30 days of the 
date of this notice, the excluded person may submit to the initiating 
agency:
    (1) Documentary evidence and a written argument challenging the 
reinstatement denial; or
    (2) A written request to present written evidence or oral argument 
to an official of the initiating agency.
    (b) If a written request as described in paragraph (a)(2) of this 
section is received timely by the initiating agency, the initiating 
agency, within 15 days of receipt of the excluded person's request, 
initiates communication with the excluded person to establish a time and 
place for the requested meeting.
    (c) After evaluating any additional evidence submitted by the 
excluded person (or at the end of the 30-day period described in 
paragraph (a) of this section, if no documentary evidence or written 
request is submitted), the initiating agency sends written notice to the 
excluded person either confirming the denial, or approving the 
reinstatement in the manner set forth in Sec. 402.304. If the 
initiating agency elects to uphold its denial decision, the written 
notice also indicates that a subsequent request for reinstatement will 
not be considered until at least 1 year after the date of the written 
denial notice.
    (d) The decision to deny reinstatement is not subject to 
administrative review.



Sec. 402.308  Waivers of exclusions.

    (a) Basis. Section 1128(c)(3)(B) of the Act specifies that in the 
case of an exclusion from participation in the Medicare program based 
upon section 1128(a)(1), (a)(3), or (a)(4) of the Act, the individual 
may request that CMS present, on his or her behalf, a request to the OIG 
for a waiver of the exclusion.

[[Page 43]]

    (b) Definitions. For purposes of this section:
    Excluded person has the same meaning as a ``person'' as defined in 
Sec. 402.3 who meets for the purposes of this subpart, the definition 
of the term ``exclusion'' in Sec. 402.3.
    Hardship for purposes of this section means something that 
negatively affects Medicare beneficiaries and results from the 
imposition of an exclusion because the excluded person is the sole 
community physician or sole source of essential specialized services in 
the Medicare community.
    Sole community physician has the same meaning as that term is 
defined Sec. 1001.2 of this title.
    Sole source of essential specialized services in the community has 
the same meaning as that term defined by the Sec. 1001.2 of this title.
    (c) General rule. If CMS determines that a hardship as defined in 
paragraph (b)(2) of this section results from exclusion of an affected 
person from the Medicare program, CMS may consider and may make a 
request to the Inspector General for waiver of the Medicare exclusion.
    (d) Submission and content of a waiver of exclusion request. An 
excluded person must submit a request for waiver of exclusion in writing 
to CMS that includes the following:
    (1) A copy of the exclusion notice from the OIG.
    (2) A statement requesting that CMS present a waiver of exclusion 
request to the OIG on his or her behalf.
    (3) A statement that he or she is the sole community physician or 
sole source of essential specialized services in the community.
    (4) Documentation to support the statement in paragraph (d)(3) of 
this section.
    (e) Processing of waiver of exclusion requests. CMS processes a 
request for a waiver of exclusion as follows:
    (1) Notifies the submitter that the waiver of exclusion request has 
been received.
    (2) Reviews and validates all submitted documents.
    (3) During its analysis, CMS may require additional, specific 
information, and authorization to obtain information from private health 
insurers, peer review organizations (including, but not limited to, 
Quality Improvement Organizations), and others as necessary to determine 
validity.
    (4) Makes a determination regarding whether or not to submit the 
waiver of exclusion request to the OIG based on review and validation of 
the submitted documents.
    (5) If CMS elects to submit the waiver of exclusion request to the 
OIG, CMS copies the excluded person on the request.
    (6) If CMS denies the request, then CMS notifies the excluded person 
of the decision and specifies the reason(s) for the decision.
    (f) Administrative or judicial review. A determination rendered 
under paragraph (e)(4) of this section is not subject to administrative 
or judicial review.



PART 403_SPECIAL PROGRAMS AND PROJECTS--Table of Contents




Subpart A [Reserved]

                Subpart B_Medicare Supplemental Policies

Sec.
403.200 Basis and scope.

                           General Provisions

403.201 State regulation of insurance policies.
403.205 Medicare supplemental policy.
403.206 General standards for Medicare supplemental policies.
403.210 NAIC model standards.
403.215 Loss ratio standards.

                        State Regulatory Programs

403.220 Supplemental Health Insurance Panel.
403.222 State with an approved regulatory program.

           Voluntary Certification Program: General Provisions

403.231 Emblem.
403.232 Requirements and procedures for obtaining certification.
403.235 Review and certification of policies.
403.239 Submittal of material to retain certification.
403.245 Loss of certification.
403.248 Administrative review of CMS determinations.

[[Page 44]]

         Voluntary Certification Program: Loss Ratio Provisions

403.250 Loss ratio calculations: General provisions.
403.251 Loss ratio date and time frame provisions.
403.253 Calculation of benefits.
403.254 Calculation of premiums.
403.256 Loss ratio supporting data.
403.258 Statement of actuarial opinion.

      Subpart C_Recognition of State Reimbursement Control Systems

403.300 Basis and purpose.
403.302 Definitions.
403.304 Minimum requirements for State systems--discretionary approval.
403.306 Additional requirements for State systems--mandatory approval.
403.308 State systems under demonstration projects--mandatory approval.
403.310 Reduction in payments.
403.312 Submittal of application.
403.314 Evaluation of State systems.
403.316 Reconsideration of certain denied applications.
403.318 Approval of State systems.
403.320 CMS review and monitoring of State systems.
403.321 State systems for hospital outpatient services.
403.322 Termination of agreements for Medicare recognition of State 
          systems.

Subpart D [Reserved]

         Subpart E_Beneficiary Counseling and Assistance Grants

403.500 Basis, scope, and definition.
403.501 Eligibility for grants.
403.502 Availability of grants.
403.504 Number and size of grants.
403.508 Limitations.
403.510 Reporting requirements.
403.512 Administration.

Subpart F [Reserved]

   Subpart G_Religious Nonmedical Health Care Institutions_Benefits, 
                Conditions of Participation, and Payment

403.700 Basis and purpose.
403.702 Definitions and terms.
403.720 Conditions for coverage.
403.724 Valid election requirements.
403.730 Condition of participation: Patient rights.
403.732 Condition of participation: Quality assessment and performance 
          improvement.
403.734 Condition of participation: Food services.
403.736 Condition of participation: Discharge planning.
403.738 Condition of participation: Administration.
403.740 Condition of participation: Staffing.
403.742 Condition of participation: Physical environment.
403.744 Condition of participation: Life safety from fire.
403.746 Condition of participation: Utilization review.
403.750 Estimate of expenditures and adjustments.
403.752 Payment provisions.
403.754 Monitoring expenditure level.
403.756 Sunset provision.
403.764 Basis and purpose of religious nonmedical health care 
          institutions providing home service.
403.766 Requirements for coverage and payment of RNHCI home services.
403.768 Excluded services.
403.770 Payments for home services.

  Subpart H_Medicare Prescription Drug Discount Card and Transitional 
                           Assistance Program

403.800 Basis and scope.
403.802 Definitions.
403.804 General rules for solicitation, application and Medicare 
          endorsement period.
403.806 Sponsor requirements for eligibility for endorsement.
403.808 Use of transitional assistance funds.
403.810 Eligibility and reconsiderations.
403.811 Enrollment, disenrollment, and associated endorsed sponsor 
          requirements.
403.812 HIPAA privacy, security, administrative data standards, and 
          national identifiers.
403.813 Marketing limitations and record retention requirements.
403.814 Special rules concerning Part C organizations and Medicare cost 
          plans and their enrollees.
403.815 Special rules concerning States.
403.816 Special rules concerning long-term care and I/T/U pharmacies.
403.817 Special rules concerning the territories.
403.820 Sanctions, penalties, and termination.
403.822 Reimbursement of transitional assistance and associated sponsor 
          requirements.

    Authority: 42 U.S.C. 1395b-3 and Secs. 1102 and 1871 of the Social 
Security Act (42 U.S.C. 1302 and 1395hh).

Subpart A [Reserved]



                Subpart B_Medicare Supplemental Policies

    Source: 47 FR 32400, July 26, 1982, unless otherwise noted.

[[Page 45]]



Sec. 403.200  Basis and scope.

    (a) Provisions of the legislation. This subpart implements, in part, 
section 1882 of the Social Security Act. The intent of that section is 
to enable Medicare beneficiaries to identify Medicare supplemental 
policies that do not duplicate Medicare, and that provide adequate, 
fairly priced protection against expenses not covered by Medicare. The 
legislation establishes certain standards for Medicare supplemental 
policies and provides two methods for informing Medicare beneficiaries 
which policies meet those standards:
    (1) Through a State approved program, that is, a program that a 
Supplemental Health Insurance Panel determines to meet certain minimum 
requirements for the regulation of Medicare supplemental policies; and
    (2) In a State without an approved program, through certification by 
the Secretary of policies voluntarily submitted by insuring 
organizations for review against the standards.
    (b) Scope of subpart. This subpart sets forth the standards and 
procedures CMS will use to implement the voluntary certification 
program.

                           General Provisions



Sec. 403.201  State regulation of insurance policies.

    (a) The provisions of this subpart do not affect the right of a 
State to regulate policies marketed in that State.
    (b) Approval of a policy under the voluntary certification program, 
as provided for in Sec. 403.235(b), does not authorize the insuring 
organization to market a policy that does not conform to applicable 
State laws and regulations.



Sec. 403.205  Medicare supplemental policy.

    (a) Except as specified in paragraph (e) of this section, Medicare 
supplemental (or Medigap) policy means a health insurance policy or 
other health benefit plan that--
    (1) A private entity offers to a Medicare beneficiary; and
    (2) Is primarily designed, or is advertised, marketed, or otherwise 
purported to provide payment for expenses incurred for services and 
items that are not reimbursed under the Medicare program because of 
deductibles, coinsurance, or other limitations under Medicare.
    (b) The term policy includes both policy form and policy as 
specified in paragraphs (b)(1) and (b)(2) of this section.
    (1) Policy form. Policy form is the form of health insurance 
contract that is approved by and on file with the State agency for the 
regulation of insurance.
    (2) Policy. Policy is the contract--
    (i) Issued under the policy form; and
    (ii) Held by the policy holder.
    (c) If the policy otherwise meets the definition in this section, a 
Medicare supplemental policy includes-
    (1) An individual policy;
    (2) A group policy;
    (3) A rider attached to an individual or group policy; or
    (4) As of January 1, 2006, a stand-alone limited health benefit plan 
or policy that supplements Medicare benefits and is sold primarily to 
Medicare beneficiaries.
    (d) Any rider attached to a Medicare supplemental policy becomes an 
integral part of the basic policy.
    (e) Medicare supplemental policy does not include a Medicare 
Advantage plan, a Prescription Drug Plan under Part D, or any of the 
other types of health insurance policies or health benefit plans that 
are excluded from the definition of a Medicare supplemental policy in 
section 1882(g)(1) of the Act.

[70 FR 4525, Jan. 28, 2005]



Sec. 403.206  General standards for Medicare supplemental policies.

    (a) For purposes of the voluntary certification program described in 
this subpart, a policy must meet--
    (1) The National Association of Insurance Commissioners (NAIC) model 
standards as defined in Sec. 405.210; and
    (2) The loss ratio standards specified in Sec. 403.215.
    (b) Except as specified in paragraph (c) of this section, the 
standards specified in paragraph (a) of this section must be met in a 
single policy.
    (c) In the case of a nonprofit hospital or a medical association 
where State law prohibits the inclusion of all benefits in a single 
policy, the standards

[[Page 46]]

specified in paragraph (a) of the section must be met in two or more 
policies issued in conjunction with one another.



Sec. 403.210  NAIC model standards.

    (a) NAIC model standards means the National Association of Insurance 
Commissioners (NAIC) ``Model Regulation to Implement the Individual 
Accident and Insurance Minimum Standards Act'' (as amended and adopted 
by the NAIC on June 6, 1979, as it applies to Medicare supplemental 
policies). Copies of the NAIC model standards can be purchased from the 
National Association of Insurance Commissioners at 350 Bishops Way, 
Brookfield, Wisconsin 53004, and from the NIARS Corporation, 318 
Franklin Avenue, Minneapolis, Minnesota 55404.
    (b) The policy must comply with the provisions of the NAIC model 
standards, except as follows--
    (1) Policy, for purposes of this paragraph, means individual and 
group policy, as specified in Sec. 403.205. The NAIC model standards 
limit ``policy'' to individual policy.
    (2) The policy must meet the loss ratio standards specified in Sec. 
403.215.

[47 FR 32400, July 26, 1982; 49 FR 44472, Nov. 7, 1984]



Sec. 403.215  Loss ratio standards.

    (a) The policy must be expected to return to the policyholders, in 
the form of aggregate benefits provided under the policy--
    (1) At least 75 percent of the aggregate amount of premiums in the 
case of group policies; and
    (2) At least 60 percent of the aggregate amount of premiums in the 
case of individual policies.
    (b) For purposes of loss ratio requirements, policies issued as a 
result of solicitation of individuals through the mail or by mass media 
advertising are considered individual policies.

                        State Regulatory Programs



Sec. 403.220  Supplemental Health Insurance Panel.

    (a) Membership. The Supplemental Health Insurance Panel (Panel) 
consists of--
    (1) The Secretary or a designee, who serves as chairperson, and
    (2) Four State Commissioners or Superintendents of Insurance 
appointed by the President. (The terms Commissioner or Superintendent of 
Insurance include persons of similar rank.)
    (b) Functions. (1) The Panel determines whether or not a State 
regulatory program for Medicare supplemental health insurance policies 
meets and continues to meet minimum requirements specified in section 
1882 of the Social Security Act.
    (2) The chairperson of the Panel informs the State Commissioners and 
Superintendents of Insurance of all determinations made under paragraph 
(b)(1) of this section.



Sec. 403.222  State with an approved regulatory program.

    (a) A State has an approved regulatory program if the Panel 
determines that the State has in effect under State law a regulatory 
program that provides for the application of standards, with respect to 
each Medicare supplemental policy issued in that State, that are equal 
to or more stringent than those specified in section 1882 of the Social 
Security Act.
    (b) Policy issued in that State means--
    (1) A group policy, if the holder of the master policy resides in 
that State; and
    (2) An individual policy, if the policy is--
    (i) Issued in that State; or
    (ii) Issued for delivery in that State.
    (c) A policy issued in a State with an approved regulatory program 
is considered to meet the NAIC model standards in Sec. 403.210 and loss 
ratio standards in Sec. 403.215.

           Voluntary Certification Program: General Provisions



Sec. 403.231  Emblem.

    (a) The emblem is a graphic symbol, approved by HHS, that indicates 
that CMS has certified a policy as meeting the requirements of the 
voluntary certification program, specified in Sec. 403.232.
    (b) Unless prohibited by the State in which the policy is marketed, 
the insuring organization may display the emblem on policies certified 
under the voluntary certification program.

[[Page 47]]

    (c) The manner in which the emblem may be displayed and the 
conditions and restrictions relating to its use will be stated in the 
letter with which CMS notifies the insuring organization that a policy 
has been certified. The insuring organization must comply with these 
conditions and restrictions.
    (d) If a certified policy is issued in a State that later has an 
approved regulatory program, as provided for in Sec. 403.222, the 
insuring organization may display the emblem on the policy until the 
earliest of the following--
    (1) When prohibited by State law or regulation.
    (2) When the policy no longer meets the requirements for Medicare 
supplemental policies specified in Sec. 403.206.
    (3) The date the insuring organization would be required to submit 
material to CMS for annual review in order to retain certification, if 
the State did not have an approved program (see Sec. 403.239).



Sec. 403.232  Requirements and procedures for obtaining certification.

    (a) To be certified by CMS, a policy must meet--
    (1) The NAIC model standards specified in Sec. 403.210;
    (2) The loss ratio standards specified in Sec. 403.215; and
    (3) Any State requirements applicable to a policy--
    (i) Issued in that State; or
    (ii) Marketed in that State.
    (b) An insuring organization requesting certification of a policy 
must submit the following to CMS for review--
    (1) A copy of the policy form (including all the documents that 
would constitute the contract of insurance that is proposed to be 
marketed as a certified policy).
    (2) A copy of the application form including all attachments.
    (3) A copy of the uniform certificate issued under a group policy.
    (4) A copy of the outline of coverage, in the form prescribed by the 
NAIC model standards.
    (5) A copy of the Medicare supplement buyers' guide to be provided 
to all applicants if the buyers' guide is not the CMS/NAIC buyers' 
guide.
    (6) A statement of when and how the outline of coverage and the 
buyers' guide will be delivered and copies of applicable receipt forms.
    (7) A copy of the notice of replacement and statement as to when and 
how that notice will be delivered.
    (8) A list of States in which the policy is authorized for sale. If 
the policy was approved under a deemer provision in any State, the 
conditions involved must be specified.
    (9) A copy of the loss ratio calculations, as specified in Sec. 
403.250.
    (10) Loss ratio supporting data, as specified in Sec. 403.256.
    (11) A statement of actuarial opinion, as specified in Sec. 
403.258.
    (12) A statement that the insuring organization will notify the 
policyholders in writing, within the period of time specified in Sec. 
403.245(c), if the policy is identified as a certified policy at the 
time of sale and later loses certification.
    (13) A signed statement in which the president of the insuring 
organization, or a designee, attests that--
    (i) The policy meets the requirements specified in paragraph (a) of 
this section; and
    (ii) The information submitted to CMS for review is accurate and 
complete and does not misrepresent any material fact.



Sec. 403.235  Review and certification of policies.

    (a) CMS will review policies that the insuring organization 
voluntarily submits, except that CMS will not review a policy issued in 
a State with an approved regulatory program under Sec. 403.222.
    (b) If the requirements specified in Sec. 403.232 are met, CMS 
will--
    (1) Certify the policy; and
    (2) Authorize the insuring organization to display the emblem on the 
policy, as provided for in Sec. 403.231.
    (c) If CMS certifies a policy, it will inform all State 
Commissioners and Superintendents of Insurance of that fact.



Sec. 403.239  Submittal of material to retain certification.

    (a) CMS certification of a policy that continues to meet the 
standards will remain in effect, if the insuring organization files the 
following material with

[[Page 48]]

CMS no later than the date specified in paragraph (b) or (c) of this 
section--
    (1) Any changes in the material, specified in Sec. 403.232(b), that 
was submitted for previous certification.
    (2) The loss ratio supporting data specified in Sec. 403.256(b).
    (3) A signed statement in which the president of the insuring 
organization, or a designee, attests that--
    (i) The policy continues to meet the requirements specified in Sec. 
403.232(a); and
    (ii) The information submitted to CMS for review is accurate and 
complete and does not misrepresent any material fact.
    (b) Except as specified in paragraph (c) of this section, the 
insuring organization must file the material with CMS no later than June 
30 of each year. The first time the insuring organization must file the 
material is no later than June 30 of the calendar year that follows the 
year in which CMS--
    (1) Certifies a new policy; or
    (2) Certifies a policy that lost certification as provided in Sec. 
403.245.
    (c) If the loss ratio calculation period, used to calculate the 
expected loss ratio for the last actuarial certification submitted to 
CMS, ends before the June 30 date of paragraph (b) of this section, the 
insuring organization must file the material with CMS no later then the 
last day of that rate calculation period.



Sec. 403.245  Loss of certification.

    (a) A policy loses certification if--
    (1) The insuring organization withdraws the policy from the 
voluntary certification program; or
    (2) CMS determines that--
    (i) The policy fails to meet the requirements specified in Sec. 
403.232(a); or
    (ii) The insuring organization has failed to meet the requirements 
for submittal of material specified in Sec. 403.239.
    (b) If a policy loses its certification, CMS will inform all State 
Commissioners and Superintendents of Insurance of that fact.
    (c) If a policy that displays the emblem, or that has been marketed 
as a certified policy without the emblem, loses certification, the 
insuring organization must notify each holder of the policy, or of a 
certificate issued under the policy, of that fact. The notice must be in 
writing and sent by the earlier of--
    (1) The date of the first regular premium notice after the date the 
policy loses its certification; or
    (2) 60 days after the date the policy loses its certification.



Sec. 403.248  Administrative review of CMS determinations.

    (a) This section provides for administrative review if CMS 
determines--
    (1) Not to certify a policy; or
    (2) That a policy no longer meets the standards for certification.
    (b) If CMS makes a determination specified in paragraph (a) of this 
section, it will send a notice to the insuring organization containing 
the following information:
    (1) That CMS has made such a determination.
    (2) The reasons for the determination.
    (3) That the insuring organization has 30 days from the date of the 
notice to--
    (i) Request, in writing, an administrative review of the CMS 
determination; and
    (ii) Submit additional information to CMS for review.
    (4) That, if the insuring organization requests an administrative 
review, CMS will conduct the review, as provided for in paragraph (c) of 
this section.
    (5) That, in a case involving loss of certification, the CMS 
determination will go into effect 30 days from the date of the notice, 
unless the insuring organization requests an administrative review. If 
the insuring organization requests an administrative review, the policy 
retains its certification until CMS makes a final determination.
    (c) If the insuring organization requests an administrative review, 
CMS will conduct the review as follows--
    (1) A CMS official, not involved in the initial CMS determination, 
will initiate and complete an administrative review within 90 days of 
the date of the notice provided for in paragraph (b) of this section.
    (2) The official will consider--

[[Page 49]]

    (i) The original material submitted to CMS for review, as specified 
in Sec. 403.232(b) or Sec. 403.239(a); and
    (ii) Any additional information, that the insuring organization 
submits to CMS.
    (3) Within 15 days after the administrative review is completed, CMS 
will inform the insuring organization in writing of the final decision, 
with an explanation of the final decision.
    (4) If the final decision is that a policy lose its certification, 
the loss of certification will go into effect 15 days after the date of 
CMS's notice informing the insuring organization of the final decision.

         Voluntary Certification Program: Loss Ratio Provisions



Sec. 403.250  Loss ratio calculations: General provisions.

    (a) Basic formula. The expected loss ratio is calculated by 
determining the ratio of benefits to premiums.
    (b) Calculations. The insuring organization must calculate loss 
ratios according to the provisions of Sec. Sec. 403.251, 403.253, and 
403.254.



Sec. 403.251  Loss ratio date and time frame provisions.

    (a) Initial calculation date means the first date of the period that 
the insuring organization uses to calculate the policy's expected loss 
ratio.
    (1) The initial calculation date may be before, the same as, or 
after the date the insuring organization sends the policy to CMS for 
review, except--
    (2) The initial calculation date must not be earlier than January 1 
of the calendar year in which the policy is sent to CMS.
    (b) Loss ratio calculation period means the period beginning with 
the initial calculation date and ending with the last day of the period 
for which the insuring organization calculates the policy's scale of 
premiums.
    (c) To calculate ``present values'', the insuring organization may 
ignore discounting (an actuarial procedure that provides for the impact 
of a variety of factors, such as lapse of policies) for loss ratio 
calculation periods not exceeding 12 months.



Sec. 403.253  Calculation of benefits.

    (a) General provisions. (1) Except as provided for in paragraph 
(a)(2) of this section, calculate the amount of ``benefits'' by--
    (i) Adding the present values on the initial calculation date of--
    (A) Expected incurred benefits in the loss ratio calculation period, 
to--
    (B) The total policy reserve at the last day of the loss ratio 
calculation period: and
    (ii) Subtracting the total policy reserve on the initial calculation 
date from the sum of these values.
    (2) To calculate the amount of ``benefits'' in the case of community 
or pool rated individual or group policies rerated on an annual basis, 
calculate the expected incurred benefits in the loss ratio calculation 
period.
    (b) Calculation of total policy reserve--(1) Option for calculation. 
The insuring organization must calculate ``total policy reserve'' 
according to the provisions of paragraph (b) (2) or (3) of this section.
    (2) Total policy reserve: Federal provisions. (i) ``Total policy 
reserve'' means the sum of--
    (A) Additional reserve; and
    (B) The reserve for future contingent benefits.
    (ii) Additional reserve means the amount calculated on a net level 
reserve basis, using appropriate values to account for lapse, mortality, 
morbidity, and interest, that on the valuation date represents--
    (A) The present value of expected incurred benefits over the loss 
ratio calculation period; less--
    (B) The present value of expected net premiums over the loss ratio 
calculation period.
    (iii) Net premium means the level portion of the gross premium used 
in calculating the additional reserve. On the day the policy is issued, 
the present value of the series of those portions equals the present 
value of the expected incurred claims over the period that the gross 
premiums are computed to provide coverage.
    (iv) Reserve for future contingent benefits means the amounts, not 
elsewhere included, that provide for the extension of benefits after 
insurance coverage terminates. These benefits--

[[Page 50]]

    (A) Are predicated on a health condition existing on the date 
coverage ends;
    (B) Accrue after the date coverage ends; and
    (C) Are payable after the valuation date.
    (3) Total policy reserve: State provisions. ``Total policy reserve'' 
means the total policy reserve calculated according to appropriate State 
law or regulation.



Sec. 403.254  Calculation of premiums.

    (a) General provisions. To calculate the amount of ``premiums'', 
calculate the present value on the initial calculation date of expected 
earned premiums for the loss ratio calculation period.
    (b) Specific provisions. (1) Earned premium for a given period 
means--
    (i) Written premiums for the period; plus--
    (ii) The total premium reserve at the beginning of the period; 
less--
    (iii) The total premium reserve at the end of the period.
    (2) Written premiums in a period means--
    (i) Premiums collected in that period; plus--
    (ii) Premiums due and uncollected at the end of that period; less--
    (iii) Premiums due and uncollected at the beginning of that period.
    (3) Total premium reserve means the sum of--
    (i) The unearned premium reserve;
    (ii) The advance premium reserve; and
    (iii) The reserve for rate credits.
    (4) Unearned premium reserve means the portion of gross premiums due 
that provide for days of insurance coverage after the valuation date.
    (5) Advance premium reserve means premiums received by the insuring 
organization that are due after the valuation date.
    (6) Reserve for rate credits means rate credits on a group policy 
that--
    (i) Accrue by the valuation date of the policy; and
    (ii) Are paid or credited after the valuation date.



Sec. 403.256  Loss ratio supporting data.

    (a) For purposes of requesting CMS certification under Sec. 
403.232, the insuring organization must submit the following loss ratio 
data to CMS for review--
    (1) A statement of why the policy is to be considered, for purposes 
of the loss ratio standards, an individual or a group policy.
    (2) The earliest age at which policyholders can purchase the policy.
    (3) The general marketing method and the underwriting criteria used 
for the selection of applicants to whom coverage is offered.
    (4) What policies are to be included under the one policy form, by 
the dates the policies are issued.
    (5) The loss ratio calculation period.
    (6) The scale of premiums for the loss ratio calculation period.
    (7) The expected level of earned premiums in the loss ratio 
calculation period.
    (8) The expected level of incurred claims in the loss ratio 
calculation period.
    (9) A description of how the following assumptions were used in 
calculating the loss ratio.
    (i) Morbidity.
    (ii) Mortality.
    (iii) Lapse.
    (iv) Assumed increases in the Medicare deductible.
    (v) Impact of inflation on reimbursement per service.
    (vi) Interest.
    (vii) Expected distribution, by age and sex, of persons who will 
purchase the policy in the coming year.
    (viii) Expected impact on morbidity by policy duration of--
    (A) The process used to select insureds from among those that apply 
for a policy; and
    (B) Pre-existing condition clauses in the policy.
    (b) For purposes of requesting continued CMS certification under 
Sec. 403.239(a), the insuring organization must submit the following to 
CMS--
    (1) A description of all changes in the loss ratio data, specified 
in paragraph (a) of this section, that occurred since CMS last reviewed 
the policy.
    (2) The past loss ratio experience for the policy, including the 
experience of

[[Page 51]]

all riders and endorsements issued under the policy. The loss ratio 
experience data must include earned premiums, incurred claims, and total 
policy reserves that the insuring organization calculates--
    (i) For all years of issue combined; and
    (ii) Separately for each calendar year since CMS first certified the 
policy.



Sec. 403.258  Statement of actuarial opinion.

    (a) For purposes of certification requests submitted under Sec. 
403.232(b) and subsequent review as specified in Sec. 403.239(a), 
statement of actuarial opinion means a signed declaration in which a 
qualified actuary states that the assumptions used in calculating the 
expected loss ratio are appropriate and reasonable, taking into account 
actual policy experience, if any, and reasonable expectations.
    (b) Qualified actuary means--
    (1) A member in good standing of the American Academy of Actuaries; 
or
    (2) A person who has otherwise demonstrated his or her actuarial 
competence to the satisfaction of the Commissioner or Superintendent of 
Insurance of the domiciliary State of the insuring organization.



      Subpart C_Recognition of State Reimbursement Control Systems

    Source: 51 FR 15492, Apr. 24, 1986, unless otherwise noted.



Sec. 403.300  Basis and purpose.

    (a) Basis. This subpart implements section 1886(c) of the Act, which 
authorizes payment for Medicare inpatient hospital services in 
accordance with a State's reimbursement control system rather than under 
the Medicare reimbursement principles as described in CMS's regulations 
and instructions.
    (b) Purpose. Contained in this subpart are--
    (1) The basic requirements that a State reimbursement control system 
must meet in order to be approved by CMS;
    (2) A description of CMS's review and evaluation procedures; and
    (3) The conditions that apply if the system is approved.



Sec. 403.302  Definitions.

    For purposes of this subpart--
    Chief executive officer of a State means the Governor of the State 
or the Governor's designee.
    Existing demonstration project refers to demonstration projects 
approved by CMS under the authority of section 402(a) 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)) and in 
effect on April 20, 1983 (the date of the enactment of Pub. L. 98-21 
(Social Security Amendments of 1983)).
    Federal hospital means a hospital that is administered by, or that 
is under exclusive contract with, the Department of Defense, the 
Veterans Administration, or the Indian Health Service.
    State system or system refers to a State reimbursement control 
system that is approved by CMS under the authority of section 1886(c) of 
the Act and that satisfies the requirements described in this subpart.



Sec. 403.304  Minimum requirements for State systems--discretionary approval.

    (a) Discretionary approval by CMS. CMS may approve Medicare payments 
under a State system, if CMS determines that the system meets the 
requirements in paragraphs (b) and (c) of this section and, if 
applicable paragraph (d) of this section.
    (b) Requirements for State system. (1) An application for approval 
of the system must be submitted to CMS by the Chief Executive Officer of 
the State.
    (2) The State system must apply to substantially all non-Federal 
acute care hospitals in the State.
    (3) All hospitals covered by the system must have and maintain a 
utilization and quality control review agreement with a Quality 
Improvement Organization, as required under section 1866(a)(1)(F) of the 
Act and Sec. 466.78(a) of this chapter.
    (4) Federal hospitals must be excluded from the State system.
    (5) Nonacute care or specialty hospital (such as rehabilitation, 
psychiatric, or children's hospitals) may, at the option of the State, 
be excluded from the State system.

[[Page 52]]

    (6) The State system must apply to at least 75 percent of all 
revenues or expenses--
    (i) For inpatient hospital services in the State; and
    (ii) For inpatient hospital services under the State's Medicaid 
plan.
    (7) Under the system, HMOs and competitive medical plans (CMPs), as 
defined by section 1876(b) of the Act and part 417 of this chapter, must 
be allowed to negotiate payment rates with hospitals.
    (8) The system must limit hospital charges for Medicare 
beneficiaries to deductibles, coinsurance or non-covered services.
    (9) Unless a waiver is granted by CMS under Sec. 489.23 of this 
chapter, the system must prohibit payment, as required under section 
1862(a)(14) of the Act and Sec. 405.310(m) of this chapter, for 
nonphysician services provided to hospital inpatients under Part B of 
Medicare.
    (10) The system must require hospitals to submit Medicare cost 
reports or approved reports in lieu of Medicare cost reports as 
required.
    (11) The system must require--
    (i) Preparation, collection, or retention by the State of reports 
(such as financial, administrative, or statistical reports) that may be 
necessary, as determined by CMS, to review and monitor the State's 
assurances; and
    (ii) Submission of the reports to CMS upon request.
    (12) The system must provide hospitals an opportunity to appeal 
errors that they believe have been made in the determination of their 
payment rates. The system, if it is prospective may not permit providers 
to file administrative appeals that would result in a retroactive 
revision of prospectively determined payment rates.
    (c) Satisfactory assurances. The State must provide to CMS 
satisfactory assurance as to the following:
    (1) The system provides for equitable treatment of hospital patients 
and hospital employees.
    (2) The system provides for equitable treatment of all entities that 
pay hospitals for inpatient hospital services, including Federal and 
State programs. Under the requirement, the following conditions must be 
met:
    (i) Both the Medicare and Medicaid programs must participate under 
the system.
    (ii) The State must assure equitable and uniform treatment under the 
system of third-party payors of inpatient hospital services in terms of 
opportunity. Equitable opportunity must include, but need not be limited 
to, participation in the system and availability of discounts. Criteria 
under which discounts are made available must be equitably and uniformly 
applied to all payors, except for discounts negotiated by HMOs and CMPs. 
Discounts available to HMOs and CMPs as result of their statutory right 
to negotiate payment rates independently of a State system, as described 
in paragraph (b)(7) of this section, need not be available to other 
payors.
    (iii) The State must assure that all third-party payors that 
participate under the system share in the system's risks and benefits.
    (3) The amount of Medicare payments made under the system over 36-
month periods may not exceed the amount of Medicare payment that would 
otherwise have been made under the Medicare principles of reimbursement 
for Medicare items and services had the State system not been in effect. 
States must submit the assurance and supporting data as required by 
Sec. 403.320 to document that the payment limit is not exceeded. States 
that have an existing Medicare demonstration project in effect on April 
20, 1983, and that have requested approval of a State system under 
section 1886(c)(4) of the Act, may elect to have the effectiveness of 
the State system under this paragraph judged on the basis of the State 
system's rate of increase or inflation in Medicare inpatient hospital 
payments as compared to the national rate of increase or inflation for 
such payments during the three cost reporting periods of the hospitals 
in the State beginning on or after October 1, 1983.
    (d) Additional cost-effectiveness assurance. If the assurances and 
supporting data required under paragraph (c)(3) of this section are 
insufficient to provide assurance satisfactory to CMS regarding the 
cost-effectiveness of a State system, the State may additionally submit 
one of the following assurances

[[Page 53]]

in order to meet the cost-effectiveness test:
    (1) State responsibility for excess payments. The State must agree 
that each month Medicare intermediaries will disburse to the State's 
hospital Federal funds that in the aggregate equal no more than would 
have been disbursed in the absence of the State system. Any additional 
funds necessary to pay hospitals for Medicare services required by the 
State system will be paid to the intermediaries by the State. These 
additional amounts will be refunded to the State by the intermediaries 
to the extent that, in subsequent months, the State system requires a 
smaller aggregate payment for Medicare services than would have been 
paid in the absence of the State system.
    (2) Limitations on payments. (i) The State must agree that if its 
projections exceed what Medicare would pay in any particular period, the 
State and CMS will establish and agreed upon payment schedule that will 
limit payments under the State system based on a predetermined 
percentage relationship between projected State payments and what 
payments would have been under Medicare.
    (ii) If deviation from the predetermined relationship described in 
paragraph (d)(2)(i) of this section occurs, the State must further agree 
that--
    (A) Medicare payments would be capped automatically at payment 
levels based on the rates used for the Medicare prospective payment 
system and the State would be required to pay the difference to 
individual hospitals in its system; or
    (B) The State may provide by legislation or legally binding 
regulations that any reduced payments to hospitals under the system that 
result from this cost-effectiveness assurance will constitute full and 
final payment for hospital services furnished to Medicare beneficiaries 
for the period covered by these reduced payments.



Sec. 403.306  Additional requirements for State systems--mandatory approval.

    (a) General policy--(1) Mandatory approval. HFCA will approve an 
application for Medicare reimbursement under a State system if the 
system meets all of the requirements of Sec. 403.304 and of paragraph 
(b) of this section.
    (2) Exception. CMS may approve an application if the State system 
meets all of the requirements of Sec. 403.304 but only some of the 
requirements of paragraph (b) of this section.
    (b) Additional requirements--(1) Operation of system. The system 
must--
    (i) Be operated directly by the State or by entity designated under 
State law;
    (ii) Provide for payments to hospitals using a methodology under 
which--
    (A) Prospectively determined payment rates are established; and
    (B) Exceptions, adjustments, and methods for changes in methodology 
are set forth;
    (iii) Provide that a change by the State in the system that has the 
effect of materially changing payments to hospitals can take effect only 
upon 60 days notice to CMS and to the hospitals likely to be materially 
affected by the change and upon CMS's approval of the change.
    (2) Satisfactory assurances--(i) Admissions practice. The State must 
assure that the operation of the system will not result in any change in 
hospital admission practices that result in--
    (A) A significant reduction in the proportion of patients receiving 
hospital services covered under the system who have no third-party 
coverage and who are unable to pay for hospital services;
    (B) A significant reduction in the proportion of individuals 
admitted to hospitals for inpatient hospital services for which payment 
is less, or is likely to be less, than the anticipated charges for or 
cost of the services;
    (C) A refusal to admit patients who would be expected to require 
unusually costly or prolonged treatment for reasons other than those 
related to the appropriateness of the care available at the hospital; or
    (D) A refusal to provide emergency services to any person who is in 
need of emergency services, if the hospital provides the services.
    (ii) Consultation with local government officials. The State must 
provide documentation that it has consulted with local government 
officials concerning

[[Page 54]]

the impact of the system on publicly owned or operated hospitals.



Sec. 403.308  State systems under demonstration projects--mandatory approval.

    CMS will approve an application from a State for a State system if--
    (a) The system was in effect prior to April 20, 1983 under an 
existing demonstration project; and
    (b) The minimum requirements and assurances for approval of a State 
system are met under Sec. 403.304 (b)(1)-(10) and Sec. 403.304(c), 
and, if appropriate Sec. 403.304(d).



Sec. 403.310  Reduction in payments.

    (a) General rule. If CMS determines that the satisfactory assurances 
required of a State under Sec. 403.304(c) and, if applicable, Sec. 
403.304(d) have not been met, or will not be met, with respect to any 
36-month period, CMS will reduce Medicare payments to individual 
hospitals being reimbursed under the State's system or, if applicable, 
under the Medicare payment system, in an amount equal to the amount by 
which the Medicare payments under the system exceed the amount of 
Medicare payments to such hospitals that otherwise would have been made 
not using the State system. The amount of the recoupment will include, 
when appropriate, interest charges computed in accordance with Sec. 
405.378 of this chapter.
    (b) Recoupment procedures. The amount of the overpayment will be 
recouped on a proportionate basis from each of those hospitals that 
received payments under the State system that exceeded the payments they 
would have received under the Medicare payment system. Each hospital's 
share of the aggregate excess payment will be determined on the basis of 
a comparison of the hospital's proportionate share of the aggregate 
payment received under the State system that is in excess of what the 
aggregate payment would have been under the Medicare payment system. 
Recoupments may be accomplished by a hospital's direct payment to the 
Medicare program or by offsets to future payments made to the hospital.
    (c) Alternative recoupment procedures. As an alternative to the 
recoupment procedures described in paragraph (b) of this section and 
subject to CMS's acceptance, the State may provide, by legislation or 
legally binding regulations, procedures for the recoupment of the amount 
of payments that exceed the amount of payments that otherwise would have 
been paid by Medicare if the State system had not been in effect.
    (d) Rule for existing Medicare demonstration projects. In cases of 
existing Medicare demonstration projects where the expenditure test is 
to be applied by a rate of increase factor, the amount of the excess 
payment will be determined, for the three hospital cost reporting 
periods beginning before October 1, 1986, by a comparison of the State 
system's rate of increase to the national rate of increase. Recoupment 
of excessive payments will be assessed and recouped as described in this 
section.

[51 FR 15492, Apr. 24, 1986, as amended at 61 FR 63748, Dec. 2, 1996]



Sec. 403.312  Submittal of application.

    The Chief Executive Officer of the State is responsible for--
    (a) Submittal of the application to CMS for approval; and
    (b) Supplying the assurances and necessary documentation as required 
under Sec. Sec. 403.304 through 403.308.



Sec. 403.314  Evaluation of State systems.

    CMS will evaluate all State applications for approval of State 
systems and notify the State of its determination within 60 days.



Sec. 403.316  Reconsideration of certain denied applications.

    (a) Request for reconsideration. If CMS denies an application for a 
State system, the State may request that CMS reconsider the denial if 
the State believes that its system meets all of the requirements for 
mandatory approval under Sec. Sec. 403.304 and 403.306 or, in the case 
of a State with a system operating under an existing demonstration 
project, the applicable requirements of Sec. Sec. 403.304 and 403.308.
    (b) Time limit. (1) The State must submit its request for 
reconsideration

[[Page 55]]

within 60 days after the date of CMS's notice that the application was 
denied.
    (2) CMS will notify the State of the results of its reconsideration 
within 60 days after it receives the request for reconsideration.



Sec. 403.318  Approval of State systems.

    (a) Approval agreement. If CMS approves a State system, a written 
agreement will be executed between CMS and the Chief Executive Officer 
of the State. The agreement must incorporate any terms of the State's 
application for approval of the system as agreed to by the parties and, 
as a minimum, must contain provisions that require the following:
    (1) The system is operated directly by the State or an entity 
designated by State law.
    (2) For purposes of the Medicare program, the State's system applies 
only to Medicare payments for inpatient, and if applicable, outpatient 
hospital services.
    (3) The system conforms to applicable Medicare law and regulations 
other than those relating to the amount of reimbursement for inpatient 
hospital services, or for inpatient and outpatient services, whichever 
the State system covers. Applicable regulations include, for example, 
those describing Medicare benefits and entitlement requirements for 
program beneficiaries, as explained in parts 406 and 409 of this 
chapter; the requirements at part 405, subpart J of this chapter 
specifying conditions of participation for hospitals; the requirements 
at part 405, subparts A, G, and S of this chapter on Medicare program 
administration; and all applicable fraud and abuse regulations contained 
in titles 42 and 45 of the CFR.
    (4) The State must obtain CMS's approval of the State's reporting 
forms and of provider cost reporting forms or other forms that have not 
been approved by CMS but that are necessary for the collection of 
required information.
    (b) Effective date. An approved State system may not be effective 
earlier than the date of the approval agreement, which may not be 
retroactive.



Sec. 403.320  CMS review and monitoring of State systems.

    (a) General rule. The State must submit an assurance and detailed 
and quantitative studies of provider cost and financial data and 
projections to support the effectiveness of its system, as required by 
paragraphs (b) and (c) of this section.
    (b) Required information. (1) Under Sec. 403.304(c)(3) an assurance 
is required that the system will not result in greater payments over a 
36-month period than would have otherwise been made under Medicare not 
using such system. If a State that has an existing demonstration project 
in effect on April 20, 1983 elects under Sec. 403.304(c)(3) to have the 
effectiveness of its system judged on the basis of a rate of increase 
factor, the State must submit an assurance that its rate of increase or 
inflation in inpatient hospital payments does not exceed, for that 
portion of the 36-month period that is subject to this test, the 
national rate of increase or inflation in Medicare inpatient hospital 
payments. The election of the rate of increase test applies only to the 
three cost reporting periods beginning on or after October 1, 1983. At 
the end of these cost reporting periods, the State must assure, 
beginning with the first month after the expiration of the third cost 
reporting period beginning after October 1, 1983, that payments under 
its system will not exceed over the remainder of the 36-month period 
what Medicare payments would have been.
    (2) Estimates and data are required to support the State's 
assurance, required under Sec. 403.304(c)(3), that expenditures under 
the State system will not exceed what Medicare would have paid over a 
36-month period. The estimates and projections of what Medicare would 
have otherwise paid must take into account all the Medicare 
reimbursement principles in effect at the time and, for any period in 
which payments either exceed or are less than Medicare levels, the 
values of interest the Medicare Trust Fund earned, or would have earned, 
on these amounts. Upon application for approval, the State must submit 
projections for each hospital for the first 12-month period covered by 
the assurance, in both the

[[Page 56]]

aggregate and on a per discharge basis, of Medicare inpatient 
expenditures under Medicare principles of reimbursement and parallel 
projections of Medicare inpatient expenditures under the State's system 
and the resulting cost or savings to Medicare. The State must also 
submit separate statewide projections for each year of the 36-month 
period, in both the aggregate and on a weighted average discharge basis, 
of inpatient expenditures under the State system and under the Medicare 
principles of reimbursement.
    (3) The projection submitted under paragraph (b)(2) of this section 
must include a detailed description of the methodology and assumptions 
used to derive the expenditure amounts under both systems. In instances 
where the assumptions are different under the projections cited in 
paragraph (b)(2) of this section, the State must provide a detailed 
explanation of the reasons for the differences. At a minimum, the 
following separate data and assumptions are to be included in the 
projections for the Medicare principles and for the State's system.
    (i) The State system base year and the Medicare allowable and 
reimbursable cost of each hospital that the State used to develop the 
projections, including the amount of estimated pass through costs.
    (ii) The categories of costs that are included in the State system 
and are reimbursed differently under the State system than under the 
Medicare system.
    (iii) The number of Medicare and total base year discharges and 
admissions for each hospital.
    (iv) The rate of change factor (and the method of application of 
this factor) used to project the base year costs over the 36-month 
period to which the assurance would apply.
    (v) Any allowance for anticipated growth in the amount of services 
from the base year (if applicable, the allowance must be presented in 
separate estimates for population increases or for increases in rates of 
admissions or both).
    (vi) Any adjustment in which the State is permitted by CMS to take 
into account previous reductions in the Medicare payment amounts that 
were the result of the effectiveness of the State's system even though 
Medicare was not a part of that system.
    (vii) Appropriate recognition and projection of the time value of 
trust fund expenditures for the period the State system expenditures 
were either less than or exceeded the Medicare system payments.
    (viii) States applying under a rate of increase effectiveness test 
under Sec. 403.304(c)(3) must also submit data projecting the parallel 
rates of increase during the requisite period.
    (4) The projections must include both the aggregate payments and the 
payments per discharge for the individual hospitals and for the State as 
a whole.
    (5) On a case-by-case basis. CMS may require additional data and 
documentation as needed to complete its review and monitoring.
    (6) For existing Medicare demonstration projects in effect on April 
20, 1983, the assurance and data as required by paragraphs (a) and (b) 
of this section, if appropriate, may be based on aggregate payments or 
payments per inpatient admission or discharge. CMS will judge the 
effectiveness of these systems on the basis of the rate of increase or 
inflation in Medicare inpatient hospital payments compared to the 
national rate of increase or inflation for such payments during the 
State's hospitals' three cost reporting periods beginning on or after 
October 1, 1983. The data submitted by the State for the period subject 
to the rate of increase test must include the rate of increase 
projection for that particular period of time. For the subsequent period 
of time, the State must assure that payments under its system will not 
exceed what Medicare payments would have been, as described in Sec. 
403.304(c)(3).
    (7) If the amount of Medicare payments under the State system 
exceeds what would have been paid under the Medicare reimbursement 
principles in any given year, the State must also submit quantitative 
evidence that the system will result in expenditures that do not exceed 
what Medicare expenditures would have been over the 36 month period 
beginning with the first month that the State system is operating. For a 
State that has an existing demonstration project in effect on

[[Page 57]]

April 20, 1983, and that elects under Sec. 403.304(c)(3) to have a rate 
of increase test apply, if the State's rate of increase or inflation 
exceeds the national rate of increase or inflation in a given year, the 
State must submit quantitative evidence that, over 36 months, its 
payments will not exceed the national rate of increase or inflation. 
Furthermore, if payments under the State's system must be compared to 
actual Medicare expenditures, at the end of the third cost reporting 
period, as described in paragraph (b)(1) of this section, and payments 
under the State's system exceed what Medicare would have paid in a given 
year, the State must submit quantitative evidence that, over 36 months, 
payments under its system will not exceed what Medicare would have paid.
    (c) Review of assurances regarding expenditures. CMS will review the 
State's assurances and data submitted under this section, as a 
prerequisite to the approval of the State's system. CMS will compare the 
State's projections of payment amounts to CMS data in order to determine 
if the State's assurance is reasonable and fully supportable. If the CMS 
data indicate that the State's system would result in payment amounts 
that would be more then that which would have been paid under the 
Medicare principles, the State's assurances would not be acceptable. For 
States applying in accordance with Sec. 403.308, if CMS data indicate 
that the State's system would result in a rate of increase or inflation 
that would be more than the national rate of increase or inflation, the 
State's assurances would not be acceptable.
    (d) Medicaid upper limit. In accordance with Sec. 447.253 of this 
chapter, the State system may not result in aggregate payments for 
Medicaid inpatient hospital services that would exceed the amount that 
would have otherwise have been paid under the Medicare principles as 
applied through the State system.
    (e) Monitoring of Medicare expenditures. CMS will monitor on a 
quarterly basis expenditures under the State's system as compared to 
what Medicare expenditures would have been if the system had not been in 
effect. If CMS determines at any time that the payments made under the 
State's system exceed the States' projections, as established by the 
satisfactory assurances required under Sec. 403.304(c) and, if 
appropriate, the predetermined percentage relationship of the payments 
as required under Sec. 403.304(d). CMS will--
    (1) Conclude that payments under the State system over a 36-month 
period will exceed what Medicare would have paid:
    (2) Terminate the waiver; and
    (3) Recoup overpayments to the affected hospitals in accordance with 
the procedures described in Sec. 403.310.



Sec. 403.321  State systems for hospital outpatient services.

    CMS may approve a State's application for approval of an outpatient 
system if the following conditions are met:
    (a) The State's inpatient system is approved.
    (b) The State's outpatient application meets the requirements and 
assurances for an inpatient system described in Sec. 403.304 (b) and 
(c), and Sec. 403.306 (b)(1) and (b)(2)(ii).
    (c) The State submits a separate application that provides separate 
assurances and estimates and data in further support of its assurance 
submitted under paragraph (b)(1) of Sec. 403.320, as follows:
    (1) Upon application for approval, the State must submit estimates 
and data that include, but are not limited to, projections for the first 
12-month period covered by the assurance for each hospital, in both the 
aggregate and on an average cost per service and payment basis, of 
Medicare outpatient expenditures under Medicare principles of 
reimbursement; parallel projections of Medicare outpatient expenditures 
under the State system; and the resulting cost or savings to Medicare 
independent of the State system for hospital inpatient services.
    (2) The State must submit separate statewide projections for each 
year of the 36-month period of the aggregate outpatient expenditures for 
each system. The projections submitted under this paragraph must--

[[Page 58]]

    (i) Comply with the requirements of paragraphs (b) (3) and (5) of 
Sec. 403.320 regarding a detailed description of the methodology used 
to derive the expenditure amounts:
    (ii) Include the data and assumptions set forth in paragraphs (b)(3) 
(i), (ii), (iii), (iv), and (v) of Sec. 403.320; and
    (iii) Include any assumption the State has adopted for establishing 
the number of Medicare and total base year outpatient services for each 
hospital.
    (3) The State must provide a detailed explanation of the reasons for 
any difference between the data or assumptions used for the separate 
projections.



Sec. 403.322  Termination of agreements for Medicare recognition of State 

systems.

    (a) Termination of agreements. (1) CMS may terminate any approved 
agreement if it finds, after the procedures described in this paragraph 
are followed that the State system does not satisfactorily meet the 
requirements of section 1886(c) of the Act or the regulations in this 
subpart. A termination must be effective on the last day of a calendar 
quarter.
    (2) CMS will give the State reasonable notice of the proposed 
termination of an agreement and of the reasons for the termination at 
least 90 days before the effective date of the termination.
    (3) CMS will give the State the opportunity to present evidence to 
refute the finding.
    (4) CMS will issue a final notice of termination upon a final review 
and determination on the State's evidence.
    (b) Termination by State. A State may voluntarily terminate a State 
system by giving CMS notice of its intent to terminate. A termination 
must be effective on the last day of a calendar quarter. The State must 
notify CMS of its intent to terminate at least 90 days before the 
effective date of the termination.

Subpart D [Reserved]



         Subpart E_Beneficiary Counseling and Assistance Grants

    Source: 59 FR 51128, Oct. 7, 1994, unless otherwise noted.



Sec. 403.500  Basis, scope, and definition.

    (a) Basis. This subpart implements, in part, the provisions of 
section 4360 of Public Law 101-508 by establishing a minimum level of 
funding for grants made to States for the purpose of providing 
information, counseling, and assistance relating to obtaining adequate 
and appropriate health insurance coverage to individuals eligible to 
receive benefits under the Medicare program.
    (b) Scope of subpart. This subpart sets forth the following:
    (1) Conditions of eligibility for the grant.
    (2) Minimum levels of funding for those States qualifying for the 
grants.
    (3) Reporting requirements.
    (c) Definition. For purposes of this subpart, the term ``State'' 
includes (except where otherwise indicated by the context) the 50 
States, the District of Columbia, the Commonwealth of Puerto Rico, the 
Virgin Islands, Guam, and American Samoa.



Sec. 403.501  Eligibility for grants.

    To be eligible for a grant under this subpart, the State must have 
an approved Medicare supplemental regulatory program under section 1882 
of the Act and submit a timely application to CMS that meets the 
requirements of--
    (a) Section 4360 of Public Law 101-508 (42 USC 1395b-4);
    (b) This subpart; and
    (c) The applicable solicitation for grant applications issued by 
CMS.



Sec. 403.502  Availability of grants.

    CMS awards grants to States subject to availability of funds, and if 
applicable, subject to the satisfactory progress in the State's project 
during the preceding grant period. The criteria by which progress is 
evaluated and the performance standards for determining whether 
satisfactory progress has been made are specified in the terms and 
conditions included in the notice of grant award sent to each State. CMS 
advises each State as to when to make application, what to include in 
the application, and provides information as to the timing of the grant 
award and the duration of the grant award. CMS also provides an estimate 
of the

[[Page 59]]

amount of funds that may be available to the State.

[71 FR 30290, May 26, 2006]



Sec. 403.504  Number and size of grants.

    (a) General. For available grant funds, up to and including 
$10,000,000, grants will be made to States according to the terms and 
formula in paragraphs (b) and (c) of this section. For any available 
grant funds in excess of $10,000,000, distribution of grants will be at 
the discretion of CMS, and will be made according to criteria that CMS 
will communicate to the States via grant solicitation. CMS will provide 
information to each State as to what must be included in the application 
for grant funds. CMS awards the following type of grants:
    (1) New program grants.
    (2) Existing program enhancement grants.
    (b) Grant award. Subject to the availability of funds, each eligible 
State that submits an acceptable application receives a grant that 
includes a fixed amount (minimum funding level) and a variable amount.
    (1) A fixed portion is awarded to States in the following amounts:
    (i) Each of the 50 States, $75,000.
    (ii) The District of Columbia, $75,000.
    (iii) Puerto Rico, $75,000.
    (iv) American Samoa, $25,000.
    (v) Guam, $25,000.
    (vi) The Virgin Islands, $25,000.
    (2) A variable portion, which is based on the number and location of 
Medicare beneficiaries residing in the State is awarded to each State. 
The variable amount a particular State receives is determined as set 
forth in paragraph (c) of this section.
    (c) Calculation of variable portion of the grant. (1) CMS bases the 
variable portion of the grant on--
    (i) The amount of available funds, and
    (ii) A comparison of each State with the average of all of the 
States (except the State being compared) with respect to three factors 
that relate to the size of the State's Medicare population and where 
that population resides.
    (2) The factors CMS uses to compare States' Medicare populations 
comprise separate components of the variable amount. These factors, and 
the extent to which they each contribute to the variable amount, are as 
follows:
    (i) Approximately 75 percent of the variable amount is based on the 
number of Medicare beneficiaries living in the State as a percentage of 
all Medicare beneficiaries nationwide.
    (ii) Approximately 10 percent of the variable amount is based on the 
percentage of the State's total population who are Medicare 
beneficiaries.
    (iii) Approximately 15 percent of the variable amount is based on 
the percentage of the State's Medicare beneficiaries that reside in 
rural areas (``rural areas'' are defined as all areas not included 
within a Metropolitan Statistical Area).
    (3) Based on the foregoing four factors (that is, the amount of 
available funds and the three comparative factors), CMS determines a 
variable rate for each participating State for each grant period.
    (d) Submission of revised budget. A State that receives an amount of 
grant funds under this subpart that differs from the amount requested in 
the budget submitted with its application must submit a revised budget 
to CMS, along with its acceptance of the grant award, that reflects the 
amount awarded.

[59 FR 51128, Oct. 7, 1994, as amended at 65 FR 34986, June 1, 2000; 71 
FR 30290, May 26, 2006]



Sec. 403.508  Limitations.

    (a) Use of grants. Except as specified in paragraph (b) of this 
section, and in the terms and conditions in the notice of grant award, a 
State that receives a grant under this subpart may use the grant for any 
reasonable expenses for planning, developing, implementing, and/or 
operating the program for which the grant is made as described in the 
solicitation for application for the grant.
    (b) Maintenance of effort. A State that receives a grant to 
supplement an existing program (that is, an existing program enhancement 
grant)--
    (1) Must not use the grant to supplant funds for activities that 
were conducted immediately preceding the date of the initial award of a 
grant made under this subpart and funded through other sources 
(including in-kind contributions).

[[Page 60]]

    (2) Must maintain the activities of the program at least at the 
level that those activities were conducted immediately preceding the 
initial award of a grant made under this subpart.

[59 FR 51128, Oct. 7, 1994, as amended at 65 FR 34986, June 1, 2000; 71 
FR 30290, May 26, 2006]



Sec. 403.510  Reporting requirements.

    A State that receives a grant under this subpart must submit at 
least one annual report to CMS and any additional reports as CMS may 
prescribe in the notice of grant award. CMS advises the State of the 
requirements concerning the frequency, timing, and contents of reports 
in the notice of grant award that it sends to the State.



Sec. 403.512  Administration.

    (a) General. Administration of grants will be in accordance with the 
provisions of this subpart, 45 CFR part 92 (``Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments''), 45 CFR 74.4, the terms of the solicitation, and the 
terms of the notice of grant award. Except for the minimum funding 
levels established by Sec. 403.504(b)(1), in the event of conflict 
between a provision of the notice of grant award, any provision of the 
solicitation, or of any regulation enumerated in 45 CFR 74.4 or in part 
92, the terms of the notice of grant award control.
    (b) Notice. CMS provides notice to each applicant regarding CMS's 
decision on an application for grant funding under Sec. 403.504.
    (c) Appeal. Any applicant for a grant under this subpart has the 
right to appeal CMS's determination regarding its application. Appeal 
procedures are governed by the regulations at 45 CFR part 16 (Procedures 
of the Departmental Grant Appeals Board).

Subpart F [Reserved]



   Subpart G_Religious Nonmedical Health Care Institutions_Benefits, 

                Conditions of Participation, and Payment

    Source: 64 FR 67047, Nov. 30, 1999, unless otherwise noted.



Sec. 403.700  Basis and purpose.

    This subpart implements sections 1821; 1861(e), (y), and (ss); 1869; 
and 1878 of the Act regarding Medicare payment for inpatient hospital or 
posthospital extended care services furnished to eligible beneficiaries 
in religious nonmedical health care institutions.



Sec. 403.702  Definitions and terms.

    For purposes of this subpart, the following definitions and terms 
apply:
    Election means a written statement signed by the beneficiary or the 
beneficiary's legal representative indicating the beneficiary's choice 
to receive nonmedical care or treatment for religious reasons.
    Excepted medical care means medical care that is received 
involuntarily or required under Federal, State, or local laws.
    FFY stands for Federal fiscal year.
    Medical care or treatment means health care furnished by or under 
the direction of a licensed physician that can involve diagnosing, 
treating, or preventing disease and other damage to the mind and body. 
It may involve the use of pharmaceuticals, diet, exercise, surgical 
intervention, and technical procedures.
    Nonexcepted medical care means medical care (other than excepted 
medical care) that is sought by or for a beneficiary who has elected 
religious nonmedical health care institution services.
    Religious nonmedical care or religious method of healing means 
health care furnished under established religious tenets that prohibit 
conventional or unconventional medical care for the treatment of a 
beneficiary, and the sole reliance on these religious tenets to fulfill 
a beneficiary's total health care needs.
    RNHCI stands for ``religious nonmedical health care institution,'' 
as defined in section 1861(ss)(1) of the Act.
    Religious nonmedical nursing personnel means individuals who are 
grounded in the religious beliefs of the RNHCI, trained and experienced 
in the principles of nonmedical care, and formally recognized as 
competent in the administration of care within their religious 
nonmedical health care group.

[[Page 61]]



Sec. 403.720  Conditions for coverage.

    Medicare covers services furnished in an RNHCI if the following 
conditions are met:
    (a) The provider meets the definition of an RNHCI as defined in 
section 1861(ss)(1) of the Act. That is, it is an institution that:
    (1) Is described in section 501(c)(3) of the Internal Revenue Code 
of 1986 and is exempt from taxes under section 501(a).
    (2) Is lawfully operated under all applicable Federal, State, and 
local laws and regulations.
    (3) Furnishes only nonmedical nursing items and services to 
beneficiaries who choose to rely solely upon a religious method of 
healing and for whom the acceptance of medical services would be 
inconsistent with their religious beliefs.
    (4) Furnishes nonmedical items and services exclusively through 
nonmedical nursing personnel who are experienced in caring for the 
physical needs of nonmedical patients.
    (5) Furnishes nonmedical items and services to inpatients on a 24-
hour basis.
    (6) Does not furnish, on the basis of religious beliefs, through its 
personnel or otherwise medical items and services (including any medical 
screening, examination, diagnosis, prognosis, treatment, or the 
administration of drugs) for its patients.
    (7) Is not owned by, is not under common ownership with, or does not 
have an ownership interest of 5 percent or more in, a provider of 
medical treatment or services and is not affiliated with a provider of 
medical treatment or services or with an individual who has an ownership 
interest of 5 percent or more in, a provider of medical treatment or 
services. (Permissible affiliations are described at Sec. 403.738(c).)
    (8) Has in effect a utilization review plan that sets forth the 
following:
    (i) Provides for review of the admissions to the institution, the 
duration of stays, and the need for continuous extended duration of 
stays in the institution, and the items and services furnished by the 
institution.
    (ii) Requires that reviews be made by an appropriate committee of 
the institution that included the individuals responsible for overall 
administration and for supervision of nursing personnel at the 
institution.
    (iii) Provides that records be maintained of the meetings, 
decisions, and actions of the review committee.
    (iv) Meets other requirements as the Secretary finds necessary to 
establish an effective utilization review plan.
    (9) Provides information CMS may require to implement section 1821 
of the Act, including information relating to quality of care and 
coverage decisions.
    (10) Meets other requirements CMS finds necessary in the interest of 
the health and safety of the patients who receive services in the 
institution. These requirements are the conditions of participation in 
this subpart.
    (b) The provider meets the conditions of participation cited in 
Sec. Sec. 403.730 through 403.746. (A provider may be deemed to meet 
conditions of participation in accordance with part 488 of this 
chapter.)
    (c) The provider has a valid provider agreement as a hospital with 
CMS in accordance with part 489 of this chapter and for payment purposes 
is classified as an extended care hospital.
    (d) The beneficiary has a condition that would make him or her 
eligible to receive services covered under Medicare Part A as an 
inpatient in a hospital or SNF.
    (e) The beneficiary has a valid election as described in Sec. 
403.724 in effect for Medicare covered services furnished in an RNHCI.



Sec. 403.724  Valid election requirements.

    (a) General requirements. An election statement must be made by the 
Medicare beneficiary or his or her legal representative.
    (1) The election must be a written statement that must include the 
following statements:
    (i) The beneficiary is conscientiously opposed to acceptance of 
nonexcepted medical treatment.
    (ii) The beneficiary acknowledges that the acceptance of nonexcepted 
medical treatment is inconsistent with his or her sincere religious 
beliefs.
    (iii) The beneficiary acknowledges that the receipt of nonexcepted 
medical treatment constitutes a revocation

[[Page 62]]

of the election and may limit further receipt of services in an RNHCI.
    (iv) The beneficiary acknowledges that the election may be revoked 
by submitting a written statement to CMS.
    (v) The beneficiary acknowledges that revocation of the election 
will not prevent or delay access to medical services available under 
Medicare Part A in facilities other than RNHCIs.
    (2) The election must be signed and dated by the beneficiary or his 
or her legal representative.
    (3) The election must be notarized.
    (4) The RNHCI must keep a copy of the election statement on file and 
submit the original to CMS with any information obtained regarding prior 
elections or revocations.
    (5) The election becomes effective on the date it is signed.
    (6) The election remains in effect until revoked.
    (b) Revocation of election. (1) A beneficiary's election is revoked 
by one of the following:
    (i) The beneficiary receives nonexcepted medical treatment for which 
Medicare payment is requested.
    (ii) The beneficiary voluntarily revokes the election and notifies 
CMS in writing.
    (2) The receipt of excepted medical treatment as defined in Sec. 
403.702 does not revoke the election made by a beneficiary.
    (c) Limitation on subsequent elections. (1) If a beneficiary's 
election has been made and revoked twice, the following limitations on 
subsequent elections apply:
    (i) The third election is not effective until 1 year after the date 
of the most recent revocation.
    (ii) Any succeeding elections are not effective until 5 years after 
the date of the most recent revocation.
    (2) CMS will not accept as the basis for payment of any claim any 
elections executed on or after January 1 of the calendar year in which 
the sunset provision described in Sec. 403.756 becomes effective.



Sec. 403.730  Condition of participation: Patient rights.

    An RNHCI must protect and promote each patient's rights.
    (a) Standard: Notice of rights. The RNHCI must do the following:
    (1) Inform each patient of his or her rights in advance of 
furnishing patient care.
    (2) Have a process for prompt resolution of grievances, including a 
specific person within the facility whom a patient may contact to file a 
grievance. In addition, the facility must provide patients with 
information about the facility's process as well as with contact 
information for appropriate State and Federal resources.
    (b) Standard: Exercise of rights. The patient has the right to:
    (1) Be informed of his or her rights and to participate in the 
development and implementation of his or her plan of care.
    (2) Make decisions regarding his or her care, including transfer and 
discharge from the RNHCI. (See Sec. 403.736 for discharge and transfer 
requirements.)
    (3) Formulate advance directives and expect staff who furnish care 
in the RNHCI to comply with those directives, in accordance with part 
489, subpart I of this chapter. For purposes of conforming with the 
requirement in Sec. 489.102 that there be documentation in the 
patient's medical records concerning advanced directives, the patient 
care records of a beneficiary in an RNHCI are equivalent to medical 
records held by other providers.
    (c) Standard: Privacy and safety. The patient has the right to the 
following:
    (1) Personal privacy.
    (2) Care in a safe setting.
    (3) Freedom from verbal, psychological, and physical abuse, and 
misappropriation of property.
    (4) Freedom from the use of restraints.
    (5) Freedom from involuntary seclusion.
    (d) Standard: Confidentiality of patient records. For any patient 
care records or election information it maintains on patients, the RNHCI 
must establish procedures to do the following:
    (1) Safeguard the privacy of any information that identifies a 
particular patient. Information from, or copies of, records may be 
released only to authorized individuals, and the RNHCI

[[Page 63]]

must ensure that unauthorized individuals cannot gain access to or alter 
patient records. Original patient care records must be released only in 
accordance with Federal or State laws, court orders, or subpoenas.
    (2) Maintain the records and information in an accurate and timely 
manner.
    (3) Ensure timely access by patients to the records and other 
information that pertains to that patient.
    (4) Abide by all Federal and State laws regarding confidentiality 
and disclosure for patient care records and election information.



Sec. 403.732  Condition of participation: Quality assessment and performance 

improvement.

    The RNHCI must develop, implement, and maintain a quality assessment 
and performance improvement program.
    (a) Standard: Program scope. (1) The quality assessment and 
performance improvement program must include, but is not limited to, 
measures to evaluate:
    (i) Access to care.
    (ii) Patient satisfaction.
    (iii) Staff performance.
    (iv) Complaints and grievances.
    (v) Discharge planning activities.
    (vi) Safety issues, including physical environment.
    (2) In each of the areas listed in paragraph (a)(1) of this section, 
and any other areas the RNHCI includes, the RNHCI must do the following:
    (i) Define quality assessment and performance improvement measures.
    (ii) Describe and outline quality assessment and performance 
improvement activities appropriate for the services furnished by or in 
the RNHCI.
    (iii) Measure, analyze, and track performance that reflect care and 
RNHCI processes.
    (iv) Inform all patients, in writing, of the scope and 
responsibilities of the quality assessment and performance improvement 
program.
    (3) The RNHCI must set priorities for performance improvement, 
considering the prevalence of and severity of identified problems.
    (4) The RNHCI must act to make performance improvements and must 
track performance to assure that improvements are sustained.
    (b) Standard: Program responsibilities. (1) The governing body, 
administration, and staff are responsible for ensuring that the quality 
assessment and performance improvement program addresses identified 
priorities in the RNHCI and are responsible for the development, 
implementation, maintenance, and performance improvement of assessment 
actions.
    (2) The RNHCI must include all programs, departments, functions, and 
contracted services when developing, implementing, maintaining, and 
evaluating the program of quality assessment and performance 
improvement.



Sec. 403.734  Condition of participation: Food services.

    The RNHCI must have an organized food service that is directed and 
adequately staffed by qualified personnel.
    (a) Standard: Sanitary conditions. The RNHCI must furnish food to 
the patient that is obtained, stored, prepared, distributed, and served 
under sanitary conditions.
    (b) Standard: Meals. The RNHCI must serve meals that furnish each 
patient with adequate nourishment in accordance with the recommended 
dietary allowances of the Food and Nutrition Board of the National 
Research Council, National Academy of Sciences. The RNHCI must do the 
following:
    (1) Furnish food that is palatable, attractive, and at the proper 
temperature and consistency.
    (2) Offer substitutes of similar nourishment to patients who refuse 
food served or desire alternative choices.
    (3) Furnish meals at regular times comparable to normal mealtimes in 
the community. There must be no more than 14 hours between a substantial 
evening meal and breakfast the following day.
    (4) The RNHCI must offer snacks at bedtime.



Sec. 403.736  Condition of participation: Discharge planning.

    The RNHCI must have in effect a discharge planning process that 
applies to all patients. The process must assure

[[Page 64]]

that appropriate post-institution services are obtained for each 
patient, as necessary.
    (a) Standard: Discharge planning evaluation. (1) The RNHCI must 
assess the need for a discharge plan for any patient identified as 
likely to suffer adverse consequences if there is no planning and for 
any other patient upon his or her request or at the request of his or 
her legal representative. This discharge planning evaluation must be 
initiated at admission and must include the following:
    (i) An assessment of the possibility of a patient needing post-RNHCI 
services and of the availability of those services.
    (ii) An assessment of the probability of a patient's capacity for 
self-care or of the possibility of the patient being cared for in the 
environment from which he or she entered the RNHCI.
    (2) The staff must complete the assessment on a timely basis so that 
arrangements for post-RNHCI care are made before discharge and so that 
unnecessary delays in discharge are avoided.
    (3) The discharge planning evaluation must be included in the 
patient's care record for use in establishing an appropriate discharge 
plan. Staff must discuss the results of the discharge planning 
evaluation with the patient or a legal representative acting on his or 
her behalf.
    (b) Standard: Discharge plan. (1) If the discharge planning 
evaluation indicates a need for a discharge plan, qualified and 
experienced personnel must develop or supervise the development of the 
plan.
    (2) In the absence of a finding by the RNHCI that the beneficiary 
needs a discharge plan, the beneficiary or his or her legal 
representative may request a discharge plan. In this case, the RNHCI 
must develop a discharge plan for the beneficiary.
    (3) The RNHCI must arrange for the initial implementation of the 
beneficiary's discharge plan.
    (4) If there are factors that may affect continuing care needs or 
the appropriateness of the discharge plan, the RNHCI must reevaluate the 
beneficiary's discharge plan.
    (5) The RNHCI must inform the beneficiary or legal representative 
about the beneficiary's post-RNHCI care requirements.
    (6) The discharge plan must inform the beneficiary or his or her 
legal representative about the freedom to choose among providers of care 
when a variety of providers is available that are willing to respect the 
discharge preferences of the beneficiary or legal representative.
    (c) Standard: Transfer or referral. The RNHCI must transfer or refer 
patients in a timely manner to another facility (including a medical 
facility if requested by the beneficiary, or his or her legal 
representative) in accordance with Sec. 403.730(b)(2).
    (d) Standard: Reassessment. The RNHCI must reassess its discharge 
planning process on an ongoing basis. The reassessment must include a 
review of discharge plans to ensure that they are responsive to 
discharge needs.

[64 FR 67047, Nov. 30, 1999, as amended at 68 FR 66720, Nov. 28, 2003]



Sec. 403.738  Condition of participation: Administration.

    An RNHCI must have written policies regarding its organization, 
services, and administration.
    (a) Standard: Compliance with Federal, State, and local laws. The 
RNHCI must operate in compliance with all applicable Federal, State, and 
local laws, regulations, and codes including, but not limited to, those 
pertaining to the following:
    (1) Protection against discrimination on the basis of race, color, 
national origin, age, or handicap (45 CFR parts 80, 84, and 91).
    (2) Protection of human research subjects (45 CFR part 46).
    (3) Application of all safeguards to protect against the possibility 
of fraud and abuse (42 CFR part 455).
    (4) Privacy of individually identifiable health information (45 CFR 
part 164).
    (b) Standard: Governing body. (1) The RNHCI must have a governing 
body, or a person designated to function as a governing body, that is 
legally responsible for establishing and implementing all policies 
regarding the RNHCI's management and operation.

[[Page 65]]

    (2) The governing body must appoint the administrator responsible 
for the management of the RNHCI.
    (c) Standard: Affiliations and disclosure. (1) An affiliation is 
permissible if it is between one of the following:
    (i) An individual serving as an uncompensated director, trustee, 
officer, or other member of the governing body of an RNHCI and a 
provider of medical treatment or services.
    (ii) An individual who is a director, trustee, officer, employee, or 
staff member of an RNHCI and another individual, with whom he or she has 
a family relationship, who is affiliated with (or has an ownership 
interest in) a provider of medical treatment or services.
    (iii) The RNHCI and an individual or entity furnishing goods or 
services as a vendor to both providers of medical treatment or services 
and RNHCIs.
    (2) The RNHCI complies with the disclosure requirements of 
Sec. Sec. 420.206 and 455.104 of this chapter.
    (3) The RNHCI furnishes written notice, including the identity of 
each new individual or company, to CMS at the time of a change, if a 
change occurs in any of the following:
    (i) Persons with an ownership or control interest, as defined in 
Sec. Sec. 420.201 and 455.101 of this chapter.
    (ii) The officers, directors, agents, or managing employees.
    (iii) The religious entity, corporation, association, or other 
company responsible for the management of the RNHCI.
    (iv) The RNHCI's administrator or director of nonmedical nursing 
services.

[64 FR 67047, Nov. 30, 1999, as amended at 68 FR 66720, Nov. 28, 2003]



Sec. 403.740  Condition of participation: Staffing.

    The RNHCI must be staffed with qualified experienced personnel who 
are present in sufficient numbers to meet the needs of the patients.
    (a) Standard: Personnel qualifications. The RNHCI must ensure that 
staff who supervise or furnish services to patients are qualified to do 
so and that staff allowed to practice without direct supervision have 
specific training to furnish these services.
    (b) Standard: Education, training, and performance evaluation. (1) 
The RNHCI must ensure that staff (including contractors and other 
individuals working under arrangement) have the necessary education and 
training concerning their duties so that they can furnish services 
competently. This education includes, but is not limited to, training 
related to the individual job description, performance expectations, 
applicable organizational policies and procedures, and safety 
responsibilities.
    (2) Staff must demonstrate, in practice, the skills and techniques 
necessary to perform their duties and responsibilities.
    (3) The RNHCI must evaluate the performance of staff and implement 
measures for improvement.



Sec. 403.742  Condition of participation: Physical environment.

    A RNHCI must be designed, constructed, and maintained to ensure the 
safety of the patients, staff, and the public.
    (a) Standard: Buildings. The physical plant and the overall 
environment must be maintained in a manner that ensures the safety and 
well-being of the patients. The RNHCI must have the following:
    (1) Emergency power for emergency lights, for fire detection and 
alarm systems, and for fire extinguishing systems.
    (2) Procedures for the proper storage and disposal of trash.
    (3) Proper ventilation and temperature control and appropriate 
lighting levels to ensure a safe and secure environment.
    (4) A written disaster plan to address loss of power, water, sewage, 
and other emergencies.
    (5) Facilities for emergency gas and water supply.
    (6) An effective pest control program.
    (7) A preventive maintenance program to maintain essential 
mechanical, electrical, and fire protection equipment operating in an 
efficient and safe manner.
    (8) A working call system for patients to summon aid or assistance.
    (b) Standard: Patient rooms. Patient rooms must be designed and 
equipped for adequate care, comfort, and privacy of the patient.

[[Page 66]]

    (1) Patient rooms must meet the following conditions:
    (i) Accommodate no more than four patients.
    (ii) Measure at least 80 square feet per patient in multiple patient 
rooms and at least 100 square feet in single patient rooms.
    (iii) Have direct access to an exit corridor.
    (iv) Be designed or equipped to assure full visual privacy for each 
patient.
    (v) Have at least one window to the outside.
    (vi) Have a floor at or above grade level.
    (2) The RNHCI must furnish each patient with the following:
    (i) A separate bed of proper size and height for the convenience of 
the patient.
    (ii) A clean, comfortable mattress.
    (iii) Bedding appropriate to the weather and climate.
    (iv) Functional furniture appropriate to the patient's needs and 
individual closet space with clothes racks and shelves accessible to the 
patient.
    (3) CMS may permit variances in requirements specified in paragraphs 
(b)(1)(i) and (ii) of this section relating to rooms on an individual 
basis when the RNHCI adequately demonstrates in writing that the 
variances meet the following:
    (i) Are in accordance with the special needs of the patients.
    (ii) Will not adversely affect patients' health and safety.



Sec. 403.744  Condition of participation: Life safety from fire.

    (a) General. An RNHCI must meet the following conditions:
    (1) Except as otherwise provided in this section--
    (i) The RNHCI must meet the applicable provisions 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 [reg] 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: http://
www.archives.gov/federal--register/code--of--federal--regulations/ibr--
locations.html. 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 Federal Register to announce the changes.
    (ii) Chapter 19.3.6.3.2, exception number 2 of the adopted Life 
Safety Code does not apply to an RNHCI.
    (2) The RNHCI must have written fire control plans that contain 
provisions for prompt reporting of fires; extinguishing fires; 
protection of patients, staff, and the public; evacuation; and 
cooperation with fire fighting authorities.
    (3) The RNHCI must maintain written evidence of regular inspection 
and approval by State or local fire control agencies.
    (4) Notwithstanding any provisions of the 2000 edition of the Life 
Safety Code to the contrary, the RNHCI may place alcohol-based hand rub 
dispensers in its facility if--
    (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;
    (ii) The dispensers are installed in a manner that minimizes leaks 
and spills that could lead to falls;
    (iii) The dispensers are installed in a manner that adequately 
protects against inappropriate access;
    (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

[[Page 67]]

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; and
    (v) The dispensers are maintained in accordance with dispenser 
manufacturer guidelines.
    (b) Exceptions. (1) If application of the Life Safety Code required 
under paragraph (a)(1) of this section would result in unreasonable 
hardship upon the RNHCI, CMS may waive specific provisions of the Life 
Safety Code, but only if the waiver does not adversely affect the health 
and safety of patients.
    (2) If CMS finds that the fire and safety code imposed by State law 
adequately protects patients in the institution, the provisions of the 
Life Safety Code required in paragraph (a)(1) of this section do not 
apply in that State.
    (c) Phase-in period. Beginning March 13, 2006, an RNHCI must be in 
compliance with Chapter 19.2.9, Emergency Lighting. Beginning March 13, 
2006, Chapter 19.3.6.3.2, exception number 2 does not apply to RNHCIs.

[64 FR 67047, Nov. 30, 1999, as amended at 68 FR 1385, Jan. 10, 2003; 69 
FR 18803, Apr. 9, 2004; 69 FR 49240, Aug. 11, 2004; 70 FR 15237, Mar. 
25, 2005; 70 FR 71007, Nov. 25, 2005; 71 FR 55339, Sept. 22, 2006]



Sec. 403.746  Condition of participation: Utilization review.

    The RNHCI must have in effect a written utilization review plan to 
assess the necessity of services furnished. The plan must provide that 
records be maintained of all meetings, decisions, and actions by the 
utilization review committee.
    (a) Standard: Utilization review plan. The utilization review plan 
must contain written procedures for evaluating the following:
    (1) Admissions.
    (2) Duration of care.
    (3) Continuing care of an extended duration.
    (4) Items and services furnished.
    (b) Standard: Utilization review committee. The committee is 
responsible for evaluating each admission and ensuring that the 
admission is necessary and appropriate. The utilization review plan must 
be carried out by the utilization review committee, consisting of the 
governing body, administrator or other individual responsible for the 
overall administration of the RNHCI, the supervisor of nursing staff, 
and other staff as appropriate.
    (c) Standard: Utilization review committee role in RNHCI home 
services. In addition to the requirements in paragraphs (a) and (b) of 
this section, the utilization review committee is responsible for:
    (1) The admission, and at least every 30 days, the continued care 
review of each patient in the RHNCI home services program.
    (2) Oversight and monitoring of the home services program, including 
the purchase and utilization of designated durable medical equipment 
items for beneficiaries in the program.

[64 FR 67047, Nov. 30, 1999, as amended at 69 FR 66419, Nov. 15, 2004]



Sec. 403.750  Estimate of expenditures and adjustments.

    (a) Estimates. CMS estimates the level of expenditures for services 
provided under this subpart before the start of each FFY beginning with 
FFY 2000.
    (b) Adjustments to payments. When the level of estimated 
expenditures is projected to exceed the FFY trigger level as described 
in paragraph (d) of this section, for the year of the projection, 
payments to RNHCIs will be reduced by a proportional percentage to 
prevent estimated expenditures from exceeding the trigger level. In 
addition to reducing payments proportionally, CMS may impose alternative 
adjustments.
    (c) Notification of adjustments. CMS notifies participating RNHCIs 
before the start of the FFY of the type and level of expenditure 
reductions to be made and when these adjustments will apply.
    (d) Calculation of trigger level. The trigger level for FFY 1998 is 
$20,000,000. For subsequent FFYs, the trigger level is the unadjusted 
trigger level increased or decreased by the carry forward as described 
in Sec. 403.754(b). The unadjusted trigger level is the base year 
amount (the unadjusted trigger

[[Page 68]]

level dollar amount for the prior FFY) increased by the average consumer 
price index (the single numerical value published monthly by the Bureau 
of Labor Statistics that presents the relationship in United States 
urban areas for the current cost of goods and services compared to a 
base year, to represent the change in spending power) for the 12-month 
period ending on July 31 preceding the beginning of the FFY.



Sec. 403.752  Payment provisions.

    (a) Payment to RNHCIs. Payment for services may be made to an RNHCI 
that meets the conditions for coverage described in Sec. 403.720 and 
the conditions of participation described in Sec. Sec. 403.730 through 
403.746. Payment is made in accordance with Sec. 413.40 of this chapter 
to an RNHCI meeting these conditions.
    (b) Review of estimates and adjustments. There is no administrative 
or judicial review of the level of estimated expenditures or the 
adjustments in payments described in Sec. Sec. 403.750(a) and (b).
    (c) Effect on beneficiary liability. When payments are reduced in 
accordance with Sec. 403.750(b), the RNHCI may bill the beneficiary the 
amount of the Medicare reduction attributable to his or her covered 
services.
    (d) Notification of beneficiary liability. (1) The RNHCI must notify 
the beneficiary in writing at the time of admission of any proposed or 
current proportional Medicare adjustment. A beneficiary currently 
receiving care in the RNHCI must be notified in writing at least 30 days 
before the Medicare reduction is to take effect. The notification must 
inform the beneficiary that the RNHCI can bill him or her for the 
proportional Medicare adjustment.
    (2) The RNHCI must, at time of billing, provide the beneficiary with 
his or her liability for payment, based on a calculation of the Medicare 
reduction pertaining to the beneficiary's covered services permitted by 
Sec. 403.750(b).



Sec. 403.754  Monitoring expenditure level.

    (a) Tracking expenditures. Starting in FFY 1999 CMS begins 
monitoring Medicare payments to RNHCIs.
    (b) Carry forward. The difference between the trigger level and 
Medicare expenditures for a FFY results in a carry forward that either 
increases or decreases the unadjusted trigger level described in Sec. 
403.750(d). In no case may the carry forward exceed $50,000,000 for an 
FFY.



Sec. 403.756  Sunset provision.

    (a) Effective date. Beginning with FFY 2002, if the level of 
estimated expenditures for all RNHCIs exceeds the trigger level for 3 
consecutive FFYs, CMS will not accept as the basis for payment of any 
claim any election executed on or after January 1 of the following 
calendar year.
    (b) Notice of activation. A notice in the Federal Register will be 
published at least 60 days before January 1 of the calendar year that 
the sunset provision becomes effective.
    (c) Effects of sunset provision. Only those beneficiaries who have a 
valid election in effect before January 1 of the year in which the 
sunset provision becomes effective will be able to claim Medicare 
payment for care in an RNHCI, and only for RNCHI services furnished 
during that election.



Sec. 403.764  Basis and purpose of religious nonmedical health care 

institutions providing home service.

    (a) Basis. This subpart implements sections 1821, 1861, 1861(e), 
1861(m), 1861(y), 1861(ss) and 1861(aaa), 1869 and 1878 of the Act 
regarding Medicare payment for items and services provided in the home 
setting furnished to eligible beneficiaries by religious nonmedical 
health care institutions (RNHCIs).
    (b) Purpose. The home benefit provides for limited durable medical 
equipment (DME) items and RNHCI services in the home setting that are 
fiscally limited to $700,000 per calendar year, with an expiration date 
of December 31, 2006, or the date on which the 2006 spending limit is 
reached.

[69 FR 66419, Nov. 15, 2004]



Sec. 403.766  Requirements for coverage and payment of RNHCI home services.

    (a) Medicare Part A pays for RNHCI home services if the RNHCI 
provider does the following:

[[Page 69]]

    (1) Submit a notice of intent to CMS to exercise the option of 
providing home service.
    (2) Provide RNHCI services to eligible beneficiaries,
    (3) Arrange with suppliers to furnish appropriate DME items as 
required to meet documented eligible beneficiary needs.
    (4) Arrange for RNHCI nurse home visits to eligible beneficiaries.
    (5) Have a utilization committee that assumes the additional 
responsibility for the oversight and monitoring of the items and RNHCI 
nursing services provided under the home benefit.
    (6) Meet all applicable requirements set forth in subpart G of this 
part.
    (b) To be an eligible beneficiary to RNHCI home services the 
beneficiary must:
    (1) Have an effective election in place.
    (2) Be confined to the home, as specified in Sec. 409.42(a) of this 
chapter.
    (3) Have a condition that makes him or her eligible to receive 
services covered under Medicare home health.
    (4) Receive home services and DME items from a RNHCI.
    (5) Be responsible for deductible and coinsurance for DME, as 
specified in Sec. 409.50 of this chapter.

[69 FR 66419, Nov. 15, 2004, as amended at 70 FR 16721, Apr. 1, 2005]



Sec. 403.768  Excluded services.

    In addition to items and services excluded in Sec. 409.49 of this 
chapter, items and services are also excluded if they are provided by:
    (a) A HHA that is not a RNHCI.
    (b) A supplier who is not providing RNHCI designated items under 
arrangement with a RNHCI.
    (c) A nurse who is not providing RNHCI home nursing services under 
arrangement with a RNHCI.

[69 FR 66419, Nov. 15, 2004]



Sec. 403.770  Payments for home services.

    (a) The RNHCI nursing visits are paid at the modified low 
utilization payment adjusted (LUPA) rate used under the home health 
prospective payment system at Sec. 484.230 of this chapter.
    (b) Appropriate DME items are paid as priced by Medicare, minus the 
deductible and coinsurance liability of the beneficiary.

[69 FR 66419, Nov. 15, 2004]



  Subpart H_Medicare Prescription Drug Discount Card and Transitional 

                           Assistance Program

    Source: 68 FR 69915, Dec. 15, 2003, unless otherwise noted.



Sec. 403.800  Basis and scope.

    (a) Basis. This subpart is based on section 1860D-31 of the Social 
Security Act (the Act).
    (b) Scope. This subpart sets forth the standards and procedures CMS 
uses to implement the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program.



Sec. 403.802  Definitions.

    For purposes of this subpart, the following definitions apply:
    Affiliated organization means an organization that is a legally 
separate entity from the endorsed drug card sponsor and meets one of the 
following conditions:
    (1) The organization and the endorsed drug card sponsor are under 
common control. Common control exists if another entity has the power, 
directly or indirectly, to significantly influence or direct the actions 
or policies of the organization and the endorsed drug card sponsor.
    (2) The organization is under the control of the endorsed drug card 
sponsor or the organization controls the endorsed drug card sponsor. 
Control exists if an entity has the power, directly or indirectly, to 
significantly influence or direct the actions or policies of another 
entity.
    (3) The organization possesses an ownership or equity interest of 5 
percent or more in the endorsed drug card sponsor on both the date on 
which the endorsed drug card sponsor markets the organization's Part D 
plan, and the date on which the endorsed drug card sponsor signed its 
endorsement contract with CMS.
    Annual coordinated election period means the period beginning on 
November 15, 2004 and ending on December 31,

[[Page 70]]

2004, during which a discount card enrollee may elect to disenroll from 
their current endorsed discount card program and elect enrollment in 
another endorsed discount card program effective January 1, 2005.
    Applicant means the non-governmental, single legal organization or 
entity doing business in the United States that is applying for Medicare 
endorsement of its prescription drug discount card program, as described 
in its application, to be operated by itself or in coordination with 
subcontractors.
    Application means the document submitted to CMS by an applicant that 
seeks to demonstrate the applicant's compliance with the requirements 
specified in this subpart in order to obtain Medicare endorsement of the 
applicant's prescription drug discount card program.
    Authorized representative means a person with legal authority to act 
on behalf of an individual in making decisions related to the 
individual's health care or the individual's enrollment in, 
disenrollment from, and access to negotiated prices and transitional 
assistance under the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program.
    Covered discount card drug means any of the following: a drug that 
may be dispensed only upon a prescription and that is described in 
sections 1927(k)(2)(A)(i) through (iii) of the Act; a biological product 
described in sections 1927(k)(2)(B)(i) through (iii) of the Act; insulin 
described in section 1927(k)(2)(C) of the Act; the following medical 
supplies associated with the injection of insulin: syringes, needles, 
alcohol swabs, and gauze; a vaccine licensed under section 351 of the 
Public Health Service Act; or any use of a covered discount card drug 
for a medically accepted indication (as defined in section 1927(k)(6) of 
the Act). The definition of covered discount card drug excludes the 
following: agents when used for anorexia, weight loss, or weight gain; 
agents when used to promote fertility; agents when used for cosmetic 
purposes or hair growth; agents when used for the symptomatic relief of 
cough and colds; prescription vitamins and mineral products, except 
prenatal vitamins and fluoride preparations; nonprescription drugs; 
outpatient drugs for which the manufacturer seeks to require that 
associated tests or monitoring services be purchased exclusively from 
the manufacturer or its designee as a condition of sale; barbiturates; 
and benzodiazepines.
    Discount card enrollee or enrollee or card enrollee means an 
individual described in Sec. 403.810(a) who elects to enroll in a 
Medicare-endorsed prescription drug discount card program.
    Effective date means the date on which an enrollment or 
disenrollment transaction becomes effective.
    Enrollment period means the period beginning on the initial 
enrollment date and ending on December 31, 2005.
    Exclusive card program means an endorsed discount card program that 
is offered by an exclusive card sponsor.
    Exclusive card sponsor means an endorsed sponsor that also operates 
one or more Medicare managed care plans and limits enrollment in its 
endorsed discount card program to individuals described in Sec. 
403.810(a) who are enrollees in one of the Medicare managed care plans 
it offers.
    Family size means one for individuals who are single, and two for 
individuals who are married.
    Federal Employee's Health Benefits Program plan means a plan under 
chapter 89 of title 5 of the United States Code including the Retired 
Federal Employee's Health Benefits Program.
    Formulary means the list of specific drugs from among covered 
discount card drugs for which an endorsed sponsor offers negotiated 
prices to Medicare beneficiaries enrolled in its Medicare-endorsed 
prescription drug discount card program.
    Group enrollment means simultaneous enrollment of all or some of the 
individuals described in sectioin 403.810(a) who are members of a 
Medicare managed care plan into the exclusive card program offered by 
the Medicare managed care organization.
    HIPAA means the Health Insurance Portability and Accountability Act 
of 1996, 42 U.S.C. 1320d and section 264 of Public Law 104-191.
    Income means the components of an individual's adjusted gross income 
(AGI), as defined under 26 U.S.C. section 62, and, to the extent not 
included

[[Page 71]]

in the components of AGI, retirement and disability benefits, or, if he 
or she is married, the sum of such income for the individual and his or 
her spouse.
    Initial enrollment date means the date established by the Secretary 
on which endorsed sponsors may begin accepting beneficiaries' standard 
enrollment forms.
    Initial enrollment year means the period beginning on the initial 
enrollment date and ending on December 31, 2004.
    I/T/U pharmacy means a pharmacy operated by the Indian Health 
Service, an Indian tribe or tribal organization, or an urban Indian 
organization, all of which are defined in section 4 of the Indian Health 
Care Improvement Act, 25 U.S.C. 1603.
    Long-term care facility means a skilled nursing facility, as defined 
in section 1819(a) of the Act, or nursing facility, as defined in 
section 1919(a) of the Act.
    Long-term care pharmacy means a pharmacy owned by or under contract 
with a long-term care facility to provide prescription drugs to the 
facility's residents.
    Medicare cost plan means an organization that offers enrollment 
under a reasonable cost reimbursement contract under section 1876(h) of 
the Act.
    Medicare managed care organization means a Part C organization 
offering a Part C plan described in section 1851(a)(2)(A) of the Act or 
a Medicare cost plan.
    Medicare managed care plan means a plan described in section 
1851(a)(2)(A) of the Act offered by a Part C organization or a Medicare 
cost plan.
    Medicare Prescription Drug Discount Card and Transitional Assistance 
Program or Medicare Drug Discount Card Program means the program 
established under section 1860D-31 of the Act.
    Medicare-endorsed prescription drug discount card program, or 
endorsed program, or endorsed discount card program means any 
prescription drug discount card program that has received Medicare 
endorsement and whose endorsed sponsor has entered into a contract with 
CMS.
    Medicare-endorsed prescription drug discount card sponsor, or 
endorsed sponsor, or endorsed discount card sponsor means any applicant 
that has received endorsement from Medicare and entered into a contract 
with CMS to operate an approved Medicare-endorsed discount card program.
    Negotiated price means the discounted price for a covered discount 
card drug offered by an endorsed sponsor, including any dispensing fee, 
which takes into account negotiated price concessions, such as 
discounts, direct or indirect subsidies, rebates, and direct or indirect 
remunerations.
    Network pharmacy means a licensed pharmacy that is not a mail order 
pharmacy and that is under contract with an endorsed sponsor to provide 
negotiated prices to its card enrollees and accept transitional 
assistance as payment for covered discount card drugs provided to its 
transitional assistance enrollees.
    New Medicare managed care organization means an entity applying for 
approval to enter into a new contract with CMS to offer a new, 
coordinated care plan or plans as described in section 1851(a)(2)(A) of 
the Act under Medicare Part C and an exclusive card program under the 
Medicare Drug Discount Card Program.
    Over-the-counter drug means a non-prescription drug.
    Part C organization means an organization offering a Part C plan.
    Part C plan means a plan described in section 1859(b)(1) of the Act.
    Part D plan has the meaning given the term at Sec. 423.4.
    Pharmacy network means the group of network pharmacies under 
contract with an endorsed sponsor.
    Poverty line means the income level defined in section 673(2) of the 
Community Services Block Grant Act, 42 U.S.C. 9902(2), including any 
revision required by such section, applicable to the family size 
involved.
    Rural means a five-digit zip code in which the population density is 
less than 1000 persons per square mile.
    Second enrollment year means the period beginning on January 1, 2005 
and ending on December 31, 2005.
    Solicitation means the application materials identified in the 
notice CMS publishes in the Federal Register announcing its intention to 
accept and consider applications from applicants

[[Page 72]]

seeking Medicare endorsement for their prescription drug discount card 
programs.
    Special election period means the period beginning the day after the 
effective date of an individual's disenrollment from an endorsed 
discount card program for one of the reasons listed in Sec. 
403.811(b)(2). The length of any given election period will be specified 
by CMS in a form and manner that supports the goals of the Medicare Drug 
Discount Card Program.
    Special endorsed sponsor means an endorsed sponsor who has received 
special endorsement by CMS.
    Special endorsement means an endorsement granted under Sec. 403.816 
or Sec. 403.817.
    Standard enrollment form means an enrollment form or other approved 
process for enrolling individuals into an endorsed program that 
incorporates the standard elements provided by CMS.
    Subcontractor means an organization or entity doing business in the 
United States with which an applicant or endorsed sponsor enters into a 
contract or other legal arrangement in connection with the operation of 
a prescription drug discount card program.
    Suburban means a five-digit zip code in which the population density 
is between 1000 and 3000 persons per square mile.
    Transition period means the period beginning on January 1, 2006 and 
ending, for individuals enrolled for coverage under Part D, on the 
effective date of the individual's coverage, and for individuals not so 
enrolled, on the last day of the initial Part D open enrollment period.
    Transitional assistance means a subsidy that transitional assistance 
enrollees may apply toward the cost of covered discount card drugs in 
the manner described in Sec. 403.808(d).
    Transitional assistance effective date means the date on which a 
transitional assistance enrollee can access transitional assistance.
    Transitional assistance enrollee means an individual described in 
Sec. 403.810(b) who has applied for and been determined eligible for 
transitional assistance and has enrolled in a discount card program.
    Urban means a five-digit zip code in which the population density is 
greater than 3000 persons per square mile.

[68 FR 69915, Dec. 15, 2003, as amended at 70 FR 52022, Sept. 1, 2005]



Sec. 403.804  General rules for solicitation, application and Medicare 

endorsement period.

    (a) Application. (1) Except as provided in paragraph (a)(2) of this 
section, an applicant must submit an application to CMS by the deadline 
announced in the solicitation to be eligible for Medicare endorsement of 
its prescription drug discount card program. The applicant must certify 
that based on best knowledge, information, and belief, the reported 
information is accurate, complete, truthful, and supportable.
    (2) A new Medicare managed care organization may simultaneously 
apply to offer a new Part C plan or plans and an exclusive card program 
after the deadline announced in the solicitation. New Medicare managed 
care organizations seeking endorsement of their prescription drug 
discount card programs must submit an application to CMS at the time 
that they submit their Part C applications. New Medicare managed care 
organizations will be eligible for endorsement provided CMS approves 
their Part C application, the new Medicare managed care organizations 
demonstrate to CMS that they meet the criteria under paragraph (b) of 
this section, and the new Medicare managed care organizations 
demonstrate that they will meet the requirements of paragraph (e)(2) of 
this section.
    (b) Eligibility to receive endorsement. Except as specified in 
Sec. Sec. 403.814, 403.816 and 403.817, an applicant will be eligible 
for endorsement if its application demonstrates to CMS's satisfaction 
that the applicant meets the requirements of Sec. 403.806(a) and Sec. 
403.806(b)(1) and that it would operate its endorsed program in a manner 
consistent with the requirements of Sec. 403.806(b)(2) and (b)(3) 
through Sec. 403.806(m). An applicant that submits a complete 
application that meets all of the requirements of this subpart will be 
eligible to enter into a contract with CMS to operate a Medicare-
endorsed prescription drug discount card program. Following the receipt 
of its Medicare endorsement, an

[[Page 73]]

endorsed sponsor must comply with the requirements of Sec. 
403.806(b)(2) and (b)(3) through Sec. 403.806(m) through the end of the 
transition period.
    (c) Ability to subcontract with other organizations and entities. 
(1) An applicant for endorsement may demonstrate that it meets the 
requirements of this subpart by combining with subcontractors.
    (2) Any subcontracts must be in final form satisfactory to CMS, 
signed by all applicable parties, and filed with CMS before an endorsed 
sponsor will be permitted to engage in any enrollment or information and 
outreach.
    (3) Once endorsed, an endorsed sponsor must ensure that its 
subcontractors comply with all applicable requirements of this subpart.
    (d) Period of endorsement. An applicant eligible to receive 
endorsement will be required to sign a contract with CMS agreeing to 
operate its approved Medicare-endorsed prescription drug discount card 
program(s) until the end of the transition period.
    (e)(1) Except as provided in paragraph (e)(2) of this section, we 
expect an endorsed sponsor to be ready by June 8, 2004, to initiate 
enrollment and fully operate its endorsed program in compliance with the 
requirements of Sec. 403.806(b)(2) and (b)(3) through Sec. 403.806(m).
    (2) A new Medicare managed care organization must be ready to 
initiate enrollment and fully operate its exclusive card program in 
compliance with the requirements of Sec. Sec. 403.806(b)(2) and (b)(3) 
through Sec. 403.806(m) upon approval of its Part C application and 
application for Medicare endorsement of its prescription drug discount 
card program.



Sec. 403.806  Sponsor requirements for eligibility for endorsement.

    Except as specified in Sec. 403.814, Sec. 403.816, and Sec. 
403.817, an endorsed sponsor must meet the following requirements:
    (a) Applicant experience. (1) An applicant must be a non-
governmental, single legal entity doing business in the United States.
    (2) An applicant must have 3 years of private sector experience in 
the United States in pharmacy benefit management, which is defined to 
mean--
    (i) Adjudicating and processing claims for drugs at the point of 
sale;
    (ii) Negotiating with prescription drug manufacturers and others for 
discounts, rebates, and/or other price concessions on prescription 
drugs; and
    (iii) Administering and tracking individuals' subsidies or benefits 
in real time.
    (3) A single legal entity which is either the applicant or a 
subcontractor must, at the time of application for Medicare endorsement, 
operate a pharmacy benefit program, a prescription drug discount card 
program, a low-income drug assistance program, or a similar program that 
serves at least 1 million covered lives.
    (b) Financial stability and business integrity. (1) An applicant 
must demonstrate a satisfactory record of the financial stability and 
business integrity of itself, any subcontractors on whom the applicant 
relies to satisfy the 3 years experience requirement in paragraph (a)(2) 
of this section and the 1 million covered lives requirement in paragraph 
(a)(3) of this section, and any subcontractors engaged by the applicant 
to perform the following activities: develop the pharmacy network; 
negotiate with manufacturers or pharmacies for rebates, discounts, or 
other price concessions; handle eligibility for or enrollment in the 
endorsed sponsor's endorsed discount card program and/or transitional 
assistance; and administer transitional assistance.
    (2) An endorsed sponsor and any subcontractors described in 
paragraph (b)(1) of this section must maintain a satisfactory record of 
financial stability and business integrity during the term of the 
endorsed program.
    (3) Medicare endorsement of a discount card program shall not be 
construed to express or imply any opinion that an endorsed sponsor or 
any subcontractor of an endorsed sponsor is in compliance with or not 
liable under the False Claims Act, anti-kickback statute (section 
1128B(b) of the Act), or other legal authorities for any improper 
billing, claims submission, or related conduct.
    (c) Compliance with applicable law. An endorsed sponsor must comply 
with all

[[Page 74]]

applicable Federal and State laws, including the Federal anti-kickback 
statute (section 1128B(b) of the Act).
    (d) Prescription drug offering. An endorsed sponsor must comply with 
the following discount, rebate, and formulary requirements:
    (1) Offer all of its discount card enrollees negotiated prices on 
covered discount card drugs, which may be limited to those covered 
discount card drugs included on the endorsed sponsor's formulary.
    (2) If the endorsed sponsor uses a formulary, offer a negotiated 
price on at least one covered discount card drug in each of the lowest 
level categories for each of the therapeutic groups representing the 
drugs most commonly needed by Medicare beneficiaries as determined by 
CMS. A specific covered discount card drug may not be used to fulfill 
this requirement for more than one category.
    (3) Offer a negotiated price on a generic drug in at least 55 
percent of the lowest level categories in each of the therapeutic groups 
representing the drugs most commonly needed by Medicare beneficiaries as 
determined by CMS.
    (4) In setting negotiated prices under this section, an endorsed 
sponsor may vary its prices and the drugs included on the formulary by 
pharmacy contract and enrollee characteristics, such as transitional 
assistance eligibility status.
    (5) Synchronize changes in the list of, and negotiated prices for, 
covered discount card drugs included in the endorsed sponsor's formulary 
with formulary and negotiated prices published on a price comparison Web 
site, as described in paragraph (i)(4)(v) of this section.
    (6) Obtain rebates, discounts, or other price concessions from 
manufacturers on covered discount card drugs and pass a share of such 
concessions to enrollees through negotiated prices.
    (7) Guarantee that network and mail order pharmacies provide the 
lower of the negotiated price or usual and customary price when a 
covered discount card drug for a negotiated price is available at the 
point of sale.
    (8) Guarantee that a network pharmacy, at the point of sale, inform 
a discount card enrollee of any differential between the price of a 
prescribed drug (if it is a covered discount card drug) and the price of 
the lowest priced generic covered discount card drug that is 
therapeutically equivalent and bioequivalent and available at such 
pharmacy. Mail order pharmacies are to provide this information at the 
time of delivery of the drug.
    (9) Except during the week of November 15, 2004 (which coincides 
with the beginning of the annual coordinated election period), ensure 
that any increase in the negotiated price for a covered discount card 
drug does not exceed an amount proportionate to the change in the drug's 
average wholesale price (AWP), and/or an amount proportionate to the 
changes in the endorsed sponsor's cost structure, including material 
changes to any discounts, rebates, or other price concessions the 
endorsed sponsor receives from a pharmaceutical manufacturer or 
pharmacy.
    (e) Transitional assistance administration. An endorsed sponsor must 
administer transitional assistance funds, including any roll-over funds 
as described in Sec. 403.808(f), for transitional assistance enrollees, 
through the following procedures:
    (1) Establish accounting procedures to manage the transitional 
assistance funds for each transitional assistance enrollee.
    (2) Ensure that transitional assistance funds are applicable to, and 
only to, all covered discount card drugs available at the endorsed 
sponsors' network and mail order pharmacies, regardless of formulary.
    (3) Ensure that, at network and mail order pharmacies, transitional 
assistance funds are applied at the lower of negotiated price (if any) 
and the pharmacy's usual and customary price.
    (4) Ensure that network pharmacies make available to the 
transitional assistance enrollee, electronically or by telephone, at the 
point-of-sale of covered discount card drugs, the amount of transitional 
assistance remaining available to the transitional assistance enrollee. 
Mail order pharmacies are to make this information available by 
telephone.
    (5) Maintain a toll-free telephone number that discount card 
enrollees

[[Page 75]]

may use to determine their transitional assistance balances.
    (6) Enforce coinsurance requirements described in Sec. 403.808(e) 
and ensure that the portion of the price paid through coinsurance is not 
deducted from the total transitional assistance funds available to the 
discount card enrollee.
    (f) Service area and pharmacy access. An endorsed sponsor must meet 
the following requirements for its service area and its pharmacy 
network:
    (1) The service area must cover one or more States.
    (2) The endorsed sponsor's discount card program must be available 
to all eligible individuals residing in each State in the endorsed 
sponsor's service area and may not be offered to individuals residing 
outside of the United States.
    (3) The endorsed sponsor must have a contracted pharmacy network, 
consisting of pharmacies other than mail-order pharmacies, sufficient to 
ensure that for beneficiaries residing in the endorsed sponsor's service 
area the following requirements are satisfied:
    (i) At least 90 percent of Medicare beneficiaries, on average, in 
urban areas served by the endorsed program, live within 2 miles of a 
network pharmacy;
    (ii) At least 90 percent of Medicare beneficiaries, on average, in 
suburban areas served by the endorsed program, live within 5 miles of a 
network pharmacy; and
    (iii) At least 70 percent of Medicare beneficiaries, on average, in 
rural areas served by the endorsed program, live within 15 miles of a 
network pharmacy.
    (4) The endorsed sponsor's pharmacy network may be supplemented by 
pharmacies offering home delivery via mail-order, provided the 
requirements of paragraph (f)(3) of this section are met.
    (g) Information and outreach and customer service. (1) An endorsed 
sponsor must provide through the Internet and some other tangible medium 
(such as a mailing) to Medicare beneficiaries information and outreach 
materials describing its endorsed drug card program, including the 
following information--
    (i) The enrollment fee;
    (ii) Negotiated prices offered for covered discount card drugs;
    (iii) If offered, discounts on over-the-counter drugs;
    (iv) Any other products or services offered under the endorsement; 
and
    (v) Any other information that CMS determines is necessary for a 
full description of the endorsed discount drug card program.
    (2) An endorsed sponsor must include on a Web site the following:
    (i) Information regarding when the Web site was last updated; and
    (ii) A disclaimer that the information on the Web site may not be 
current.
    (3) An endorsed sponsor must use the following forms which 
incorporate standard elements provided by CMS:
    (i) An enrollment form (except as may be modified for an exclusive 
card sponsor as discussed in Sec. 403.814(b)(5)(iii); and
    (ii) An eligibility determination notice.
    (4) An endorsed sponsor must provide to each enrollee a card that 
complies with National Council for Prescription Drug Programs standards.
    (5) An endorsed sponsor must meet the following requirements for the 
review and approval of information and outreach materials:
    (i) Comply with the Information and Outreach Guidelines published by 
CMS except as provided in paragraph (g)(5)(vi) of this section.
    (ii) Except as provided in paragraph (g)(5)(iii) of this section, 
not distribute any information and outreach materials until or unless 
they are approved by CMS.
    (iii) If CMS does not disapprove the initial submission of 
information and outreach materials within 30 days of receipt of these 
materials, the materials are deemed approved under paragraph (g)(5)(ii) 
of this section.
    (iv) Information and outreach materials may discuss only products or 
services inside the scope of endorsement, as described in paragraph (h) 
of this section.
    (v) Information and outreach materials include the same kinds of 
materials described in 42 CFR 422.80(b), as well as the enrollment form, 
eligibility determination form, and membership

[[Page 76]]

card described in paragraphs (g)(3) and (g)(4) of this section, Web site 
content, and information regarding discounts for over-the-counter drugs.
    (vi) All materials related to products and services that are Part D 
plans must comply with the requirements specified in Sec. 423.50 of 
this chapter.
    (6) An endorsed sponsor must maintain a toll-free customer call 
center that is open during usual business hours and that provides 
customer telephone service, including to pharmacists, in accordance with 
standard business practices. The endorsed sponsor must inform enrollees 
that the toll-free telephone number provides information on the amount 
of remaining transitional assistance, in accordance with paragraph 
(e)(5) of this section.
    (7) An endorsed sponsor must provide a system to reduce the 
likelihood of medical errors and adverse drug interactions and to 
improve medication use.
    (h) Products and services inside and outside the scope of the 
endorsement. (1) An endorsed sponsor may provide, under the endorsement, 
only those products and services inside the scope of the endorsement, 
including conducting enrollment. An endorsed sponsor must ensure that 
discount card enrollees are not charged any additional fee (other than 
the enrollment fee allowed under Sec. 403.811(c)) for products or 
services inside the scope of the endorsement.
    (2) Products and services inside the scope of the endorsement are 
limited to--
    (i) Products or services offered for no additional fee, other than 
the enrollment fee allowed under Sec. 403.811(c), that are directly 
related to a covered discount card drug; or
    (ii) A discounted price for an over-the-counter drug.
    (i) Reporting. (1) An endorsed sponsor must report to CMS on a 
periodic basis information on the major features of the endorsed 
sponsor's programs that correspond to the qualifications for 
endorsement, including, but not limited to, information concerning--
    (i) Savings from pharmacies and manufacturers obtained through 
rebates, discounts, and other price concessions;
    (ii) Savings shared with discount card enrollees by manufacturer, by 
all retail pharmacies, by all mail order pharmacies, and by all brand 
name and all generic covered discount card drugs;
    (iii) Dispensing fees;
    (iv) Certified (by the chief financial officer) financial accounting 
records on transitional assistance used by the transitional assistance 
enrollees in each month;
    (v) Participant utilization and spending statements;
    (vi) Utilization and spending for selected drugs;
    (vii) Performance on customer service metrics such as call center 
performance;
    (viii) Grievance logs; and
    (ix) Endorsed sponsor's compliance with the pharmacy network access 
standards.
    (2) An endorsed sponsor must provide notice of, and the rationale 
for, negotiated price increases, except for increases during the week of 
November 15, 2004, due to reasons other than changes in average 
wholesale price (AWP).
    (3) An endorsed sponsor must certify that based on best knowledge, 
information, and belief, the reported information is accurate, complete, 
truthful, and supportable.
    (4) Through a price comparison Web site, an endorsed sponsor must 
report the following information:
    (i) Customer service hours;
    (ii) Customer service contact information;
    (iii) Endorsed program Web site address;
    (iv) Annual enrollment fee; and
    (v) Negotiated prices (including any applicable dispensing fee), for 
every covered discount card drug included in the discount card program's 
offering.
    (5) CMS may require endorsed sponsors to submit, in standard 
terminology, descriptions of other discount card related services they 
provide, such as pharmacist services.
    (j) Grievance process. An endorsed sponsor must establish and 
maintain a grievance process. This process must be designed to track and 
appropriately address in a timely manner enrollees' complaints about any 
aspect of their

[[Page 77]]

endorsed program for which the endorsed sponsor is responsible.
    (k) Eligibility, enrollment, and disenrollment. (1) An endorsed 
sponsor must make preliminary eligibility determinations in accordance 
with Sec. 403.810 and conduct enrollment and disenrollment in 
accordance with Sec. 403.811.
    (l) Authorized representative. An endorsed sponsor must treat an 
individual's authorized representative as the individual, if under 
applicable law, the authorized representative has the legal authority to 
act on behalf of the individual with respect to the action at issue.
    (m) Other. An endorsed sponsor must meet the requirements of 
Sec. Sec. 403.812, 403.813, and 403.822 of this subpart.

[68 FR 69915, Dec. 15, 2003, as amended at 70 FR 52023, Sept. 1, 2005]



Sec. 403.808  Use of transitional assistance funds.

    (a) Individuals determined eligible for transitional assistance in 
2004. Subject to paragraph (d) of this section, an individual who, in 
calendar year 2004, is determined eligible for transitional assistance 
under Sec. 403.810(b) is entitled to the following:
    (1) $600 in calendar year 2004; and
    (2) $600 in calendar year 2005.
    (b) Individuals determined eligible for transitional assistance in 
2005. Subject to paragraph (d) of this section, an individual who, in 
calendar year 2005, is determined eligible for transitional assistance 
under Sec. 403.810(b) is entitled to one of the following amounts for 
calendar year 2005:
    (1) If the complete application for the individual's transitional 
assistance eligibility is received on or after January 1, 2005 and 
before April 1, 2005, $600.
    (2) If the complete application for the individual's transitional 
assistance eligibility is received on or after April 1, 2005 and before 
July 1, 2005, $450.
    (3) If the complete application for the individual's transitional 
assistance eligibility is received on or after July 1, 2005 and before 
October 1, 2005, $300.
    (4) If the complete application for the individual's transitional 
assistance eligibility is received on or after October 1, 2005 and on or 
before December 31, 2005, $150.
    (c) Payment of enrollment fee. An individual found eligible for 
transitional assistance is entitled to have CMS pay the annual 
enrollment fee to the endorsed sponsor on his or her behalf.
    (d) Conditions on use of transitional assistance. A transitional 
assistance enrollee may access the transitional assistance described in 
paragraphs (a) and (b) of this section only if the following conditions 
are met:
    (1) Except as provided in Sec. 403.814(b)(3)(v), the transitional 
assistance funds are applied toward the cost of a covered discount card 
drug obtained under the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program;
    (2) The individual pays a coinsurance amount in accordance with 
Sec. 403.808(e);
    (3) The individual purchases the covered discount card drug on or 
after the individual's transitional assistance effective date; and
    (4) The individual is enrolled in the Medicare Prescription Drug 
Discount Card and Transitional Assistance Program on the date the 
individual's claim for the covered discount card drug is adjudicated.
    (e) Coinsurance. If sufficient transitional assistance funds are 
available, transitional assistance funds must be expended in accordance 
with the following:
    (1) For beneficiaries with incomes at or below 100 percent of the 
poverty line, 95 percent of the price of a covered discount card drug 
must be paid from the available transitional assistance funds.
    (2) For beneficiaries with incomes greater than 100 percent but at 
or below 135 percent of the poverty line, 90 percent of the price of a 
covered discount card drug must be paid from the available transitional 
assistance funds.
    (f) Rollover. An individual with transitional assistance retains 
access to any balance of transitional assistance not expended in a 
calendar year during the next calendar year, up to and including the 
transition period, if the individual--
    (1) Remains in his or her current endorsed discount card program;
    (2) Elects a new endorsed program in an Annual Coordinated Election 
Period; or

[[Page 78]]

    (3) Is eligible for a Special Election Period under Sec. 
403.811(b)(2) and elects a new endorsed discount card program during 
such Special Election Period.



Sec. 403.810  Eligibility and reconsiderations.

    (a) Eligibility for an endorsed discount card program. An individual 
is eligible to enroll in an endorsed discount card program only if such 
individual meets the following conditions:
    (1) The individual is entitled to benefits, or enrolled, under 
Medicare Part A or enrolled under Medicare Part B; and
    (2) The individual, at the time of applying to enroll in an endorsed 
discount card program, is not enrolled in a State medical assistance 
program under Title XIX of the Act or under a waiver pursuant to section 
1115 of the Act, under which the individual is entitled to any medical 
assistance for outpatient prescribed drugs as described in section 
1905(a)(12) of the Act, except as allowed in Sec. 403.817(d).
    (b) Eligibility for transitional assistance. An individual is 
eligible to receive transitional assistance if, at the time of applying 
for transitional assistance, the individual meets the following 
conditions:
    (1) The individual meets the conditions in paragraph (a) of this 
section;
    (2) The individual resides in one of the 50 States or the District 
of Columbia;
    (3) The individual's income is not more than 135 percent of the 
poverty line applicable to the individual's family size;
    (4) The individual does not have coverage for covered discount card 
drugs under one or more of the following sources:
    (i) A group health plan or health insurance coverage, as these terms 
are defined under section 2791 of the Public Health Service Act, other 
than a Part C plan or a group health plan consisting solely of excepted 
benefits (such as a Medigap plan) as the term is defined under section 
2791 of the Public Health Service Act;
    (ii) Coverage provided under Chapter 55 of Title 10, United States 
Code, including TRICARE; or
    (iii) A Federal Employee's Health Benefits Program plan; and
    (5) The individual (or the individual's authorized representative) 
completes a standard enrollment form and signs and dates the form in 
accordance with Sec. 403.811(a)(4). By signing the form, the individual 
(or the individual's authorized representative) certifies, under penalty 
of perjury, that, to the best of the individual's knowledge, the 
information he or she provides on the form is accurate.
    (c) Special rule for QMBs, SLMBs and QIs. An individual is deemed to 
meet the income requirements in paragraph (b)(3) of this section if the 
individual is enrolled under Title XIX of the Act as a--
    (1) Qualified Medicare Beneficiary (QMB);
    (2) Specified Low-Income Medicare Beneficiary (SLMB); or
    (3) Qualified Individual (QI).
    (d) Duration of eligibility determinations. An individual determined 
eligible for the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program and, in the case of transitional 
assistance enrollees, for transitional assistance, shall remain eligible 
for the Medicare Prescription Drug Discount Card and Transitional 
Assistance Program and, in the case of transitional assistance 
enrollees, for transitional assistance for the duration of the 
individual's enrollment in the Medicare Prescription Drug Discount Card 
and Transitional Assistance Program.
    (e) Drug card and transitional assistance benefits not treated as 
benefits under other Federal programs. Any benefits received under the 
Medicare Prescription Drug Discount Card and Transitional Assistance 
Program must not be taken into account in determining an individual's 
eligibility for, or the amount of benefits under, any other Federal 
program.
    (f) Verification of eligibility. (1) CMS will verify eligibility to 
enroll in an endorsed discount card program or to receive transitional 
assistance.
    (2) If CMS is unable to verify an individual's eligibility or 
ineligibility for transitional assistance, CMS can require the 
individual to provide additional income information in a form and manner 
specified by CMS as one

[[Page 79]]

condition of eligibility for transitional assistance.
    (g) Reconsideration. (1) If an individual is determined ineligible 
to enroll in an endorsed discount card program under paragraph (a) of 
this section or determined ineligible to receive transitional assistance 
under paragraph (b) of this section, the individual (or the individual's 
authorized representative) has a right to request that an independent 
review entity under contract with CMS reconsider the determination.
    (2) Reconsideration requests must be filed within 60 days from date 
of notice of an ineligibility determination, unless the individual (or 
the individual's authorized representative) can demonstrate good cause 
for why the 60-day time frame should be extended.
    (3) An individual (or the individual's authorized representative) 
may submit additional documentary evidence or an explanation about his 
or her eligibility in writing to the independent review entity, as part 
of the reconsideration process.
    (4) Reconsideration decisions shall be issued by the independent 
review entity in writing and contain an explanation of the reasoning of 
the decision.



Sec. 403.811  Enrollment and disenrollment and associated endorsed sponsor 

requirements.

    (a) Enrollment process. (1) An individual (or an individual's 
authorized representative) applying to enroll in an endorsed discount 
card program must complete a standard enrollment form or other method 
allowed by CMS and provide such information to the endorsed discount 
card program in which the individual wishes to enroll.
    (2) An individual electing to join an endorsed discount card program 
that charges an annual enrollment fee, and who is not applying for 
transitional assistance, must agree to pay the annual enrollment fee, if 
any, in a form and manner determined by the endorsed card sponsor.
    (3) An individual applying for transitional assistance at the time 
that they apply for enrollment in an endorsed discount card program may 
only enroll in the endorsed discount card program at that time if CMS 
determines that the individual is eligible for transitional assistance. 
Individuals not found eligible for transitional assistance may enroll in 
an endorsed discount card program without applying for transitional 
assistance after being notified of their ineligibility for transitional 
assistance.
    (4) An individual applying for transitional assistance must complete 
a standard enrollment form and sign and date the form, certifying, under 
penalty of perjury or similar sanction for false statements, as to the 
accuracy of the information provided on the standard enrollment form.
    (5) Except as provided in Sec. 403.811(b)(4), an individual who is 
not currently enrolled in an endorsed card program seeking to enroll in 
the Medicare Prescription Drug Discount Card and Transitional Assistance 
Program may do so at any time during the enrollment period.
    (6) An individual may not be enrolled in more than one endorsed 
discount card program at a time.
    (7) An individual may enroll in only one endorsed discount card 
program per year during the enrollment period. An individual enrolling 
during the initial enrollment year, with the exception of the 
circumstances under paragraph (b)(2) of this section, may change 
election for the second enrollment year during the annual coordinated 
election period. During the second enrollment year, an individual may 
enroll in only one endorsed discount card program, unless the individual 
meets the circumstances described in paragraph (b)(2) of this section.
    (8) An individual remains enrolled in an endorsed discount card 
program elected unless--
    (i) The individual is disenrolled under paragraph (b) of this 
section;
    (ii) The individual elects a new program during the Annual 
Coordinated Election Period; or
    (iii) The endorsed sponsor terminates its endorsed discount card 
program, or is terminated.
    (9) No new enrollment in an endorsed discount card program or 
changing election of an endorsed discount card program is allowed during 
the transition period.

[[Page 80]]

    (10) Except as specified in Sec. 403.814(b)(6)(i), an individual 
may enroll in any endorsed discount card program, and only those 
endorsed discount card programs, offered in the individual's State of 
residence.
    (11) In order to access negotiated prices or transitional 
assistance, if applicable, an individual must be enrolled in an endorsed 
discount card program. Access to negotiated prices begins with the 
effective date of enrollment and ends with disenrollment. Access to 
transitional assistance begins with the transitional assistance 
effective date and ends for claims finalized on the date of 
disenrollment.
    (12) Except as provided in paragraph (b)(5) of this section, an 
individual may apply for transitional assistance at any time during the 
enrollment period.
    (b) Disenrollment process. (1) An enrollee may voluntarily disenroll 
at any time by notifying (or by having his authorized representative 
notify) the endorsed sponsor.
    (2) An enrolled individual who disenrolls during the enrollment 
period under the following circumstances is granted a Special Election 
Period in which the individual may enroll in another endorsed discount 
card program during the enrollment period:
    (i) A move of residence outside the service area of the current 
program;
    (ii) A change in residence to or from a long-term care facility;
    (iii) Enrollment in or disenrollment from a Part C plan or Medicare 
cost plan;
    (iv) An individual's current endorsed discount card program is 
terminated or terminates; or
    (v) Other exceptional circumstances, as defined by the Secretary.
    (3) Notification in order to effect a disenrollment is not required 
for an individual disenrolling from a terminating endorsed discount card 
program or enrolling in or disenrolling from a Medicare managed care 
plan offering an exclusive card program, or for individuals changing 
endorsed discount card programs during the Annual Coordinated Election 
Period.
    (4) A drug discount card enrollee who disenrolls from an endorsed 
discount card program other than for one of the reasons listed in 
paragraph (b)(2) of this section will no longer be determined eligible 
for the Medicare Prescription Drug Discount Card and Transitional 
Assistance Program and, if he or she disenrolls in 2004, must re-apply 
for the Medicare Prescription Drug Discount Card and Transitional 
Assistance Program should he or she wish to enroll in another endorsed 
discount card program for the second enrollment year.
    (5) An individual receiving transitional assistance who voluntarily 
disenrolls from an endorsed discount card program other than for one of 
the reasons listed in paragraph (b)(2) of this section will forfeit any 
transitional assistance remaining available to the individual on the 
date of disenrollment, and, if he or she disenrolls in 2004, must re-
apply for transitional assistance for 2005 in order to receive 
transitional assistance in 2005.
    (6) A discount card enrollee other than a transitional assistance 
enrollee may be involuntarily disenrolled from his or her endorsed 
discount card program for failure to pay the annual enrollment fee on a 
timely basis.
    (7) A discount drug card enrollee other than a transitional 
assistance enrollee may be charged another annual enrollment fee each 
time the individual disenrolls from one endorsed discount card program 
and enrolls in another endorsed discount card program during the 
calendar year.
    (c) Enrollment fees. (1) An endorsed sponsor may charge an annual 
enrollment fee of no more than $30 to each individual enrolled in its 
endorsed discount card program.
    (2) An endorsed sponsor may not collect an enrollment fee from any 
individual applying for or receiving transitional assistance.
    (3) The annual enrollment fee must not be prorated for portions of 
the year.
    (4) An endorsed sponsor must charge a uniform enrollment fee to 
every discount card eligible individual, or to the Secretary in the case 
of individuals receiving transitional assistance, residing in a State.
    (5) An endorsed sponsor must refund any enrollment fee collected 
from a discount card enrollee, or any State

[[Page 81]]

that has paid the enrollment fee on behalf of the discount card 
enrollee, during the calendar year during which the individual is 
determined eligible to receive transitional assistance.
    (6) An endorsed sponsor may not charge an annual enrollment fee 
during the transition period.



Sec. 403.812  HIPAA privacy, security, administrative data standards, and 

national identifiers.

    (a) HIPAA covered entities. An endorsed sponsor is a HIPAA covered 
entity and must comply with the standards, implementation 
specifications, and requirements in 45 CFR parts 160, 162, and 164 as 
set forth in this section. Those functions of an endorsed sponsor the 
performance of which are necessary or directly related to the operations 
of the endorsed discount card program are covered functions for purposes 
of applying to endorsed sponsors the standards, implementation 
specifications, and requirements in 45 CFR parts 160, 162, and 164.
    (b) HIPAA privacy requirements. An endorsed sponsor must comply with 
the standards, implementation specifications, and requirements in the 
Standards for Privacy of Individually Identifiable Health Information, 
45 CFR parts 160 and 164, subparts A and E, in the same manner as a 
health plan, except to the extent such requirements are temporarily 
waived by the Secretary.
    (c) Security requirements--(1) Standard. An endorsed sponsor must 
comply with the applicable standards, implementation specifications, and 
requirements in the HIPAA Security Rule, 45 CFR parts 160 and 164, 
subparts A and C, in the same manner as other covered entities as of the 
compliance date of such Rule.
    (2) Attestation. An applicant in its application shall--
    (i) Attest that, as of the initial enrollment date, it will have in 
place appropriate administrative, technical, and physical safeguards to 
protect the privacy of protected health information in accordance with 
45 CFR 164.530(c); and
    (ii) Attest that its information security measures will meet the 
standards, implementation specifications, and requirements of 45 CFR 
part 164 subparts A and C as of the initial enrollment date, or, if 
unable to make this attestation, provide a plan for coming into 
compliance with these requirements by the compliance date of the 
Security Rule set forth in 45 CFR part 164, subpart C.
    (d) Administrative data standards. An endorsed sponsor must comply 
with any applicable standards, implementation specifications, and 
requirements in the Standards for Electronic Transactions under 45 CFR 
parts 160 and 162 subparts I through R.
    (e) Unique identifiers. An endorsed sponsor must comply with any 
applicable standards, implementation specifications, and requirements 
regarding standard unique identifiers under 45 CFR parts 160 and 162 as 
of the compliance date of any final rule for standard unique 
identifiers.
    (f) Applicability of other regulations. Nothing in this paragraph or 
in Sec. 403.813 shall be deemed a modification of parts 160, 162 and 
164 of title 45, Code of Federal Regulations or otherwise modify the 
applicability of such regulations to other organizations or covered 
entities independently subject to the mandates of HIPAA. If an endorsed 
sponsor is also a health plan, health care provider, or health care 
clearinghouse, nothing is this paragraph shall impair or otherwise 
affect the application of HIPAA or parts 160, 162 and 164 of title 45, 
Code of Federal Regulations to such entity and its performance of those 
functions which make such entity a health plan, health care provider, or 
health care clearinghouse.



Sec. 403.813  Marketing limitations and record retention requirements.

    (a) Marketing limitations. (1) An endorsed sponsor may only market 
the following:
    (i) Those products and services offered under the endorsed program 
that are inside the scope of endorsement defined in Sec. 403.806(h) and 
permitted under Sec. 403.812(b).
    (ii) A Part D plan offered by the endorsed sponsor or an affiliated 
organization of the endorsed sponsor.
    (2) An endorsed sponsor may not request that a drug card enrollee or 
an

[[Page 82]]

individual seeking to enroll in its endorsed discount card program 
authorize the endorsed sponsor to use or disclose individually 
identifiable health information for purposes of marketing any product or 
service not allowed under paragraph (a)(1) of this section.
    (3) An endorsed sponsor may not co-mingle any materials related to 
the marketing of products and services allowed under paragraph (a)(1) of 
this section with other marketing materials.
    (4) Following termination of an endorsed sponsor's endorsement under 
Sec. Sec. 403.820(c), (d) or (e) or termination of the Medicare Drug 
Discount Card and Transitional Assistance Program, a drug card 
enrollee's individually identifiable health information collected or 
maintained by an endorsed sponsor may not be used or disclosed for 
purposes of marketing any product or service.
    (b) Record retention standard. (1) An endorsed sponsor must retain 
records that it creates, collects, or maintains while participating in 
the Medicare Drug Discount Card and Transitional Assistance Program as 
part of its operations of an endorsed program for at least 6 years 
following termination of such program, or, in the event the endorsed 
sponsor's endorsement is terminated under Sec. 420.820(c), (d), or (e) 
of this chapter at least 6 years following termination of such 
endorsement. The Secretary may extend the six-year retention period if 
an endorsed sponsor's records relate to an ongoing investigation, 
litigation, or negotiation by the Secretary, the Department of Health 
and Human Services Office of Inspector General, the Department of 
Justice, or a State, or such documents otherwise relate to suspicions of 
fraud and abuse or violations of Federal or State law.
    (2) For the period during which an endorsed sponsor retains records 
as specified in paragraph (b)(1) of this section, an endorsed sponsor 
must continue to apply security and privacy protections to such records 
and the information contained therein to the same extent endorsed 
sponsors are required to do so under Sec. 403.812(b) and Sec. 
403.812(c)(1) prior to termination.

[68 FR 69915, Dec. 15, 2003, as amended at 70 FR 52023, Sept. 1, 2005]



Sec. 403.814  Special rules concerning Part C organizations and Medicare cost 

plans and their enrollees.

    (a) General requirements. (1) A Part C organization and Medicare 
cost plan may not require enrollment in an endorsed discount card 
program as a condition for enrollment in its Part C plan or Medicare 
cost plan.
    (2) A Part C organization may subsidize the enrollment fee for an 
endorsed discount card program, whether operated by the Part C 
organization or another endorsed sponsor, for individuals described in 
Sec. 403.810(a), provided that any such benefit is reflected in the 
Part C organization's Adjusted Community Rate filing.
    (b) Exclusive card sponsors. (1) A Medicare managed care 
organization may elect to become an exclusive card sponsor by limiting 
enrollment in its endorsed discount card program to individuals 
described in Sec. 403.810(a) who are enrolled in any of its Medicare 
managed care plans. The Medicare managed care organization must be the 
applicant for endorsement in order to offer an exclusive card program. 
Such an election must be made at the time of application for 
endorsement.
    (2) Except as noted in paragraphs (b)(3) and (b)(4) of this section, 
an exclusive card sponsor must comply with all requirements for endorsed 
sponsors noted in Sec. 403.804 and Sec. 403.806.
    (3) An exclusive card sponsor is deemed to meet or is exempt from 
certain specific requirements listed in Sec. 403.806 as follows:
    (i) An exclusive card sponsor is deemed to meet the pharmacy network 
requirement in Sec. 403.806(f)(3) if its pharmacy network is not 
limited to mail-order pharmacies and is equivalent to the pharmacy 
network used in its Medicare managed care plan and such pharmacy network 
has been approved by the Secretary, or, if its Medicare managed care 
plan does not use a pharmacy network, the Secretary determines that the 
pharmacy network provides sufficient access to covered discount card 
drugs at negotiated prices for discount card enrollees under the 
standard set forth under 42 CFR 422.112 for a Part C organization 
described in section 1851(a)(2)(A) of the Act, or

[[Page 83]]

under 42 CFR 417.416(e) for a Medicare cost plan.
    (ii) An exclusive card sponsor is deemed to meet the service area 
requirements in Sec. 403.806(f)(1) and (f)(2) if it operates in a 
service area equivalent to its Medicare managed care plan's service 
area.
    (iii) An exclusive card sponsor is deemed to meet the requirement 
for financial stability and business integrity in Sec. 403.806(b) 
through compliance with Sec. 422.400 of this chapter (if a Part C 
organization described in section 1851(a)(2)(A) of the Act) or 
compliance with Sec. 417.120 and Sec. 417.122 of this chapter (if a 
Medicare cost plan).
    (iv) An exclusive card sponsor is deemed to meet the covered lives 
requirement in Sec. 403.806(a)(3).
    (v) An exclusive card sponsor is deemed to meet the requirements of 
Sec. 403.806(e)(2) if it ensures that transitional assistance funds are 
applied to, and only to, the cost to transitional assistance enrollees 
of any covered discount card drugs obtained from a network or mail order 
pharmacy included in the exclusive card sponsor's pharmacy network, and 
at the option of the exclusive card sponsor, any covered discount card 
drug obtained under an outpatient prescription drug benefit offered 
under the affiliated Medicare managed care plan, including any 
deductibles, co-payments, coinsurance, and other cost-sharing amounts 
for which transitional assistance enrollees are responsible under the 
Medicare managed care plan's outpatient prescription drug benefit.
    (4) As the Secretary determines appropriate on a case-by-case basis, 
any additional requirements discussed in Sec. 403.804 and Sec. 
403.806, except for the requirements in Sec. 403.812 and Sec. 403.813, 
may be waived or modified on behalf of an exclusive card sponsor if:
    (i) The requirements are duplicative of or conflict with the 
requirements that a Medicare managed care organization must meet either 
under Part C or under section 1876 of Title XVIII of the Act; or
    (ii) The waiver or modification is necessary to improve coordination 
between benefits under the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program and the benefits either under Part C or 
under section 1876 of Title XVIII of the Act.
    (iii) The applicant seeking to become an exclusive card sponsor 
requests such waivers or modifications in writing in a manner required 
by the Secretary.
    (5) An exclusive card sponsor may conduct group enrollment according 
to the following rules:
    (i) The exclusive card sponsor must seek CMS verification that its 
Medicare managed care members are individuals described in Sec. 
403.810(a) and enroll such individuals as a group into its exclusive 
card program.
    (ii) The exclusive card sponsor must give all individuals it is 
enrolling as a group the opportunity to decline enrollment, and the 
opportunity to apply for transitional assistance.
    (iii) The exclusive card sponsor may use a modified version of the 
standard enrollment form described in Sec. 403.806(g)(3) or other CMS-
approved process for group enrollment in its endorsed discount card 
program.
    (6) An individual enrolled in a Medicare managed care plan offered 
by a Medicare managed care organization offering an exclusive card 
program to individuals enrolled in such Medicare managed care plan is 
subject to the following requirements:
    (i) The individual may enroll only in the endorsed discount card 
program offered by his or her Medicare managed care organization.
    (ii) If the exclusive card sponsor group elects to group enroll into 
an exclusive card program members of the Medicare managed plan, the 
individual must actively decline enrollment to avoid enrollment in the 
exclusive card program.
    (c) Non-uniformity of Benefits. Implementation of the Medicare 
Prescription Drug Discount Card and Transitional Assistance Program, 
including the provision of transitional assistance and the payment or 
waiver of any enrollment fee by a Part C organization, will not be taken 
into account in applying the uniform premium and uniform benefits 
requirement in sections 1854(c) and 1854(f)(1)(D) of the Act and 42 CFR 
422.100(d)(2) and 42 CFR 422.312(b)(2).

[[Page 84]]



Sec. 403.815  Special rules concerning States.

    (a) Optional State payment of enrollment fee. (1) A State may enter 
into payment arrangements with endorsed sponsors to provide payment of 
some or all of endorsed discount card programs' enrollment fees for some 
or all of the State's individuals described in Sec. 403.810(a) who are 
not transitional assistance enrollees, provided the enrollment fees are 
paid directly by the State to the endorsed sponsor.
    (2) Expenditures made by a State for enrollment fees described in 
paragraph (a)(1) of this section must not be treated as State 
expenditures for which Federal matching payments are available under 
titles XIX or XXI of the Act.
    (b) Optional State payment of coinsurance. (1) A State may enter 
into payment arrangements with pharmacies to provide payment of some or 
all of coinsurance amounts described in Sec. 403.808(e) for some or all 
of the State's transitional assistance enrollees, provided the 
coinsurance amounts are paid directly by the State to the pharmacy.
    (2) Expenditures made by a State for coinsurance described in 
paragraph (b)(1) of this section must not be treated as State 
expenditures for which Federal matching payments are available under 
titles XIX or XXI of the Act.
    (c) Coinsurance for Qualified Medicare Beneficiaries. For 
transitional assistance enrollees who are qualified Medicare 
beneficiaries, any coinsurance liability under Sec. 403.808(e) must not 
be treated as Medicare cost-sharing coinsurance, under section 
1905(p)(3)(B) of the Act, for which a State would otherwise be required 
to pay.
    (d) State data. (1) A State must provide data on a monthly basis in 
an electronic format as determined necessary by the Secretary to 
effectuate the verification of beneficiary eligibility for the Medicare 
Prescription Drug Discount Card and Transitional Assistance Program.
    (2) Expenditures made by a State in complying with the requirements 
of paragraph (d)(1) of this section will be treated as State 
expenditures for which Federal matching payments are available under 
section 1903(a)(7) of the Act.



Sec. 403.816  Special rules concerning long-term care and I/T/U pharmacies.

    (a) In general. (1) An applicant for endorsement may submit an 
application to become a special endorsed sponsor for long-term care and/
or for I/T/U pharmacies.
    (2) Of qualified applicants, the Secretary will select at least two 
of the best-qualified applicants for special endorsement for long-term 
care and at least two of the best-qualified applicants for special 
endorsement for I/T/U pharmacies.
    (3) Applicants for special endorsement for long-term care must 
demonstrate in their applications that they meet the requirements in 
paragraph (b) of this section.
    (4) Applicants for special endorsement for I/T/U pharmacies must 
demonstrate in their applications that they meet the requirements in 
paragraph (d) of this section.
    (b) Long-term care. A special endorsed sponsor for long-term care 
must--
    (1) Apply transitional assistance toward the cost of covered 
discount card drugs obtained by transitional assistance enrollees who 
reside in long-term care facilities and who receive such prescription 
drugs through long-term care pharmacies;
    (2) Offer contractual arrangements to any long-term care pharmacy 
seeking reimbursement from transitional assistance for covered discount 
card drugs provided by such pharmacy to transitional assistance 
enrollees who reside in long-term care facilities;
    (3) Process any submitted claims from network pharmacies and out-of-
network long-term care pharmacies that supply covered discount card 
drugs to transitional assistance enrollees who reside in long-term care 
facilities, when such enrollees have unspent transitional assistance 
remaining;
    (4) Include special terms and conditions in its contracts with 
network pharmacies that are long-term care pharmacies to facilitate 
access to and the administration of transitional assistance to 
transitional assistance enrollees residing in long-term care facilities, 
including, but not limited to the following--

[[Page 85]]

    (i) Waiving penalties against long-term care pharmacies for 
submitting late claims to the special endorsed sponsor due to the 
pharmacy's coordination of benefits activities; and
    (ii) Permitting a long-term care pharmacy to limit its services to 
only transitional assistance enrollees who reside in a long-term care 
facility served by the long-term care pharmacy.
    (5) Except as noted in paragraph (c) of this section, comply with 
all requirements for endorsed sponsors noted in Sec. Sec. 403.804 and 
403.806.
    (c) Waiver of requirements. (1) The following requirements will not 
apply to or will be waived for special endorsed sponsors providing 
transitional assistance to long-term care residents:
    (i) Section 403.806(d) (relating to the prescription drug offering) 
shall not apply to long-term care pharmacies in the special endorsed 
sponsor's network; and
    (ii) Section 403.806(e)(4) (requiring information about the amount 
of transitional assistance remaining) shall not apply to long-term care 
pharmacies in the special endorsed sponsor's network.
    (2)(i) As the Secretary determines appropriate on a case-by-case 
basis, any additional requirements discussed in Sec. Sec. 403.804 and 
403.806, except for the requirements in Sec. Sec. 403.812 and 403.813, 
may be waived or modified on behalf of a special endorsed sponsor for 
long-term care if the waiver or modification is--
    (A) Necessary to enable the applicant to either initiate enrollment 
activities under the special endorsement within 6 months of enactment of 
section 1860D-31 of the Act, or accommodate the unique needs of long-
term care pharmacies; or
    (B) Compliance with the requirement(s) in question would be 
impracticable or inefficient.
    (ii) Applicants to become special endorsed sponsors for long-term 
care must request such waivers or modifications in writing in a manner 
required by the Secretary.
    (d) I/T/U pharmacies. A special endorsed sponsor for I/T/U 
pharmacies must--
    (1) Apply transitional assistance toward the cost of covered 
discount card drugs obtained by transitional assistance enrollees who 
are American Indians and Alaska Natives and who receive prescription 
drugs through I/T/U pharmacies as allowed under paragraph (d)(2) of this 
section;
    (2) Offer contractual arrangements to any I/T/U pharmacy that is in 
the special endorsed sponsor's service area and seeking reimbursement 
from transitional assistance for covered discount card drugs provided by 
such pharmacy to transitional assistance enrollees who are also American 
Indians/Alaska Natives;
    (3) Include special terms and conditions in its contracts with 
network I/T/U pharmacies to facilitate access to and the administration 
of transitional assistance for transitional assistance enrollees who are 
American Indians/Alaska Natives, including, but not limited to the 
following:
    (i) Permitting an I/T/U pharmacy to limit its services to only those 
transitional assistance enrollees who are American Indians/Alaska 
Natives, and
    (ii) Allowing an I/T/U pharmacy to select which drugs to stock, 
which may be a more limited set than other retail pharmacies.
    (4) Except as noted in paragraph (e) of this section, comply with 
all requirements for endorsed sponsors noted in Sec. Sec. 403.804 and 
403.806.
    (e) Waiver of requirements. (1) The following requirements will not 
apply to or will be waived for special endorsed sponsors providing 
transitional assistance through I/T/U pharmacies:
    (i) Section 403.806(d) (relating to the prescription drug offering) 
shall not apply to I/T/U pharmacies in the special endorsed sponsor's 
network; and
    (ii) Section 403.806(e)(4) (requiring information about the amount 
of transitional assistance remaining) shall not apply to I/T/U 
pharmacies in the special endorsed sponsor's network.
    (2)(i) As the Secretary determines appropriate on a case-by-case 
basis, any additional requirements discussed in Sec. Sec. 403.804 and 
403.806, except for the requirements in Sec. Sec. 403.812 and 403.813, 
may be waived or modified on behalf of a special endorsed sponsor for I/
T/U pharmacies if the waiver or modification is--
    (A) Necessary to enable the applicant to either initiate enrollment 
activities

[[Page 86]]

under the special endorsement within 6 months of enactment of section 
1860D-31 of the Act, or accommodate the unique needs of I/T/U 
pharmacies; or
    (B) Compliance with the requirement(s) in question would be 
impracticable or inefficient.
    (ii) Applicants to become special endorsed sponsors for I/T/U 
pharmacies must request such waivers or modifications in writing in a 
manner required by the Secretary.



Sec. 403.817  Special rules concerning the territories.

    (a) In general. (1) An applicant for endorsement may submit an 
application to become a special endorsed sponsor for all of the 
territories.
    (2) Of qualified applicants, the Secretary will select at least one 
of the best-qualified applicants to receive a special endorsement for 
the territories.
    (3) Applicants for special endorsement for the territories must 
demonstrate in their applications that they meet the requirements in 
paragraph (b) of this section.
    (b) Requirements--(1) Negotiated prices. A special endorsed sponsor 
for residents of the territories must provide access to negotiated 
prices in the territories.
    (2) Transitional assistance. Any transitional assistance in the 
territories must be in accordance with paragraph (e) of this section.
    (3) Requirements, exception. Except as specified in paragraph (c) of 
this section, a special endorsed sponsor for the territories must meet 
the requirements of Sec. Sec. 403.804 and 403.806.
    (c) Waiver of requirements and alternative requirements. (1) Section 
403.806(d)(8) (requiring information about price differentials) shall 
not apply to pharmacies located in the territories and which are in the 
special endorsed sponsor's pharmacy network.
    (2) Sections 403.806(f)(2) and (f)(3) will be deemed met if the 
special endorsed sponsor makes a good faith effort to secure the 
participation of retail and mail order pharmacies throughout a 
territory.
    (3)(i) As the Secretary determines appropriate on a case-by-case 
basis, any additional requirements discussed in Sec. Sec. 403.804 and 
403.806, except for the requirements in Sec. Sec. 403.812 and 403.813, 
may be waived or modified on behalf of a special endorsed sponsor for 
the territories if--
    (A) Such waiver is necessary to enable the applicant to either 
initiate enrollment activities under the special endorsement within 6 
months of enactment of section 1860D-31 of the Act, or accommodate the 
unique needs of pharmacies in the territories; or
    (B) Compliance with the requirement(s) in question would be 
impracticable or inefficient.
    (ii) Applicants to become special endorsed sponsors for the 
territories must request such waivers or modifications in writing in a 
manner required by the Secretary.
    (d) Other exceptions. A special endorsed sponsor for the territories 
may enroll in its endorsed discount card program Medicaid enrollees with 
coverage for outpatient prescription drugs, as described in Sec. 
403.810(a)(2).
    (e) Transitional assistance provided by Territories. (1) 
Transitional assistance in the territories may be administered only 
according to a plan submitted by a territory and approved by CMS.
    (2) Territories choosing to provide transitional assistance must 
submit a plan to CMS within 90 days of the publication of this 
regulation. The plan must--
    (i) Describe how funds allocated to the territory are to be used to 
cover the cost of covered discount card drugs obtained by individuals 
who reside in the territory, who are entitled to benefits under Medicare 
Part A or enrolled under Medicare Part B, and who have income at or 
below 135 percent of the poverty line for the contiguous United States; 
and
    (ii) Describe how the territory will ensure that amounts received 
under the allotment are to be used only to provide covered discount card 
drugs to those individuals determined eligible for transitional 
assistance, as described in paragraph (e)(2)(i) of this section, and
    (iii) Provide such written assurance for the requirements in 
paragraph (e)(2)(ii) of this section.
    (3) CMS will review and approve plans submitted and make allotments 
to territories with approved plans.

[[Page 87]]

    (4) CMS may request reports or information to substantiate that the 
territories have administered the program consistent with the 
territory's approved transitional assistance plan.



Sec. 403.820  Sanctions, penalties, and termination.

    (a) Intermediate sanctions. (1) For the violations listed in 
paragraph (a)(3) of this section, the following intermediate sanctions 
may be imposed on any endorsed sponsor:
    (i) Suspension of enrollment of Medicare beneficiaries.
    (ii) Suspension of information and outreach activities to Medicare 
beneficiaries.
    (2) Duration of sanctions. The intermediate sanctions continue in 
effect until CMS is satisfied that the deficiency on which the 
determination was based has been corrected and is not likely to recur.
    (3) Sanctionable violations. The violations for which intermediate 
sanctions may be imposed are as follows:
    (i) Substantial failure to maintain a contracted retail pharmacy 
network meeting the requirements of Sec. 403.806(f);
    (ii) Substantial failure to comply with CMS Information and Outreach 
Guidelines;
    (iii) Substantial failure to provide discount card enrollees with 
negotiated prices consistent with information reported to CMS for the 
price comparison Web site and/or reported by the endorsed sponsor;
    (iv) Except during the week of November 15, 2004 (which coincides 
with the beginning of the annual coordinated election period), 
substantial failure to ensure that the negotiated price for a covered 
discount card drug does not exceed an amount proportionate to the change 
in the drug's average wholesale price (AWP), and/or an amount 
proportionate to changes in the card sponsor's cost structure (including 
material changes to any discounts, rebates, or other price concessions 
the sponsor receives from a pharmaceutical manufacturer or pharmacy);
    (v) Charging drug card enrollees additional fees beyond a $30 
enrollment fee;
    (vi) Charging transitional assistance enrollees any enrollment fee;
    (vii) Charging a coinsurance more than 5 percent for those at or 
below 100 percent of the poverty line, or 10 percent for those above 100 
percent but at or below 135 percent of the poverty line;
    (viii) Substantial failure to administer properly the transitional 
assistance funding for transitional assistance enrollees;
    (ix) Substantial failure to provide CMS or its designees with 
requested information related to the endorsed sponsor's endorsed 
discount card operations; or
    (x) Failure to otherwise substantially comply with the requirements 
of this subpart, including failing to perform the operational 
requirements of this program or the failure to submit an acceptable plan 
of correction within the timeframe specified by CMS.
    (4) Written notice of proposed sanctions. (i) Prior to imposing 
sanctions, CMS will send a written notice to the endorsed sponsor 
stating the nature and basis of the proposed sanction.
    (ii) CMS will send a copy of the notice in paragraph (a)(4)(i) of 
this section to the Office of the Inspector General.
    (iii) CMS will allow the endorsed sponsor 15 days from the receipt 
of notice to provide evidence that it has not committed an act or 
omission that may fairly be characterized as a basis for sanction.
    (iv) Should an endorsed sponsor present evidence described in 
paragraph (a)(4)(iii) of this section and by the time limit described in 
that paragraph, a CMS official not involved in the original sanction 
determination shall review the evidence and provide the endorsed sponsor 
a concise written decision setting forth the factual and legal basis for 
the decision that affirms or rescinds the original determination.
    (5) Effective date of sanction. (i) A sanction is effective 15 days 
after the date that the endorsed sponsor is notified of the sanction or, 
if the endorsed sponsor timely seeks reconsideration of that sanction 
decision, on the date specified in the notice of CMS's reconsideration 
determination.
    (ii) The sanction remains in effect until CMS notifies the endorsed 
sponsor that CMS is satisfied that the basis

[[Page 88]]

for imposing the sanction has been corrected and is not likely to recur.
    (b) Civil monetary penalties--(1) OIG penalties. The Office of the 
Inspector General (OIG) may impose civil monetary penalties in 
accordance with 42 CFR parts 1003 and 1005 in addition to, or in place 
of, sanctions that CMS may impose, as described in paragraph (a) of this 
section, against an endorsed sponsor whom it determines has knowingly--
    (i) Misrepresented or falsified information in information and 
outreach or comparable material provided to program enrollee or other 
persons;
    (ii) Charged a program enrollee in violation of the terms of the 
endorsement contract; or
    (iii) Used transitional assistance funds in any manner that is 
inconsistent with the purpose of the transitional assistance program.
    (2) CMS penalties. If CMS determines that an endorsed sponsor has 
engaged in conduct that it knows or should know constitutes a violation 
as described in paragraph (a)(3) of this section, where the failure to 
perform involves the operational requirements of the program, CMS may 
impose civil monetary penalties in accordance with 42 CFR parts 1003 and 
1005 in addition to, or in place of, the sanctions that CMS may impose, 
as described in paragraph (a) of this section.
    (3) CMS or the OIG may impose civil monetary penalties of no more 
than $10,000 for each violation.
    (c) Termination of endorsement by CMS. (1) CMS may terminate the 
endorsement contract at any time with notice on the following bases:
    (i) Any of the bases for the imposition of intermediate sanctions as 
stated in paragraph (a)(3) of this section; or
    (ii) The endorsed sponsor engaged in false or misleading information 
and outreach practices; or
    (iii) The endorsed sponsor fails to comply with the requirement of 
Sec. 403.804(e).
    (2) CMS shall provide the endorsed sponsor written notice of 
termination 30 days prior to the CMS-determined effective date of the 
termination at which time the endorsed sponsor must do the following:
    (i) Provide its discount card enrollees notice of the termination 
within 10 days of receiving notice from CMS;
    (ii) Continue to provide services to its discount card enrollees for 
90 days after the discount card enrollees were sent the notice of 
termination from the endorsed sponsor; and
    (iii) Suspend all information and outreach and enrollment activities 
once enrollees have received the notice of termination.
    (3) Corrective action plan. Before terminating a contract, CMS shall 
provide the endorsed sponsor with reasonable opportunity to develop and 
receive CMS approval of a corrective action plan to correct the 
deficiencies that are the basis of the proposed termination.
    (d) Termination by endorsed sponsor--(1) Cause for termination. The 
endorsed sponsor may terminate its endorsement contract if CMS fails 
substantially to carry out the terms of the contract.
    (2) Card sponsor notice. The endorsed sponsor must give advance 
notice as follows:
    (i) To CMS, at least 90 days prior to the intended date of 
termination. This notice must specify the reasons why the endorsed 
sponsor is requesting contract termination; and
    (ii) To its discount card enrollees, by mail, at least 60 days prior 
to the termination effective date. This notice must include a written 
description of alternative endorsed discount card programs that serve 
the discount card enrollee's address.
    (3) Effective date of termination. The effective date of the 
termination is determined by CMS and is at least 90 days after the date 
CMS receives the endorsed sponsor's notice of intent to terminate.
    (e) Termination by mutual consent. (1) A contract may be modified or 
terminated at any time by written mutual consent.
    (2) If the contract is terminated by mutual consent, the endorsed 
sponsor must provide notice to its discount card enrollees as provided 
in paragraph (d)(2) of this section.
    (3) If the contract is modified by mutual consent, the endorsed 
sponsor must provide notice to its discount

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card enrollees of any changes that CMS determines are appropriate for 
notification within timeframes specified by CMS.
    (f) Appeal of contract determinations--(1) Scope. This section 
establishes the procedures for reviewing the following contract 
determinations:
    (i) A determination that an applicant is not qualified to enter into 
a contract with CMS under section 1860D-31 of the Act; and
    (i) A determination to terminate a contract with an endorsed sponsor 
in accordance with paragraph (c) of this section.
    (2) Notice of determination. When CMS makes an initial contract 
determination, it gives the endorsed sponsor or applicant written notice 
specifying--
    (i) The reasons for the determination; and
    (ii) The endorsed sponsor's or applicant's right to request 
reconsideration.
    (3) Effect of contract determination. The contract determination is 
final and binding unless a timely request for a reconsideration hearing 
is filed under this section.
    (4) Right to reconsideration. An endorsed sponsor whose contract is 
terminated or an applicant denied endorsement may request a hearing for 
reconsideration of the CMS contract determination.
    (5) Method and place for filing a request. A request for a 
reconsideration hearing must be made in writing and filed with the CMS 
Central Office.
    (6) Time for filing a request. The request for a reconsideration 
hearing must be filed within 15 days from the date of the notice of the 
initial determination.
    (7) Appointment of hearing officer. CMS shall appoint a hearing 
officer to conduct the reconsideration. The hearing officer shall be a 
representative of the Administrator and not otherwise a party to the 
contract determination.
    (8) Conduct of hearing. The endorsed sponsor or applicant may be 
represented by counsel and may present evidence and examine witnesses. A 
complete recording of the proceedings will be made and transcribed.
    (9) Reconsideration determination. A reconsideration determination 
is a new determination that--
    (i) Is based on a review of the contract determination, the evidence 
and findings upon which it was based, and any other written evidence 
submitted before notice of the reconsidered determination is mailed, 
including facts relating to the status of the endorsed sponsor 
subsequent to the contract determination; and
    (ii) Affirms, reverses, or modifies the initial contract 
determination.
    (10) Notice of reconsidered determination. As soon as practicable 
after the close of the hearing, the hearing officer issues a written 
reconsideration determination that contains the following:
    (i) Findings with respect to the applicant's qualifications to enter 
into or an endorsed sponsor's qualifications to remain under a contract 
with CMS under section 1860D-31 of the Act;
    (ii) A statement of the specific reasons for the reconsidered 
determination.
    (11) Effect of reconsidered determination. A reconsidered 
determination is final and binding on the parties and is not subject to 
judicial review.
    (g) Compliance with HIPAA. Failure of an endorsed sponsor to comply 
with HIPAA and/or the standards, implementation specifications, and 
requirements in 45 CFR parts 160, 162, and 164, as established in Sec. 
403.812, shall be a violation of HIPAA and may be enforced under 
sections 1176 and 1177 of the Act.



Sec. 403.822  Reimbursement of transitional assistance and associated sponsor 

requirements.

    (a) A Transitional Assistance Account is created within the Federal 
Supplementary Medical Insurance Trust Fund and kept separate from all 
other funds within that fund.
    (b) The Managing Trustee of the Transitional Assistance Account 
shall pay on a monthly basis from the Account the amounts certified by 
CMS as necessary to make payments for transitional assistance as allowed 
in Sec. 403.808.
    (c) Endorsed sponsors must routinely account to CMS for the 
transitional assistance provided to the transitional assistance 
enrollees for finalized (not

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pending, or denied) claims up to the allowed balance provided by CMS to 
the sponsor.
    (d) Payment transactions will be audited by the Secretary or his 
agent.
    (e) Federal funding in excess of the amount of the balance included 
in CMS's system is not permitted.

[[Page 91]]



                      SUBCHAPTER B_MEDICARE PROGRAM



PART 405_FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED--Table of Contents




Subpart A [Reserved]

Subpart B_Medical Services Coverage Decisions That Relate to Health Care 
                               Technology

Sec.
405.201 Scope of subpart and definitions.
405.203 FDA categorization of investigational devices.
405.205 Coverage of a non-experimental/investigational (Category B) 
          device.
405.207 Services related to a noncovered device.
405.209 Payment for a non-experimental/investigational (Category B) 
          device.
405.211 Procedures for Medicare contractors in making coverage decisions 
          for a non-experimental/investigational (Category B) device.
405.213 Re-evaluation of a device categorization.
405.215 Confidential commercial and trade secret information.

Subpart C_Suspension of Payment, Recovery of Overpayments, and Repayment 
                        of Scholarships and Loans

                           General Provisions

405.301 Scope of subpart.

   Liability for Payments to Providers and Suppliers, and Handling of 
                           Incorrect Payments

405.350 Individual's liability for payments made to providers and other 
          persons for items and services furnished the individual.
405.351 Incorrect payments for which the individual is not liable.
405.352 Adjustment of title XVIII incorrect payments.
405.353 Certification of amount that will be adjusted against individual 
          title II or railroad retirement benefits.
405.354 Procedures for adjustment or recovery--title II beneficiary.
405.355 Waiver of adjustment or recovery.
405.356 Principles applied in waiver of adjustment or recovery.
405.357 Notice of right to waiver consideration.
405.358 When waiver of adjustment or recovery may be applied.
405.359 Liability of certifying or disbursing officer.

  Suspension and Recoupment of Payment to Providers and Suppliers and 
                Collection and Compromise of Overpayments

405.370 Definitions.
405.371 Suspension, offset, and recoupment of Medicare payments to 
          providers and suppliers of services.
405.372 Proceeding for suspension of payment.
405.373 Proceeding for offset or recoupment.
405.374 Opportunity for rebuttal.
405.375 Time limits for, and notification of, administrative 
          determination after receipt of rebuttal statement.
405.376 Suspension and termination of collection action and compromise 
          of claims for overpayment.
405.377 Withholding Medicare payments to recover Medicaid overpayments.
405.378 Interest charges on overpayment and underpayments to providers, 
          suppliers, and other entities.

                   Repayment of Scholarships and Loans

405.380 Collection of past-due amounts on scholarship and loan programs.

                       Subpart D_Private Contracts

405.400 Definitions.
405.405 General rules.
405.410 Conditions for properly opting-out of Medicare.
405.415 Requirements of the private contract.
405.420 Requirements of the opt-out affidavit.
405.425 Effects of opting-out of Medicare.
405.430 Failure to properly opt-out.
405.435 Failure to maintain opt-out.
405.440 Emergency and urgent care services.
405.445 Renewal and early termination of opt-out.
405.450 Appeals.
405.455 Application to Medicare+Choice contracts.

          Subpart E_Criteria for Determining Reasonable Charges

405.500 Basis.
405.501 Determination of reasonable charges.
405.502 Criteria for determining reasonable charges.
405.503 Determining customary charges.
405.504 Determining prevailing charges.
405.505 Determination of locality
405.506 Charges higher than customary or prevailing charges or lowest 
          charge levels.

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405.507 Illustrations of the application of the criteria for determining 
          reasonable charges.
405.508 Determination of comparable circumstances; limitation.
405.509 Determining the inflation-indexed charge.
405.511 Reasonable charges for medical services, supplies, and 
          equipment.
405.512 Carriers' procedural terminology and coding systems.
405.515 Reimbursement for clinical laboratory services billed by 
          physicians.
405.517 Payment for drugs and biologicals that are not paid on a cost or 
          prospective payment basis.
405.520 Payment for a physician assistant's, nurse practitioner's, and 
          clinical nurse specialists' services and services furnished 
          incident to their professional services.
405.534 Limitation on payment for screening mammography services.
405.535 Special rule for nonparticipating physicians and suppliers 
          furnishing screening mammography services before January 1, 
          2002.

Subpart F [Reserved]

      Subpart G_Reconsiderations and Appeals Under Medicare Part A

405.701 Basis, purpose and definitions.
405.702 Notice of initial determination.
405.704 Actions which are initial determinations.
405.705 Actions which are not initial determinations.
405.706 Decisions of utilization review committees.
405.708 Effect of initial determination.
405.710 Right to reconsideration.
405.711 Time and place of filing request for reconsideration.
405.712 Extension of time to request reconsideration.
405.714 Withdrawal of request for reconsideration.
405.715 Reconsidered determination.
405.716 Notice of reconsidered determination.
405.717 Effect of a reconsidered determination.
405.718 Expedited appeals process.
405.720 Hearing; right to hearing.
405.722 Time and place of filing request for a hearing.
405.724 Departmental Appeals Board (DAB) review.
405.730 Court review.
405.732 Review of a national coverage determination (NCD).
405.740 Principles for determining the amount in controversy.
405.745 Amount in controversy ascertained after reconsideration.
405.747 Dismissal of request for hearing; amount in controversy less 
          than $100.
405.750 Time period for reopening initial, revised, or reconsidered 
          determinations and decisions or revised decisions of an ALJ or 
          the Departmental Appeals Board (DAB); binding effect of 
          determination and decisions.
405.753 Appeal of a categorization of a device.

           Subpart H_Appeals Under the Medicare Part B Program

405.801 Part B appeals--general description.
405.802 Definitions.
405.803 Initial determination.
405.804 Notice of initial determination.
405.805 Parties to the initial determination.
405.806 Effect of initial determination.
405.807 Request for review of initial determination.
405.808 Parties to the review.
405.809 Opportunity to submit evidence.
405.810 Review determination.
405.811 Notice of review determination.
405.812 Effect of review determination.
405.815 Amount in controversy for carrier hearing, ALJ hearing and 
          judicial review.
405.817 Principles for determining amount in controversy.
405.821 Request for carrier hearing.
405.822 Parties to a carrier hearing.
405.823 Carrier hearing officer.
405.824 Disqualification of carrier hearing officer.
405.825 Location of carrier hearing.
405.826 Notice of carrier hearing.
405.830 Conduct of the carrier hearing.
405.831 Waiver of right to appear at carrier hearing and present 
          evidence.
405.832 Dismissal of request for carrier hearing.
405.833 Record of carrier hearing.
405.834 Carrier hearing officer's decision.
405.835 Effect of carrier hearing officer's decision.
405.836 Authority of the carrier hearing officer.
405.841 Reopening initial or review determination of the carrier, and 
          decision of a carrier hearing officer.
405.842 Notice of reopening and revision.
405.850 Change of ruling or legal precedent.
405.853 Expedited appeals process.
405.855 ALJ hearing.
405.856 Departmental Appeals Board (DAB) review.
405.857 Court review.
405.860 Review of a national coverage determination (NCD).
405.870 Appointment of representative.
405.871 Qualifications of representatives.
405.872 Authority of representatives.
405.874 Appeals of CMS or a CMS contractor.

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405.877 Appeal of a categorization of a device.

   Subpart I_Determinations, Redeterminations, Reconsiderations, and 
             Appeals Under Original Medicare (Parts A and B)

405.900 Basis and scope.
405.902 Definitions.
405.904 Medicare initial determinations, redeterminations and appeals: 
          General description.
405.906. Parties to the initial determinations, redeterminations, 
          reconsiderations, hearings and reviews.
405.908 Medicaid State agencies.
405.910 Appointed representatives.
405.912 Assignment of appeal rights.

                         Initial Determinations

405.920 Initial determinations.
405.921 Notice of initial determination.
405.922 Time frame for processing initial determinations.
405.924 Actions that are initial determinations.
405.926 Actions that are not initial determinations.
405.927 Initial determinations subject to the reopenings process.
405.928 Effect of the initial determination.

                            Redeterminations

405.940 Right to a redetermination.
405.942 Time frame for filing a request for a redetermination.
405.944 Place and method of filing a request for a redetermination.
405.946 Evidence to be submitted with the redetermination request.
405.948 Conduct of a redetermination.
405.950 Time frame for making a redetermination.
405.952 Withdrawal or dismissal of a request for a redetermination.
405.954 Redetermination.
405.956 Notice of a redetermination.
405.958 Effect of a redetermination.

                             Reconsideration

405.960 Right to a reconsideration.
405.962 Time frame for filing a request for a reconsideration.
405.964 Place and method of filing a request for a reconsideration.
405.966 Evidence to be submitted with the reconsideration request.
405.968 Conduct of a reconsideration.
405.970 Time frame for making a reconsideration.
405.972 Withdrawal or dismissal of a request for a reconsideration.
405.974 Reconsideration.
405.976 Notice of a reconsideration.
405.978 Effect of a reconsideration.

                               Reopenings

405.980 Reopenings of initial determinations, redeterminations, and 
          reconsiderations, hearings and reviews.
405.982 Notice of a revised determination or decision.
405.984 Effect of a revised determination or decision.
405.986 Good cause for reopening.

                   Expedited Access to Judicial Review

405.990 Expedited access to judicial review.

                              ALJ Hearings

405.1000 Hearing before an ALJ: General rule.
405.1002 Right to an ALJ hearing.
405.1004 Right to ALJ review of QIC notice of dismissal.
405.1006 Amount in controversy required to request an ALJ hearing and 
          judicial review.
405.1008 Parties to an ALJ hearing.
405.1010 When CMS or its contractors may participate in an ALJ hearing.
405.1012 When CMS or its contractors may be a party to a hearing.
405.1014 Request for an ALJ hearing.
405.1016 Time frames for deciding an appeal before an ALJ.
405.1018 Submitting evidence before the ALJ hearing.
405.1020 Time and place for a hearing before an ALJ.
405.1022 Notice of a hearing before an ALJ.
405.1024 Objections to the issues.
405.1026 Disqualification of the ALJ.
405.1028 Prehearing case review of evidence submitted to the ALJ.
405.1030 ALJ hearing procedures.
405.1032 Issues before an ALJ.
405.1034 When an ALJ may remand a case to the QIC.
405.1036 Description of an ALJ hearing process.
405.1037 Discovery.
405.1038 Deciding a case without a hearing before an ALJ.
405.1040 Prehearing and posthearing conferences.
405.1042 The administrative record.
405.1044 Consolidated hearing before an ALJ.
405.1046 Notice of an ALJ decision.
405.1048 The effect of an ALJ's decision.
405.1050 Removal of a hearing request from an ALJ to the MAC.
405.1052 Dismissal of a request for a hearing before an ALJ.
405.1054 Effect of dismissal of a request for a hearing before an ALJ.

               Applicability of Medicare Coverage Policies

405.1060 Applicability of nation coverage determinations (NCDs).

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405.1062 Applicability of local coverage determinations and other 
          policies not binding on the ALJ and MAC.
405.1063 Applicability of CMS rulings.
405.1064 ALJ decisions involving statistical samples.

                     Medicare Appeals Council Review

405.1100 Medicare Appeals Council review: General.
405.1102 Request for MAC review when an ALJ issues decision or 
          dismissal.
405.1104 Request for MAC review when an ALJ does not issue a decision 
          timely.
405.1106 Where a request for review or escalation may be filed.
405.1108 MAC actions when request for review or escalation is filed.
405.1110 MAC reviews on its own motion.
405.1112 Content of request for review.
405.1114 Dismissal of request for review.
405.1116 Effect of dismissal of request for MAC review or request for 
          hearing.
405.1118 Obtaining evidence from the MAC.
405.1120 Filling briefs with the MAC.
405.1122 What evidence may be submitted to the MAC.
405.1124 Oral argument.
405.1126 Case remanded by the MAC.
405.1128 Action of the MAC.
405.1130 Effect of the MAC's decision.
405.1132 Request for escalation to Federal district court.
405.1134 Extension of time to file action in Federal district court.
405.1136 Judicial review.
405.1138 Case remanded by a Federal district court.
405.1140 MAC review of ALJ decision in a case remanded by a Federal 
          district court.

  Subpart J_Expedited Determinations and Reconsiderations of Provider 
 Service Terminations, and Procedures for Inpatient Hospital Discharges

405.1200 Notifying beneficiaries of provider service terminations.
405.1202 Expedited determination procedures.
405.1204 Expedited reconsiderations.
405.1205 Notifying beneficiaries of hospital discharge appeal rights.
405.1206 Expedited determination procedures for inpatient hospital care.
405.1208 Hospital requests expedited QIO review.

Subparts K-Q [Reserved]

       Subpart R_Provider Reimbursement Determinations and Appeals

405.1801 Introduction.
405.1803 Intermediary determination and notice of amount of program 
          reimbursement.
405.1804 Matters not subject to administrative or judicial review under 
          prospective payment.
405.1805 Parties to intermediary determination.
405.1807 Effect of intermediary determination.
405.1809 Intermediary hearing procedures.
405.1811 Right to intermediary hearing; contents of, and adding issues 
          to, hearing request.
405.1813 Good cause extension of time limit for requesting an 
          intermediary hearing.
405.1814 Intermediary hearing officer jurisdiction.
405.1815 Parties to proceedings before the intermediary hearing 
          officer(s).
405.1817 Hearing officer or panel of hearing officers authorized to 
          conduct intermediary hearing; disqualification of officers.
405.1819 Conduct of intermediary hearing.
405.1821 Prehearing discovery and other proceedings prior to the 
          intermediary hearing.
405.1823 Evidence at intermediary hearing.
405.1825 Witnesses at intermediary hearing.
405.1827 Record of proceedings before the intermediary hearing 
          officer(s).
405.1829 Scope of authority of intermediary hearing officer(s).
405.1831 Intermediary hearing decision.
405.1833 Effect of intermediary hearing decision.
405.1834 CMS reviewing official procedure.
405.1835 Right to Board hearing; contents of, and adding issues to, 
          hearing request.
405.1836 Good cause extension of time limit for requesting a Board 
          hearing.
405.1837 Group appeals.
405.1839 Amount in controversy.
405.1840 Board jurisdiction.
405.1842 Expedited judicial review.
405.1843 Parties to proceedings in a Board appeal.
405.1845 Composition of Board; hearings, decisions, and remands.
405.1847 Disqualification of Board members.
405.1849 Establishment of time and place of hearing by the Board.
405.1851 Conduct of Board hearing.
405.1853 Board proceedings prior to any hearing; discovery.
405.1855 Evidence at Board hearing.
405.1857 Subpoenas.
405.1859 Witnesses.
405.1861 Oral argument and written allegations.
405.1863 Administrative policy at issue.
405.1865 Record of administrative proceedings.
405.1867 Scope of Board's legal authority.
405.1868 Board actions in response to failure to follow Board rules.

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405.1869 Scope of Board's authority in a hearing decision.
405.1871 Board hearing decision.
405.1873 [Reserved]
405.1875 Administrator review.
405.1877 Judicial review.
405.1881 Appointment of representative.
405.1883 Authority of representative.
405.1885 Reopening an intermediary determination or reviewing entity 
          decision.
405.1887 Notice of reopening; effect of reopening.
405.1889 Effect of a revision; issue-specific nature of appeals of 
          revised determinations and decisions.

Subparts S-T [Reserved]

   Subpart U_Conditions for Coverage of Suppliers of End-Stage Renal 
                         Disease (ESRD) Services

405.2100 Scope of subpart.
405.2101 Objectives of the end-stage renal disease (ESRD) program.
405.2102 Definitions.
405.2110 Designation of ESRD networks.
405.2111 [Reserved]
405.2112 ESRD network organizations.
405.2113 Medical review board.
405.2114 [Reserved]
405.2131 Condition: Provider status: Renal transplantation center or 
          renal dialysis center.
405.2132 [Reserved]
405.2133 Condition: Furnishing data and information for ESRD program 
          administration.
405.2134 Condition: Participation in network activities.
405.2135 Condition: Compliance with Federal, State, and local laws and 
          regulations.
405.2136 Condition: Governing body and management.
405.2137 Condition: Patient long-term program and patient care plan.
405.2138 Condition: Patients' rights and responsibilities.
405.2139 Condition: Medical records.
405.2140 Condition: Physical environment.
405.2150 Condition: Reuse of hemodialyzers and other dialysis supplies.
405.2160 Condition: Affiliation agreement or arrangement.
405.2161 Condition: Director of a renal dialysis facility or renal 
          dialysis center.
405.2162 Condition: Staff of a renal dialysis facility or renal dialysis 
          center.
405.2163 Condition: Minimal service requirements for a renal dialysis 
          facility or renal dialysis center.
405.2164 Conditions for coverage of special purpose renal dialysis 
          facilities.
405.2180 Termination of Medicare coverage.
405.2181 Alternative sanctions.
405.2182 Notice of sanction and appeal rights: Termination of coverage.
405.2184 Notice of appeal rights: Alternative sanctions.

Subparts V-W [Reserved]

  Subpart X_Rural Health Clinic and Federally Qualified Health Center 
                                Services

405.2400 Basis.
405.2401 Scope and definitions.
405.2402 Basic requirements.
405.2403 Content and terms of the agreement with the Secretary.
405.2404 Terminations of agreements.
405.2410 Application of Part B deductible and coinsurance.
405.2411 Scope of benefits.
405.2412 Physicians' services.
405.2413 Services and supplies incident to a physician's services.
405.2414 Nurse practitioner and physician assistant services.
405.2415 Services and supplies incident to nurse practitioner and 
          physician assistant services.
405.2416 Visiting nurse services.
405.2417 Visiting nurse services: Determination of shortage of agencies.

               Federally Qualified Health Center Services

405.2430 Basic requirements.
405.2434 Content and terms of the agreement.
405.2436 Termination of agreement.
405.2440 Conditions for reinstatement after termination by CMS.
405.2442 Notice to the public.
405.2444 Change of ownership.
405.2446 Scope of services.
405.2448 Preventive primary services.
405.2450 Clinical psychologist and clinical social worker services.
405.2452 Services and supplies incident to clinical psychologist and 
          clinical social worker services.

 Payment for Rural Health Clinic and Federally Qualified Health Center 
                                Services

405.2460 Applicability of general payment exclusions.
405.2462 Payment for rural health clinic and Federally qualified health 
          center services.
405.2463 What constitutes a visit.
405.2464 All-inclusive rate.
405.2466 Annual reconciliation.
405.2468 Allowable costs.
405.2469 Federally Qualified Health Centers supplemental payments.
405.2470 Reports and maintenance of records.
405.2472 Beneficiary appeals.


[[Page 96]]


    Authority: Secs. 1102, 1861, 1862(a), 1871, 1874, 1881, and 1886(k) 
of the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 1395hh, 
1395kk, 1395rr and 1395ww(k)), and sec. 353 of the Public Health Service 
Act (42 U.S.C. 263a).

Subpart A [Reserved]



Subpart B_Medical Services Coverage Decisions That Relate to Health Care 

                               Technology

    Authority: Secs. 1102, 1862 and 1871 of the Social Security Act as 
amended (42 U.S.C.1302, 1395y, and 1395hh).

    Source: 60 FR 48423, Sept. 19, 1995, unless otherwise noted.



Sec. 405.201  Scope of subpart and definitions.

    (a) Scope. This subpart establishes that--
    (1) CMS uses the FDA categorization of a device as a factor in 
making Medicare coverage decisions; and
    (2) CMS may consider for Medicare coverage certain devices with an 
FDA-approved investigational device exemption (IDE) that have been 
categorized as non-experimental/investigational (Category B).
    (b) Definitions. As used in this subpart--
    Class I refers to devices for which the general controls of the 
Food, Drug, and Cosmetic Act, such as adherence to good manufacturing 
practice regulations, are sufficient to provide a reasonable assurance 
of safety and effectiveness.
    Class II refers to devices that, in addition to general controls, 
require special controls, such as performance standards or postmarket 
surveillance, to provide a reasonable assurance of safety and 
effectiveness.
    Class III refers to devices that cannot be classified into Class I 
or Class II because insufficient information exists to determine that 
either special or general controls would provide reasonable assurance of 
safety and effectiveness. Class III devices require premarket approval.
    Contractors refers to carriers, fiscal intermediaries, and other 
entities that contract with CMS to review and adjudicate claims for 
Medicare services.
    Experimental/investigational (Category A) device refers to an 
innovative device believed to be in Class III for which ``absolute 
risk'' of the device type has not been established (that is, initial 
questions of safety and effectiveness have not been resolved and the FDA 
is unsure whether the device type can be safe and effective).
    IDE stands for investigational device exemption. An FDA-approved IDE 
application permits a device, which would otherwise be subject to 
marketing clearance, to be shipped lawfully for the purpose of 
conducting a clinical trial in accordance with 21 U.S.C. 360j(g) and 21 
CFR parts 812 and 813.
    Non-experimental/investigational (Category B) device refers to a 
device believed to be in Class I or Class II, or a device believed to be 
in Class III for which the incremental risk is the primary risk in 
question (that is, underlying questions of safety and effectiveness of 
that device type have been resolved), or it is known that the device 
type can be safe and effective because, for example, other manufacturers 
have obtained FDA approval for that device type.
    PMA stands for ``premarket approval'' and refers to a marketing 
application for a Class III device, which includes all information 
submitted with or incorporated by reference in the application in 
accordance with 21 U.S.C. 360e and 360j and 21 CFR 814.3(e).
    Sponsor refers to a person or entity that initiates, but does not 
conduct, an investigation under an IDE.



Sec. 405.203  FDA categorization of investigational devices.

    (a) The FDA assigns a device with an FDA-approved IDE to one of two 
categories:
    (1) Experimental/Investigational (Category A) Devices.
    (2) Non-Experimental/Investigational (Category B) Devices.
    (b) The FDA notifies CMS, when it notifies the sponsor, that the 
device is categorized by FDA as experimental/investigational (Category 
A) or non-experimental/investigational (Category B).

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    (c) CMS uses the categorization of the device as a factor in making 
Medicare coverage decisions.



Sec. 405.205  Coverage of a non-experimental/investigational (Category B) 

device.

    (a) For any device that meets the requirements of the exception at 
Sec. 411.15(o) of this chapter, the following procedures apply:
    (1) The FDA notifies CMS, when it notifies the sponsor, that the 
device is categorized by FDA as non-experimental/investigational 
(Category B).
    (2) CMS uses the categorization of the device as a factor in making 
Medicare coverage decisions.
    (b) If the FDA becomes aware that a categorized device no longer 
meets the requirements of the exception at Sec. 411.15(o) of this 
chapter, the FDA notifies the sponsor and CMS and the procedures 
described in paragraph (a)(2) of this section apply.



Sec. 405.207  Services related to a noncovered device.

    (a) When payment is not made. Medicare payment is not made for 
medical and hospital services that are related to the use of a device 
that is not covered because CMS determines the device is not 
``reasonable'' and ``necessary'' under section 1862(a)(1)(A) of the Act 
or because it is excluded from coverage for other reasons. These 
services include all services furnished in preparation for the use of a 
noncovered device, services furnished contemporaneously with and 
necessary to the use of a noncovered device, and services furnished as 
necessary after-care that are incident to recovery from the use of the 
device or from receiving related noncovered services.
    (b) When payment is made. Medicare payment may be made for--
    (1) Covered services to treat a condition or complication that 
arises due to the use of a noncovered device or a noncovered device-
related service; or
    (2) Routine care services related to experimental/investigational 
(Category A) devices as defined in Sec. 405.201(b); and furnished in 
conjunction with an FDA-approved clinical trial. The trial must meet 
criteria established through the national coverage determination 
process; and if the trial is initiated before January 1, 2010, the 
device must be determined as intended for use in the diagnosis, 
monitoring or treatment of an immediately life-threatening disease or 
condition.
    (3) Routine care services related to a non-experimental/
investigational (Category B) device defined in Sec. 405.201(b) that is 
furnished in conjunction with an FDA-approved clinical trial.

[60 FR 48423, Sept. 19, 1995, as amended at 69 FR 66420, Nov. 15, 2004]



Sec. 405.209  Payment for a non-experimental/investigational (Category B) 

device.

    Payment under Medicare for a non-experimental/investigational 
(Category B) device is based on, and may not exceed, the amount that 
would have been paid for a currently used device serving the same 
medical purpose that has been approved or cleared for marketing by the 
FDA.



Sec. 405.211  Procedures for Medicare contractors in making coverage decisions 

for a non-experimental/investigational (Category B) device.

    (a) General rule. In their review of claims for payment, Medicare 
contractors are bound by the statute, regulations, and all CMS 
administrative issuances, including all national coverage decisions.
    (b) Potentially covered non-experimental/investigational (Category 
B) devices. Medicare contractors may approve coverage for any device 
with an FDA-approved IDE categorized as a non-experimental/
investigational (Category B) device if all other coverage requirements 
are met.
    (c) Other considerations. Medicare contractors must consider whether 
any restrictions concerning site of service, indications for use, or any 
other list of conditions for coverage have been placed on the device's 
use.



Sec. 405.213  Re-evaluation of a device categorization.

    (a) General rules. (1) Any sponsor that does not agree with an FDA 
decision that categorizes its device as experimental/investigational 
(Category A) may request re-evaluation of the categorization decision.

[[Page 98]]

    (2) A sponsor may request review by CMS only after the requirements 
of paragraph (b) of this section are met.
    (3) No reviews other than those described in paragraphs (b) and (c) 
of this section are available to the sponsor.
    (4) Neither the FDA original categorization or re-evaluation 
(described in paragraph (b) of this section) nor CMS's review (described 
in paragraph (c) of this section) constitute an initial determination 
for purposes of the Medicare appeals processes under part 405, subpart G 
or subpart H, or parts 417, 473, or 498 of this chapter.
    (b) Request to FDA. A sponsor that does not agree with the FDA's 
categorization of its device may submit a written request to the FDA at 
any time requesting re-evaluation of its original categorization 
decision, together with any information and rationale that it believes 
support recategorization. The FDA notifies both CMS and the sponsor of 
its decision.
    (c) Request to CMS. If the FDA does not agree to recategorize the 
device, the sponsor may seek review from CMS. A device sponsor must 
submit its request in writing to CMS. CMS obtains copies of relevant 
portions of the application, the original categorization decision, and 
supplementary materials. CMS reviews all material submitted by the 
sponsor and the FDA's recommendation. CMS reviews only information in 
the FDA record to determine whether to change the categorization of the 
device. CMS issues a written decision and notifies the sponsor of the 
IDE and the FDA.



Sec. 405.215  Confidential commercial and trade secret information.

    To the extent that CMS relies on confidential commercial or trade 
secret information in any judicial proceeding, CMS will maintain 
confidentiality of the information in accordance with Federal law.



Subpart C_Suspension of Payment, Recovery of Overpayments, and Repayment 

                        of Scholarships and Loans

    Authority: Secs. 1102, 1815, 1833, 1842, 1866, 1870, 1871, 1879, and 
1892 of the Social Security Act (42 U.S.C. 1302, 1395g, 1395l, 1395u, 
1395cc, 1395gg, 1395hh, 1395pp, and 1395ccc) and 31 U.S.C. 3711.

    Source: 31 FR 13534, Oct. 20, 1966, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977.

                           General Provisions



Sec. 405.301  Scope of subpart.

    This subpart sets forth the policies and procedures for handling of 
incorrect payments and recovery of overpayments.

[54 FR 41733, Oct. 11, 1989]

    Liability for Payments To Providers or Suppliers and Handling of 
                           Incorrect Payments



Sec. 405.350  Individual's liability for payments made to providers and other 

persons for items and services furnished the individual.

    Any payment made under title XVIII of the Act to any provider of 
services or other person with respect to any item or service furnished 
an individual shall be regarded as a payment to the individual, and 
adjustment shall be made pursuant to Sec. Sec. 405.352 through 405.358 
where:
    (a) More than the correct amount is paid to a provider of services 
or other person and the Secretary determines that:
    (1) Within a reasonable period of time, the excess over the correct 
amount cannot be recouped from the provider of services or other person, 
or
    (2) The provider of services or other person was without fault with 
respect to the payment of such excess over the correct amount, or
    (b) A payment has been made under the provisions described in 
section 1814(e) of the Act, to a provider of services for items and 
services furnished the individual.
    (c) For purposes of paragraph (a)(2) of this section, a provider of 
services or other person shall, in the absence of evidence to the 
contrary, be deemed to be without fault if the determination of the 
carrier, the intermediary, or the Centers for Medicare & Medicaid 
Services that more than the correct amount was paid was made subsequent 
to the third year following the year in

[[Page 99]]

which notice was sent to such individual that such amount had been paid.

[41 FR 1492, Jan. 8, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 61 FR 49271, Sept. 19, 1996]



Sec. 405.351  Incorrect payments for which the individual is not liable.

    Where an incorrect payment has been made to a provider of services 
or other person, the individual is liable only to the extent that he has 
benefited from such payment.



Sec. 405.352  Adjustment of title XVIII incorrect payments.

    Where an individual is liable for an incorrect payment (i.e., a 
payment made under Sec. 405.350(a) or Sec. 405.350(b)) adjustment is 
made (to the extent of such liability) by:
    (a) Decreasing any payment under title II of the Act, or under the 
Railroad Retirement Act of 1937, to which the individual is entitled; or
    (b) In the event of the individual's death before adjustment is 
completed, by decreasing any payment under title II of the Act, or under 
the Railroad Retirement Act of 1937 payable to the estate of the 
individual or to any other person, that are based on the individual's 
earnings record (or compensation).

[31 FR 13534, Oct. 20, 1966, as amended by 41 FR 1492, Jan. 8, 1976. 
Redesignated at 42 FR 52826, Sept. 30, 1977]



Sec. 405.353  Certification of amount that will be adjusted against individual 

title II or railroad retirement benefits.

    As soon as practicable after any adjustment is determined to be 
necessary, the Secretary, for purposes of this subpart, shall certify 
the amount of the overpayment or payment (see Sec. 405.350) with 
respect to which the adjustment is to be made. If the adjustment is to 
be made by decreasing subsequent payments under the Railroad Retirement 
Act of 1937, such certification shall be made to the Railroad Retirement 
Board.



Sec. 405.354  Procedures for adjustment or recovery--title II beneficiary.

    The procedures applied in making an adjustment or recovery in the 
case of a title II beneficiary are the applicable procedures of 20 CFR 
404.502.

[31 FR 13534, Oct. 20, 1966, as amended at 32 FR 18027, Dec. 16, 1967. 
Redesignated at 42 FR 52826, Sept. 30, 1977]



Sec. 405.355  Waiver of adjustment or recovery.

    (a) The provisions of Sec. 405.352 may not be applied and there may 
be no adjustment or recovery of an incorrect payment (i.e., a payment 
made under Sec. 405.350(a) or Sec. 405.350(b)) in any case where such 
incorrect payment has been made with respect to an individual who is 
without fault, or where such adjustment or recovery would be made by 
decreasing payments to which another person who is without fault is 
entitled as provided in section 1870(b) of the Act where such adjustment 
or recovery would defeat the purpose of title II or title XVIII of the 
Act or would be against equity and good conscience. (See 20 CFR 404.509 
and 404.512.)
    (b) Adjustment or recovery of an incorrect payment (or only such 
part of an incorrect payment as may be determined to be inconsistent 
with the purposes of Title XVIII of the Act) against an individual who 
is without fault shall be deemed to be against equity and good 
conscience if the determination that such payment was incorrect was made 
subsequent to the third year following the year in which notice of such 
payment was sent to such individual. (See Sec. Sec. 405.330-405.332 for 
conditions under which payment may be made for items or services 
furnished after October 30, 1972 which are noncovered by reasons of 
Sec. 405.310 (g) and (k).)

[41 FR 1493, Jan. 8, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977]



Sec. 405.356  Principles applied in waiver of adjustment or recovery.

    The principles applied in determining waiver of adjustment or 
recovery (Sec. 405.355) are the applicable principles of Sec. 405.358 
and 20 CFR 404.507-404.509, 404.510a, and 404.512.

[61 FR 49271, Sept. 19, 1996]



Sec. 405.357  Notice of right to waiver consideration.

    Whenever an initial determination is made that more than the correct

[[Page 100]]

amount of payment has been made, notice of the provisions of section 
1870(c) of the Act regarding waiver of adjustment or recovery shall be 
sent to the overpaid individual and to any other individual against whom 
adjustment or recovery of the overpayment is to be effected (see Sec. 
405.358).

[61 FR 49271, Sept. 19, 1996]



Sec. 405.358  When waiver of adjustment or recovery may be applied.

    Section 1870(c) of the Act provides that there shall be no 
adjustment or recovery in any case where an incorrect payment under 
title XVIII (hospital and supplementary medical insurance benefits) has 
been made (including a payment under section 1814(e) of the Act with 
respect to an individual:
    (a) Who is without fault, and
    (b) Adjustment or recovery would either:
    (1) Defeat the purposes of title II or title XVIII of the Act, or
    (2) Be against equity and good conscience.

[61 FR 49271, Sept. 19, 1996]



Sec. 405.359  Liability of certifying or disbursing officer.

    No certifying or disbursing officer shall be held liable for any 
amount certified or paid by him to any provider of services or other 
person:
    (a) Where the adjustment or recovery of such amount is waived (see 
Sec. 405.355), or
    (b) Where adjustment (see Sec. 405.352) or recovery is not 
completed prior to the death of all persons against whose benefits such 
adjustment is authorized.

  Suspension and Recoupment of Payment to Providers and Suppliers and 
                Collection and Compromise of Overpayments



Sec. 405.370  Definitions.

    For purposes of this subpart, the following definitions apply:
    Offset. The recovery by Medicare of a non-Medicare debt by reducing 
present or future Medicare payments and applying the amount withheld to 
the indebtedness. (Examples are Public Health Service debts or Medicaid 
debts recovered by CMS).
    Recoupment. The recovery by Medicare of any outstanding Medicare 
debt by reducing present or future Medicare payments and applying the 
amount withheld to the indebtedness.
    Suspension of payment. The withholding of payment by an intermediary 
or carrier from a provider or supplier of an approved Medicare payment 
amount before a determination of the amount of the overpayment exists.

[61 FR 63745, Dec. 2, 1996]



Sec. 405.371  Suspension, offset, and recoupment of Medicare payments to 

providers and suppliers of services.

    (a) General. Medicare payments to providers and suppliers, as 
authorized under this subchapter (excluding payments to beneficiaries), 
may be--
    (1) Suspended, in whole or in part, by CMS, an intermediary, or a 
carrier if CMS, the intermediary, or the carrier possesses reliable 
information that an overpayment or fraud or willful misrepresentation 
exists or that the payments to be made may not be correct, although 
additional evidence may be needed for a determination; or
    (2) Offset or recouped, in whole or in part, by an intermediary or a 
carrier if the intermediary, carrier, or CMS has determined that the 
provider or supplier to whom payments are to be made has been overpaid.
    (b) Steps necessary for suspension of payment, offset, and 
recoupment. Except as provided in paragraph (c) of this section, CMS, 
the intermediary, or carrier suspends payments only after it has 
complied with the procedural requirements set forth at Sec. 405.372. 
The intermediary or carrier offsets or recoups payments only after it 
has complied with the procedural requirements set forth at Sec. 
405.373.
    (c) Suspension of payment in the case of unfiled cost reports. If a 
provider has failed to timely file an acceptable cost report, payment to 
the provider is immediately suspended in whole or in part until a cost 
report is filed and determined by the intermediary to be acceptable. In 
the case of an unfiled cost report, the provisions of Sec. 405.372 do 
not

[[Page 101]]

apply. (See Sec. 405.372(a)(2) concerning failure to furnish other 
information.)

[61 FR 63746, Dec. 2, 1996, as amended at 67 FR 66813, Nov. 1, 2002]



Sec. 405.372  Proceeding for suspension of payment.

    (a) Notice of intention to suspend--(1) General rule. Except as 
provided in paragraphs (a)(2) through (a)(4) of this section, if the 
intermediary, carrier, or CMS has determined that a suspension of 
payments under Sec. 405.371(a)(1) should be put into effect, the 
intermediary or carrier must notify the provider or supplier of the 
intention to suspend payments, in whole or in part, and the reasons for 
making the suspension.
    (2) Failure to furnish information. The notice requirement of 
paragraph (a)(1) of this section does not apply if the intermediary or 
carrier suspends payments to a provider or supplier in accordance with 
section 1815(a) or section 1833(e) of the Act, respectively, because the 
provider or supplier has failed to submit information requested by the 
intermediary or carrier that is needed to determine the amounts due the 
provider or supplier. (See Sec. 405.371(c) concerning failure to file 
timely acceptable cost reports.)
    (3) Harm to Trust Funds. A suspension of payment may be imposed 
without prior notice if CMS, the intermediary, or carrier determines 
that the Medicare Trust Funds would be harmed by giving prior notice. 
CMS may base its determination on an intermediary's or carrier's belief 
that giving prior notice would hinder the possibility of recovering the 
money.
    (4) Fraud or misrepresentation. If the intended suspension of 
payment involves suspected fraud or misrepresentation, CMS determines 
whether to impose the suspension and if prior notice is appropriate. CMS 
directs the intermediary or carrier as to the timing and content of the 
notification to the provider or supplier. CMS is the real party in 
interest and is responsible for the decision. CMS may base its decision 
on information from the intermediary, carrier, law enforcement agencies, 
or other sources. CMS determines whether the information is reliable.
    (b) Rebuttal--(1) If prior notice is required. If prior notice is 
required under paragraph (a) of this section, the intermediary or 
carrier must give the provider or supplier an opportunity for rebuttal 
in accordance with Sec. 405.374. If a rebuttal statement is received 
within the specified time period, the suspension of payment goes into 
effect on the date stated in the notice, and the procedures and 
provisions set forth in Sec. 405.375 apply. If by the end of the period 
specified in the notice no statement has been received, the suspension 
goes into effect automatically, and the procedures set forth in 
paragraph (c) of this section are followed.
    (2) If prior notice is not required. If, under the provisions of 
paragraphs (a)(2) through (a)(4) of this section, a suspension of 
payment is put into effect without prior notice to the provider or 
supplier, the intermediary or carrier must, once the suspension is in 
effect, give the provider or supplier an opportunity to submit a 
rebuttal statement as to why the suspension should be removed.
    (c) Subsequent action. If a suspension of payment is put into 
effect, the intermediary, carrier, or CMS takes timely action after the 
suspension to obtain the additional evidence it may need to make a 
determination as to whether an overpayment exists or the payments may be 
made. The intermediary, carrier, or CMS makes all reasonable efforts to 
expedite the determination. As soon as the determination is made, the 
intermediary or carrier informs the provider or supplier and, if 
appropriate, the suspension is rescinded or any existing recoupment or 
offset is adjusted to take into account the determination.
    (d) Duration of suspension of payment--(1) General rule. Except as 
provided in paragraphs (d)(2) and (d)(3) of this section, a suspension 
of payment is limited to 180 days, starting with the date the suspension 
begins.
    (2) 180-day extension. (i) An intermediary, a carrier, or, in cases 
of fraud and misrepresentation, OIG or a law enforcement agency, may 
request a one-time only extension of the suspension period for up to 180 
additional days if it is unable to complete its examination of the 
information or investigation, as appropriate, within the 180-

[[Page 102]]

day time limit. The request must be submitted in writing to CMS.
    (ii) Upon receipt of a request for an extension, CMS notifies the 
provider or supplier of the requested extension. CMS then either extends 
the suspension of payment for up to an additional 180 days or determines 
that the suspended payments are to be released to the provider or 
supplier.
    (3) Exceptions to the time limits. (i) The time limits specified in 
paragraphs (d)(1) and (d)(2) of this section do not apply if the case 
has been referred to, and is being considered by, the OIG for 
administrative action (for example, civil money penalties).
    (ii) CMS may grant an extension in addition to the extension 
provided under paragraph (d)(2) of this section if the Department of 
Justice submits a written request to CMS that the suspension of payment 
be continued based on the ongoing investigation and anticipated filing 
of criminal and/or civil actions. At a minimum, the request must include 
the following:
    (A) Identification of the entity under suspension.
    (B) The amount of time needed for continued suspension in order to 
implement the criminal and/or civil proceedings.
    (C) A statement of why and/or how criminal and/or civil actions may 
be affected if the requested extension is not granted.
    (e) Disposition of suspended payments. Payments suspended under the 
authority of Sec. 405.371(b) are first applied to reduce or eliminate 
any overpayments determined by the intermediary, carrier, or CMS, 
including any interest assessed under the provisions of Sec. 405.378, 
and then applied to reduce any other obligation to CMS or to HHS. In the 
absence of a legal requirement that the excess be paid to another 
entity, the excess is released to the provider or supplier.

[61 FR 63746, Dec. 2, 1996]



Sec. 405.373  Proceeding for offset or recoupment.

    (a) General rule. Except as specified in paragraph (b) of this 
section, if the intermediary, carrier, or CMS has determined that an 
offset or recoupment of payments under Sec. 405.371(a)(2) should be put 
into effect, the intermediary or carrier must--
    (1) Notify the provider or supplier of its intention to offset or 
recoup payment, in whole or in part, and the reasons for making the 
offset or recoupment; and
    (2) Give the provider or supplier an opportunity for rebuttal in 
accordance with Sec. 405.374.
    (b) Paragraph (a) of this section does not apply if the 
intermediary, after furnishing a provider a written notice of the amount 
of program reimbursement in accordance with Sec. 405.1803, recoups 
payment under paragraph (c) of Sec. 405.1803. (For provider rights in 
this circumstance, see Sec. Sec. 405.1809, 405.1811, 405.1815, 
405.1835, and 405.1843.)
    (c) Actions following receipt of rebuttal statement. If a provider 
or supplier submits, in accordance with Sec. 405.374, a statement as to 
why an offset or recoupment should not be put into effect on the date 
specified in the notice, the intermediary or carrier must comply with 
the time limits and notification requirements of Sec. 405.375.
    (d) No rebuttal statement received. If, by the end of the time 
period specified in the notice, no statement has been received, the 
recoupment or offset goes into effect automatically.
    (e) Duration of recoupment or offset. If a recoupment or offset is 
put into effect, it remains in effect until the earliest of the 
following:
    (1) The overpayment and any assessed interest are liquidated.
    (2) The intermediary or carrier obtains a satisfactory agreement 
from the provider or supplier for liquidation of the overpayment.
    (3) The intermediary or carrier, on the basis of subsequently 
acquired evidence or otherwise, determines that there is no overpayment.

[61 FR 63747, Dec. 2, 1996]



Sec. 405.374  Opportunity for rebuttal.

    (a) General rule. If prior notice of the suspension of payment, 
offset, or recoupment is given under Sec. 405.372 or Sec. 405.373, the 
intermediary or carrier must give the provider or supplier an 
opportunity, before the suspension, offset, or recoupment takes effect, 
to submit any statement (to include any pertinent information) as to why 
it should

[[Page 103]]

not be put into effect on the date specified in the notice. Except as 
provided in paragraph (b) of this section, the provider or supplier has 
at least 15 days following the date of notification to submit the 
statement.
    (b) Exception. The intermediary or carrier may for cause--
    (1) Impose a shorter period for rebuttal; or
    (2) Extend the time within which the statement must be submitted.

[61 FR 63747, Dec. 2, 1996]



Sec. 405.375  Time limits for, and notification of, administrative 

determination after receipt of rebuttal statement.

    (a) Submission and disposition of evidence. If the provider or 
supplier submits a statement, under Sec. 405.374, as to why a 
suspension of payment, offset, or recoupment should not be put into 
effect, or, under Sec. 405.372(b)(2), why a suspension should be 
terminated, CMS, the intermediary, or carrier must within 15 days, from 
the date the statement is received, consider the statement (including 
any pertinent evidence submitted), together with any other material 
bearing upon the case, and determine whether the facts justify the 
suspension, offset, or recoupment or, if already initiated, justify the 
termination of the suspension, offset, or recoupment. Suspension, 
offset, or recoupment is not delayed beyond the date stated in the 
notice in order to review the statement.
    (b) Notification of determination. The intermediary or carrier must 
send written notice of the determination made under paragraph (a) of 
this section to the provider or supplier. The notice must--
    (1) In the case of offset or recoupment, contain rationale for the 
determination; and
    (2) In the case of suspension of payment, contain specific findings 
on the conditions upon which the suspension is initiated, continued, or 
removed and an explanatory statement of the determination.
    (c) Determination is not appealable. A determination made under 
paragraph (a) of this section is not an initial determination and is not 
appealable.

[61 FR 63747, Dec. 2, 1996]



Sec. 405.376  Suspension and termination of collection action and compromise 

of claims for overpayment.

    (a) Basis and purpose. This section contains requirements and 
procedures for the compromise of, or suspension or termination of 
collection action on, claims for overpayments against a provider or a 
supplier under the Medicare program. It is adopted under the authority 
of the Federal Claims Collection Act (31 U.S.C. 3711). Collection and 
compromise of claims against Medicare beneficiaries are explained at 20 
CFR 404.515.
    (b) Definitions. As used in this section, debtor means a provider of 
services or a physician or other supplier of services that has been 
overpaid under title XVIII of the Social Security Act. It includes an 
individual, partnership, corporation, estate, trust, or other legal 
entity.
    (c) Basic conditions. A claim for recovery of Medicare overpayments 
against a debtor may be compromised, or collection action on it may be 
suspended or terminated, by the Centers for Medicare & Medicaid Services 
(CMS) if;
    (1) The claim does not exceed $100,000, or such higher amount as the 
Attorney General may from time to time prescribe, exclusive of interest; 
and
    (2) There is no indication of fraud, the filing of a false claim, or 
misrepresentation on the part of the debtor or any director, partner, 
manager, or other party having an interest in the claim.
    (d) Basis for compromise. A claim may be compromised for one or more 
of the following reasons:
    (1) The debtor, or the estate of a deceased debtor, does not have 
the present or prospective ability to pay the full amount within a 
reasonable time;
    (2) The debtor refuses to pay the claim in full and the United 
States is unable to collect the full amount within a reasonable time by 
legal proceedings;
    (3) There is real doubt the United States can prove its case in 
court; or
    (4) The cost of collecting the claim does not justify enforced 
collection of the full amount.

[[Page 104]]

    (e) Basis for termination of collection action. Collection action 
may be terminated for one or more of the following reasons:
    (1) The United States cannot enforce collection of any significant 
sum;
    (2) The debtor cannot be located, there is no security to be 
liquidated, the statute of limitations has run, and the prospects of 
collecting by offset are too remote to justify retention of the claim;
    (3) The cost of further collection action is likely to exceed any 
recovery;
    (4) It is determined the claim is without merit; or
    (5) Evidence to substantiate the claim is no longer available.
    (f) Basis for suspension of collection action. Collection action may 
be suspended for either of the following reasons if future collection 
action is justified based on potential productivity, including 
foreseeable ability to pay, and size of claim:
    (1) The debtor cannot be located; or
    (2) The debtor is unable to make payments on the claim or to fulfill 
an acceptable compromise.
    (g) Factors considered. In determining whether a claim will be 
compromised, or collection action terminated or suspended, CMS will 
consider the following factors:
    (1) Age and health of the debtor, present and potential income, 
inheritance prospects, possible concealment or fraudulent transfer of 
assets, and the availability of assets which may be reached by enforced 
collection proceedings, for compromise under paragraph (d)(1) of this 
section, termination under paragraph (e)(1) of this section, and 
suspension under paragraph (f)(2) of this section;
    (2) Applicable exemptions available to a debtor and uncertainty 
concerning the price of the property in a forced sale, for compromise 
under paragraph (d)(2) of this section and termination under paragraph 
(e)(1) of this section; and
    (3) The probability of proving the claim in court, the probability 
of full or partial recovery, the availability of necessary evidence, and 
related pragmatic considerations, for compromise under paragraph (d)(3) 
of this section.
    (h) Amount of compromise. The amount accepted in compromise will be 
reasonable in relation to the amount that can be recovered by enforced 
collection proceedings.

Consideration shall be given to the following:
    (1) The exemptions available to the debtor under State or Federal 
law;
    (2) The time necessary to collect the overpayment;
    (3) The litigative probabilities involved; and
    (4) The administrative and litigative costs of collection where the 
cost of collecting the claim is a basis for compromise.
    (i) Payment of compromise--(1) Time and manner. Payment of the 
amount that CMS has agreed to accept as a compromise in full settlement 
of a Medicare overpayment claim must be made within the time and in the 
manner prescribed by CMS. An overpayment claim is not compromised or 
settled until the full payment of the compromised amount has been made 
within the time and in the manner prescribed by CMS.
    (2) Failure to pay compromised amount. Failure of the debtor or the 
estate to make payment as provided by the comprise reinstates the full 
amount of the overpayment claim, less any amounts paid prior to the 
default.
    (j) Effect of compromise, or suspension, or termination of 
collection action. Any action taken by CMS under this section regarding 
the compromise of an overpayment claim, or termination or suspension of 
collection action on an overpayment claim, is not an initial 
determination for purposes of the appeal procedures under subparts G, H, 
and R of this part.

[43 FR 59381, Dec. 20, 1978, as amended at 57 56998, Dec. 2, 1992. 
Redesignated and amended at 61 FR 63745, 63747, Dec. 2, 1996]



Sec. 405.377  Withholding Medicare payments to recover Medicaid overpayments.

    (a) Basis and purpose. This section implements section 1885 of the 
Act, which provides for withholding Medicare payments to certain 
Medicaid providers that have not arranged to repay Medicaid overpayments 
as determined by the Medicaid State agency or have

[[Page 105]]

failed to provide information necessary to determine the amount (if any) 
of overpayments.
    (b) When withholding may be used. CMS may withhold Medicare payment 
to offset Medicaid overpayments that a Medicaid agency has been unable 
to collect if--
    (1) The Medicaid agency has followed the procedure specified in 
Sec. 447.31 of this chapter; and
    (2) The institution or person is one described in paragraph (c) of 
this section and either--
    (i) Has not made arrangements satisfactory to the Medicaid agency to 
repay the overpayment; or
    (ii) Has not provided information to the Medicaid agency necessary 
to enable the agency to determine the existence or amount of Medicaid 
overpayment.
    (c) Institutions or persons affected. Withholding under paragraph 
(b) of this section may be made with respect to any of the following 
entities that has or had in effect an agreement with a Medicaid agency 
to furnish services under an approved Medicaid State plan:
    (1) An institutional provider that has in effect an agreement under 
section 1866 of the Act. (Part 489 (Provider and Supplier Agreements) 
implements section 1866 of the Act.)
    (2) A physician or supplier that has accepted payment on the basis 
of an assignment under section 1842(b)(3)(B)(ii) of the Act. (Section 
424.55 sets forth the conditions a supplier agrees to in accepting 
assignment.)
    (d) Amount to be withheld. (1) CMS contacts the appropriate 
intermediary or carrier to determine the amount of Medicare payment to 
which the institution or person is entitled.
    (2) CMS may require the intermediary or carrier to withhold Medicare 
payments to the institution or person by the lesser of the following 
amounts:
    (i) The amount of the Medicare payments to which the institution or 
person would otherwise be entitled.
    (ii) The total Medicaid overpayment to the institution or person.
    (e) Notice of withholding. If CMS intends to withhold payments under 
this section, it notifies by certified mail, return receipt requested, 
the institution or person and the appropriate intermediary or carrier of 
the intention to withhold Medicare payments and follows the procedure in 
Sec. 405.374. The notice includes--
    (1) Identification of the institution or person; and
    (2) The amount of Medicaid overpayment to be withheld from payments 
to which the institution or person would otherwise be entitled under 
Medicare.
    (f) Termination of withholding. CMS terminates the withholding if--
    (1) The Medicaid overpayment is completely recovered;
    (2) The institution or person enters into an agreement satisfactory 
to the Medicaid agency to repay the overpayment; or
    (3) The Medicaid agency determines that there is no overpayment 
based on newly acquired evidence or a subsequent audit.
    (g) Disposition of funds withheld. CMS releases amounts withheld 
under this section to the Medicaid agency to be applied against the 
Medicaid overpayment made by the State agency.

[61 FR 63747, Dec. 2, 1996]



Sec. 405.378  Interest charges on overpayment and underpayments to providers, 

suppliers, and other entities.

    (a) Basis and purpose. This section, which implements sections 
1815(d) and 1833(j) of the common law and Act, and authority granted 
under the Federal Claims Collection Act, provides for the charging and 
payment of interest on overpayments and underpayments to Medicare 
providers, suppliers, HMOs, competitive medical plans (CMPs), and health 
care prepayment plans (HCPPs).
    (b) Basic rules. (1) CMS will charge interest on overpayments, and 
pay interest on underpayments, to providers and suppliers of services 
(including physicians and other practitioners), except as specified in 
paragraphs (f) and (h) of this section.
    (2) Interest accrues from the date of the final determination as 
defined in paragraph (c) of this section, and either is charged on the 
overpayment balance or paid on the underpayment balance for each full 
30-day period that payment is delayed.
    (c) Definition of final determination. (1) For purposes of this 
section, any of the

[[Page 106]]

following constitutes a final determination:
    (i) A Notice of Amount of Program Reimbursement (NPR) is issued, as 
discussed in Sec. Sec. 405.1803, 417.576, and 417.810, and either--
    (A) A written demand for payment is made; or
    (B) A written determination of an underpayment is made by the 
intermediary after a cost report is filed.
    (ii) In cases in which an NPR is not used as a notice of 
determination (that is, primarily under part B), one of the following 
determinations is issued--
    (A) A written determination that an overpayment exists and a written 
demand for payment;
    (B) A written determination of an underpayment; or
    (C) An Administrative Law Judge (ALJ) decision that reduces the 
amount of an overpayment below the amount that CMS has already 
collected.
    (iii) Other examples of cases in which an NPR is not used are 
carrier reasonable charge determinations under subpart E of this part, 
interim cost settlements made for HMOs, CMPs, and HCPPs under Sec. Sec. 
417.574 and 417.810(e) of this chapter, and initial retroactive 
adjustment determinations under Sec. 413.64(f)(2) of this chapter. In 
the case of interim cost settlements and initial retroactive adjustment 
determinations, if the debtor does not dispute the adjustment 
determination within the timeframe designated in the notice of the 
determination (generally at least 15 days), a final determination is 
deemed to have been made. If the provider or supplier does dispute 
portions of the determination, a final determination is deemed to have 
been made on those portions when the intermediary issues a new 
determination in response to the dispute.
    (iv) The due date of a timely-filed cost report that indicates an 
amount is due CMS, and is not accompanied by payment in full. (If an 
additional overpayment or underpayment is determined by the carrier or 
intermediary, a final determination on the additional amount is made in 
accordance with paragraphs (c)(1)(i), (c)(1)(ii), or (c)(1)(iii), of 
this section.)
    (v) With respect to a cost report that is not filed on time, the day 
following the date the cost report was due (plus a single extension of 
time not to exceed 30 days if granted for good cause), until the time as 
a cost report is filed. (When the cost report is subsequently filed, 
there is an additional determination as specified in paragraphs (c)(1) 
(i), (ii), (iii), or (iv) of this section.)
    (2) Except as required by any subsequent administrative or judicial 
reversal, interest accrues from the date of final determination as 
specified in this subsection.
    (d) Rate of interest. (1) The interest rate on overpayments and 
underpayments is the higher of--
    (i) The rate as fixed by the Secretary of the Treasury after taking 
into consideration private consumer rates of interest prevailing on the 
date of final determination as defined in paragraph (c) of this section 
(this rate is published quarterly in the Federal Register by the 
Department under 45 CFR 30.13(a)); or
    (ii) The current value of funds rate (this rate is published 
annually in the Federal Register by the Secretary of the Treasury, 
subject to quarterly revisions).
    (2) [Reserved]
    (e) Accrual of interest. (1) If a cost report is filed that does not 
indicate an amount is due CMS but the intermediary makes a final 
determination that an overpayment exists, or if a carrier makes a final 
determination that an overpayment to a physician or supplier exists, 
interest will accrue beginning with the date of such final 
determination. Interest will continue to accrue during periods of 
administrative and judicial appeal and until final disposition of the 
claim.
    (2)(i) If a cost report is filed and indicates that an amount is due 
CMS, interest on the amount due will accrue from the due date of the 
cost report unless--
    (A) Full payment on the amount due accompanies the cost report; or
    (B) The provider and the intermediary agree in advance to liquidate 
the overpayment through a reduction in interim payments over the next 
30-day period.

[[Page 107]]

    (ii) If the intermediary determines an additional overpayment during 
the cost settlement process, interest will accrue from the date of each 
determination.
    (iii) The interest rate on each of the final determinations of an 
overpayment will be the rate of interest in effect on the date the 
determination is made.
    (3) In the case of a cost report that is not filed on time, interest 
also will accrue on a determined overpayment from the day following the 
due date of the report (plus a single extension of time not to exceed 30 
days if granted for good cause, as specified in Sec. 413.24(f)) of this 
chapter, to the time the cost report is filed.
    (4) If an intermediary or a carrier makes a final determination that 
an underpayment exists, interest to the provider or the supplier will 
accrue from the date of notification of the underpayment.
    (f) Waiver of interest charges. (1) When an intermediary or a 
carrier makes a final determination that an overpayment or underpayment 
exists, as specified in paragraphs (e)(1), (e)(2)(ii), and (e)(4)--
    (i) Interest charges will be waived if the overpayment or 
underpayment is completely liquidated within 30 days from the date of 
the final determination.
    (ii) CMS may waive interest charges if it determines that the 
administrative cost of collecting them exceeds the interest charges.
    (2) Interest will not be waived for that period of time during which 
the cost report was due but remained unfiled for more than 30 days, as 
specified in paragraph (e)(3) of this section.
    (g) Rules applicable to partial payments. If an overpayment is 
repaid in installments or recouped by withholding from several payments 
due the provider or supplier of services--
    (1) Each payment or recoupment will be applied first to accrued 
interest and then to the principal; and
    (2) After each payment or recoupment, interest will accrue on the 
remaining unpaid balance.
    (h) Exceptions to applicability. (1) The provisions of this section 
do not apply to the time period for which interest is payable under 
Sec. 413.64(j) of this chapter because the provider seeks judicial 
review of a decision of the Provider Reimbursement Review Board, or a 
subsequent reversal, affirmance, or modification of that decision by the 
Administrator. Prior to that time, until the provider seeks judicial 
review, interest accrues at the rate specified in this section on 
outstanding unpaid balances resulting from final determinations as 
defined in paragraph (c) of this section.
    (2) If an overpayment or an underpayment determination is reversed 
administratively or judicially, and the reversal is no longer subject to 
appeal, appropriate adjustments will be made with respect to the 
overpayment or underpayment and the amount of interest charged.
    (i) Nonallowable cost. As specified in Sec. Sec. 412.113 and 
413.153 of this chapter, interest accrued on overpayments and interest 
on funds borrowed specifically to repay overpayments are not considered 
allowable costs, up to the amount of the overpayment, unless the 
provider had made a prior commitment to borrow funds for other purposes 
(for example, capital improvements).


(See Sec. 413.153(a)(2) of this chapter for exceptions based on 
administrative or judicial reversal.)

[47 FR 54814, Dec. 6, 1982, as amended at 49 FR 36102, Sept. 14, 1984; 
49 FR 44472, Nov. 7, 1984; 51 FR 34792, Sept. 30, 1986; 56 FR 31336, 
July 10, 1991. Redesignated at 61 FR 63745, Dec. 2, 1996; 69 FR 45607, 
July 30, 2004]

                   Repayment of Scholarships and Loans



Sec. 405.380  Collection of past-due amounts on scholarship and loan programs.

    (a) Basis and purpose. This section implements section 1892 of the 
Act, which authorizes the Secretary to deduct from Medicare payments for 
services amounts considered as past-due obligations under the National 
Health Service Corps Scholarship program, the Physician Shortage Area 
Scholarship program, and the Health Education Assistance Loan program.
    (b) Offsetting against Medicare payment. (1) Medicare carriers and 
intermediaries offset against Medicare payments in accordance with the 
signed

[[Page 108]]

repayment agreement between the Public Health Service and individuals 
who have breached their scholarship or loan obligations and who--
    (i) Accept Medicare assignment for services;
    (ii) Are employed by or affiliated with a provider, HMO, or 
Competitive Medical Plan (CMP) that receives Medicare payment for 
services; or
    (iii) Are members of a group practice that receives Medicare payment 
for services.
    (2) For purposes of this section, ``provider'' includes all entities 
eligible to receive Medicare payment in accordance with an agreement 
under section 1866 of the Act.
    (c) Beginning of offset. (1) The Medicare carrier offsets Medicare 
payments beginning six months after it notifies the individual or the 
group practice of the amount to be deducted and the particular 
individual to whom the deductions are attributable.
    (2) The Medicare intermediary offsets payments beginning six months 
after it notifies the provider, HMO, CMP or group practice of the amount 
to be deducted and the particular individuals to whom the deductions are 
attributable. Offset of payments is made in accordance with the terms of 
the repayment agreement. If the individual ceases to be employed by the 
provider, HMO, or CMP, or leaves the group practice, no deduction is 
made.
    (d) Refusal to offset against Medicare payment. If the individual 
refuses to enter into a repayment agreement, or breaches any provision 
of the agreement, or if Medicare payment is insufficient to maintain the 
offset collection according to the agreed upon formula, then--
    (1) The Department, within 30 days if feasible, informs the Attorney 
General; and
    (2) The Department excludes the individual from Medicare until the 
entire past due obligation has been repaid, unless the individual is a 
sole community practitioner or the sole source of essential specialized 
services in a community and the State requests that the individual not 
be excluded.

[57 FR 19092, May 4, 1992]



                       Subpart D_Private Contracts

    Authority: Secs. 1102, 1802, and 1871 of the Social Security Act (42 
U.S.C. 1302, 1395a, and 1395hh).

    Source: 63 FR 58901, Nov. 2, 1998, unless otherwise noted.



Sec. 405.400  Definitions.

    For purposes of this subpart, the following definitions apply:
    Beneficiary means an individual who is enrolled in Part B of 
Medicare.
    Emergency care services means services furnished to an individual 
for treatment of an ``emergency medical condition'' as that term is 
defined in Sec. 422.2 of this chapter.
    Legal representative means one or more individuals who, as 
determined by applicable State law, has the legal authority to enter 
into the contract with the physician or practitioner on behalf of the 
beneficiary.
    Opt-out means the status of meeting the conditions specified in 
Sec. 405.410.
    Opt-out period means the 2-year period beginning on the effective 
date of the affidavit as specified by Sec. 405.410(c)(1) or Sec. 
405.410(c)(2), as applicable.
    Participating physician means a ``physician'' as defined in this 
section who has signed an agreement to participate in Part B of 
Medicare.
    Physician means a doctor of medicine; doctor of osteopathy; doctor 
of dental surgery or of dental medicine; doctor of podiatric medicine; 
or doctor of optometry who is legally authorized to practice medicine, 
osteopathy, dental surgery, dental medicine, podiatric medicine, or 
optometry by the State in which he performs such function and who is 
acting within the scope of his license when he performs such functions.
    Practitioner means a physician assistant, nurse practitioner, 
clinical nurse specialist, certified registered nurse anesthetist, 
certified nurse midwife, clinical psychologist, clinical social worker, 
registered dietitian or nutrition professional, who is currently legally 
authorized to practice in that capacity by each State in which he or she 
furnishes services to patients or clients.

[[Page 109]]

    Private contract means a document that meets the criteria specified 
in Sec. 405.415.
    Properly opt-out means to complete, without defect, the requirements 
for opt-out as specified in Sec. 405.410.
    Properly terminate opt-out means to complete, without defect, the 
requirements for terminating opt-out as specified in Sec. 405.445.
    Urgent care services means services furnished to an individual who 
requires services to be furnished within 12 hours in order to avoid the 
likely onset of an emergency medical condition.

[63 FR 58901, Nov. 2, 1998, as amended at 69 FR 1116, Jan. 7, 2004; 71 
FR 69782, Dec. 1, 2006]



Sec. 405.405  General rules.

    (a) A physician or practitioner may enter into one or more private 
contracts with Medicare beneficiaries for the purpose of furnishing 
items or services that would otherwise be covered by Medicare, provided 
the conditions of this subpart are met.
    (b) A physician or practitioner who enters into at least one private 
contract with a Medicare beneficiary under the conditions of this 
subpart, and who submits one or more affidavits in accordance with this 
subpart, opts-out of Medicare for a 2-year period unless the opt-out is 
terminated early according to Sec. 405.445. The physician's or 
practitioner's opt-out may be renewed for subsequent 2-year periods.
    (c) Both the private contracts described in paragraph (a) of this 
section and the physician's or practitioner's opt-out described in 
paragraph (b) of this section are null and void if the physician or 
practitioner fails to properly opt-out in accordance with the conditions 
of this subpart.
    (d) Both the private contracts described in paragraph (a) of this 
section and the physician's or practitioner's opt-out described in 
paragraph (b) of this section are null and void for the remainder of the 
opt-out period if the physician or practitioner fails to remain in 
compliance with the conditions of this subpart during the opt-out 
period.
    (e) Services furnished under private contracts meeting the 
requirements of this subpart are not covered services under Medicare, 
and no Medicare payment will be made for such services either directly 
or indirectly, except as permitted in accordance with Sec. 405.435(c).



Sec. 405.410  Conditions for properly opting-out of Medicare.

    The following conditions must be met for a physician or practitioner 
to properly opt-out of Medicare:
    (a) Each private contract between a physician or a practitioner and 
a Medicare beneficiary that is entered into prior to the submission of 
the affidavit described in paragraph (b) of this section must meet the 
specifications of Sec. 405.415.
    (b) The physician or practitioner must submit an affidavit that 
meets the specifications of Sec. 405.420 to each Medicare carrier with 
which he or she would file claims absent completion of opt-out.
    (c) A nonparticipating physician or a practitioner may opt-out of 
Medicare at any time in accordance with the following:
    (1) The 2-year opt-out period begins the date the affidavit meeting 
the requirements of Sec. 405.420 is signed, provided the affidavit is 
filed within 10 days after he or she signs his or her first private 
contract with a Medicare beneficiary.
    (2) If the physician or practitioner does not timely file any 
required affidavit, the 2-year opt-out period begins when the last such 
affidavit is filed. Any private contract entered into before the last 
required affidavit is filed becomes effective upon the filing of the 
last required affidavit and the furnishing of any items or services to a 
Medicare beneficiary under such contract before the last required 
affidavit is filed is subject to standard Medicare rules.
    (d) A participating physician may properly opt-out of Medicare at 
the beginning of any calendar quarter, provided that the affidavit 
described in Sec. 405.420 is submitted to the participating physician's 
Medicare carriers at least 30 days before the beginning of the selected 
calendar quarter. A private contract entered into before the beginning 
of the selected calendar quarter becomes effective at the beginning of 
the selected calendar quarter

[[Page 110]]

and the furnishing of any items or services to a Medicare beneficiary 
under such contract before the beginning of the selected calendar 
quarter is subject to standard Medicare rules.



Sec. 405.415  Requirements of the private contract.

    A private contract under this subpart must:
    (a) Be in writing and in print sufficiently large to ensure that the 
beneficiary is able to read the contract.
    (b) Clearly state whether the physician or practitioner is excluded 
from Medicare under sections 1128, 1156, or 1892 or any other section of 
the Social Security Act.
    (c) State that the beneficiary or his or her legal representative 
accepts full responsibility for payment of the physician's or 
practitioner's charge for all services furnished by the physician or 
practitioner.
    (d) State that the beneficiary or his or her legal representative 
understands that Medicare limits do not apply to what the physician or 
practitioner may charge for items or services furnished by the physician 
or practitioner.
    (e) State that the beneficiary or his or her legal representative 
agrees not to submit a claim to Medicare or to ask the physician or 
practitioner to submit a claim to Medicare.
    (f) State that the beneficiary or his or her legal representative 
understands that Medicare payment will not be made for any items or 
services furnished by the physician or practitioner that would have 
otherwise been covered by Medicare if there was no private contract and 
a proper Medicare claim had been submitted.
    (g) State that the beneficiary or his or her legal representative 
enters into this contract with the knowledge that he or she has the 
right to obtain Medicare-covered items and services from physicians and 
practitioners who have not opted-out of Medicare, and that the 
beneficiary is not compelled to enter into private contracts that apply 
to other Medicare-covered services furnished by other physicians or 
practitioners who have not opted-out.
    (h) State the expected or known effective date and expected or known 
expiration date of the opt-out period.
    (i) State that the beneficiary or his or her legal representative 
understands that Medigap plans do not, and that other supplemental plans 
may elect not to, make payments for items and services not paid for by 
Medicare.
    (j) Be signed by the beneficiary or his or her legal representative 
and by the physician or practitioner.
    (k) Not be entered into by the beneficiary or by the beneficiary's 
legal representative during a time when the beneficiary requires 
emergency care services or urgent care services. (However, a physician 
or practitioner may furnish emergency or urgent care services to a 
Medicare beneficiary in accordance with Sec. 405.440.)
    (l) Be provided (a photocopy is permissible) to the beneficiary or 
to his or her legal representative before items or services are 
furnished to the beneficiary under the terms of the contract.
    (m) Be retained (original signatures of both parties required) by 
the physician or practitioner for the duration of the opt-out period.
    (n) Be made available to CMS upon request.
    (o) Be entered into for each opt-out period.



Sec. 405.420  Requirements of the opt-out affidavit.

    An affidavit under this subpart must:
    (a) Be in writing and be signed by the physician or practitioner.
    (b) Contain the physician's or practitioner's full name, address, 
telephone number, national provider identifier (NPI) or billing number, 
if one has been assigned, uniform provider identification number (UPIN) 
if one has been assigned, or, if neither an NPI nor a UPIN has been 
assigned, the physician's or practitioner's tax identification number 
(TIN).
    (c) State that, except for emergency or urgent care services (as 
specified in Sec. 405.440), during the opt-out period the physician or 
practitioner will provide services to Medicare beneficiaries only 
through private contracts that meet the criteria of paragraph Sec. 
405.415 for services that, but for their provision under a private 
contract, would have been Medicare-covered services.
    (d) State that the physician or practitioner will not submit a claim 
to

[[Page 111]]

Medicare for any service furnished to a Medicare beneficiary during the 
opt-out period, nor will the physician or practitioner permit any entity 
acting on his or her behalf to submit a claim to Medicare for services 
furnished to a Medicare beneficiary, except as specified in Sec. 
405.440.
    (e) State that, during the opt-out period, the physician or 
practitioner understands that he or she may receive no direct or 
indirect Medicare payment for services that he or she furnishes to 
Medicare beneficiaries with whom he or she has privately contracted, 
whether as an individual, an employee of an organization, a partner in a 
partnership, under a reassignment of benefits, or as payment for a 
service furnished to a Medicare beneficiary under a Medicare+Choice 
plan.
    (f) State that a physician or practitioner who opts-out of Medicare 
acknowledges that, during the opt-out period, his or her services are 
not covered under Medicare and that no Medicare payment may be made to 
any entity for his or her services, directly or on a capitated basis.
    (g) State a promise by the physician or practitioner to the effect 
that, during the opt-out period, the physician or practitioner agrees to 
be bound by the terms of both the affidavit and the private contracts 
that he or she has entered into.
    (h) Acknowledge that the physician or practitioner recognizes that 
the terms of the affidavit apply to all Medicare-covered items and 
services furnished to Medicare beneficiaries by the physician or 
practitioner during the opt-out period (except for emergency or urgent 
care services furnished to the beneficiaries with whom he or she has not 
previously privately contracted) without regard to any payment 
arrangements the physician or practitioner may make.
    (i) With respect to a physician who has signed a Part B 
participation agreement, acknowledge that such agreement terminates on 
the effective date of the affidavit.
    (j) Acknowledge that the physician or practitioner understands that 
a beneficiary who has not entered into a private contract and who 
requires emergency or urgent care services may not be asked to enter 
into a private contract with respect to receiving such services and that 
the rules of Sec. 405.440 apply if the physician furnishes such 
services.



Sec. 405.425  Effects of opting-out of Medicare.

    If a physician or practitioner opts-out of Medicare in accordance 
with this subpart for the 2-year period for which the opt-out is 
effective, the following results obtain:
    (a) Except as provided in Sec. 405.440, no payment may be made 
directly by Medicare or by any Medicare+Choice plan to the physician or 
practitioner or to any entity to which the physician or practitioner 
reassigns his right to receive payment for services.
    (b) The physician or practitioner may not furnish any item or 
service that would otherwise be covered by Medicare (except for 
emergency or urgent care services) to any Medicare beneficiary except 
through a private contract that meets the requirements of this subpart.
    (c) The physician or practitioner is not subject to the requirement 
to submit a claim for items or services furnished to a Medicare 
beneficiary, as specified in Sec. 424.5(a)(6) of this chapter, except 
as provided in Sec. 405.440.
    (d) The physician or practitioner is prohibited from submitting a 
claim to Medicare for items or services furnished to a Medicare 
beneficiary except as provided in Sec. 405.440.
    (e) In the case of a physician, he or she is not subject to the 
limiting charge provisions of Sec. 414.48 of this chapter, except for 
services provided under Sec. 405.440.
    (f) The physician or practitioner is not subject to the prohibition-
on-reassignment provisions of Sec. 414.80 of this chapter, except for 
services provided under Sec. 405.440.
    (g) In the case of a practitioner, he or she is not prohibited from 
billing or collecting amounts from beneficiaries (as provided in 42 
U.S.C. 1395u(b)(18)(B)).
    (h) The death of a beneficiary who has entered into a private 
contract (or whose legal representative has done so) does not invoke 
Sec. 424.62 or Sec. 424.64 of

[[Page 112]]

this chapter with respect to the physician or practitioner with whom the 
beneficiary (or legal representative) has privately contracted.
    (i) The physician or practitioner who has not been excluded under 
sections 1128, 1156, or 1892 of the Social Security Act may order, 
certify the need for, or refer a beneficiary for Medicare-covered items 
and services, provided the physician or practitioner is not paid, 
directly or indirectly, for such services (except as provided in Sec. 
405.440).
    (j) The physician or practitioner who is excluded under sections 
1128, 1156, or 1892 of the Social Security Act may not order, prescribe, 
or certify the need for Medicare-covered items and services except as 
provided in Sec. 1001.1901 of this title, and must otherwise comply 
with the terms of the exclusion in accordance with Sec. 1001.1901 
effective with the date of the exclusion.



Sec. 405.430  Failure to properly opt-out.

    (a) A physician or practitioner fails to properly opt-out if--
    (1) Any private contract between the physician or practitioner and a 
Medicare beneficiary, that was entered into before the affidavit 
described in Sec. 405.420 was filed, does not meet the specifications 
of Sec. 405.415; or
    (2) He or she fails to submit the affidavit(s) in accordance with 
Sec. 405.420.
    (b) If a physician or practitioner fails to properly opt-out in 
accordance with paragraph (a) of this section, the following results 
obtain:
    (1) The physician's or practitioner's attempt to opt-out of Medicare 
is nullified, and all of the private contracts between the physician or 
practitioner and Medicare beneficiaries for the two-year period covered 
by the attempted opt-out are deemed null and void.
    (2) The physician or practitioner must submit claims to Medicare for 
all Medicare-covered items and services furnished to Medicare 
beneficiaries, including the items and services furnished under the 
nullified contracts. A nonparticipating physician is subject to the 
limiting charge provisions of Sec. 414.48 of this chapter. A 
participating physician is subject to the limitations on charges of the 
participation agreement he or she signed.
    (3) The practitioner may not reassign any claim except as provided 
in Sec. 424.80 of this chapter.
    (4) The practitioner may neither bill nor collect an amount from the 
beneficiary except for applicable deductible and coinsurance amounts.
    (5) The physician or practitioner may make another attempt to 
properly opt-out at any time.



Sec. 405.435  Failure to maintain opt-out.

    (a) A physician or practitioner fails to maintain opt-out under this 
subpart if, during the opt-out period--
    (1) He or she knowingly and willfully--
    (i) Submits a claim for Medicare payment (except as provided in 
Sec. 405.440); or
    (ii) Receives Medicare payment directly or indirectly for Medicare-
covered services furnished to a Medicare beneficiary (except as provided 
in Sec. 405.440).
    (2) He or she fails to enter into private contracts with Medicare 
beneficiaries for the purpose of furnishing items and services that 
would otherwise be covered by Medicare, or enters into contracts that 
fail to meet the specifications of Sec. 405.415; or
    (3) He or she fails to comply with the provisions of Sec. 405.440 
regarding billing for emergency care services or urgent care services; 
or
    (4) He or she fails to retain a copy of each private contract that 
he or she has entered into for the duration of the opt-out period for 
which the contracts are applicable or fails to permit CMS to inspect 
them upon request.
    (b) If a physician or practitioner fails to maintain opt-out in 
accordance with paragraph (a) of this section, then, for the remainder 
of the opt-out period, except as provided by paragraph (d) of this 
section--
    (1) All of the private contracts between the physician or 
practitioner and Medicare beneficiaries are deemed null and void.
    (2) The physician's or practitioner's opt-out of Medicare is 
nullified.
    (3) The physician or practitioner must submit claims to Medicare for 
all Medicare-covered items and services furnished to Medicare 
beneficiaries.

[[Page 113]]

    (4) The physician or practitioner or beneficiary will not receive 
Medicare payment on Medicare claims for the remainder of the opt-out 
period, except as provided in paragraph (c) of this section.
    (5) The physician is subject to the limiting charge provisions of 
Sec. 414.48 of this chapter.
    (6) The practitioner may not reassign any claim except as provided 
in Sec. 424.80 of this chapter.
    (7) The practitioner may neither bill nor collect any amount from 
the beneficiary except for applicable deductible and coinsurance 
amounts.
    (8) The physician or practitioner may not attempt to once more meet 
the criteria for properly opting-out until the 2-year opt-out period 
expires.
    (c) Medicare payment may be made for the claims submitted by a 
beneficiary for the services of an opt-out physician or practitioner 
when the physician or practitioner did not privately contract with the 
beneficiary for services that were not emergency care services or urgent 
care services and that were furnished no later than 15 days after the 
date of a notice by the carrier that the physician or practitioner has 
opted-out of Medicare.
    (d) If a physician or practitioner demonstrates that he or she has 
taken good faith efforts to maintain opt-out (including by refunding 
amounts in excess of the charge limits to beneficiaries with whom he or 
she did not sign a private contract) within 45 days of a notice from the 
carrier of a violation of paragraph (a) of this section, then the 
requirements of paragraphs (b)(1) through (b)(8) of this section are not 
applicable. In situations where a violation of paragraph (a) of this 
section is not discovered by the carrier during the 2-year opt-out 
period when the violation actually occurred, then the requirements of 
paragraphs (b)(1) through (b)(8) of this section are applicable from the 
date that the first violation of paragraph (a) of this section occurred 
until the end of the opt-out period during which the violation occurred 
(unless the physician or practitioner takes good faith efforts, within 
45 days of any notice from the carrier that the physician or 
practitioner failed to maintain opt-out, or within 45 days of the 
physician's or practitioner's discovery of the failure to maintain opt-
out, whichever is earlier, to correct his or her violations of paragraph 
(a) of this section. Good faith efforts include, but are not limited to, 
refunding any amounts collected in excess of the charge limits to 
beneficiaries with whom he or she did not sign a private contract.

[63 FR 58901, Nov. 2, 1998, as amended at 70 FR 70329, Nov. 21, 2005]



Sec. 405.440  Emergency and urgent care services.

    (a) A physician or practitioner who has opted-out of Medicare under 
this subpart need not enter into a private contract to furnish emergency 
care services or urgent care services to a Medicare beneficiary. 
Accordingly, a physician or practitioner will not be determined to have 
failed to maintain opt-out if he or she furnishes emergency care 
services or urgent care services to a Medicare beneficiary with whom the 
physician or practitioner has not previously entered into a private 
contract, provided the physician or practitioner complies with the 
billing requirements specified in paragraph (b) of this section.
    (b) When a physician or practitioner who has not been excluded under 
sections 1128, 1156, or 1892 of the Social Security Act furnishes 
emergency care services or urgent care services to a Medicare 
beneficiary with whom the physician or practitioner has not previously 
entered into a private contract, he or she:
    (1) Must submit a claim to Medicare in accordance with both 42 CFR 
part 424 and Medicare instructions (including but not limited to 
complying with proper coding of emergency or urgent care services 
furnished by physicians and practitioners who have opted-out of 
Medicare).
    (2) May collect no more than--
    (i) The Medicare limiting charge, in the case of a physician; or
    (ii) The deductible and coinsurance, in the case of a practitioner.
    (c) Emergency care services or urgent care services furnished to a 
Medicare beneficiary with whom the physician or practitioner has 
previously entered into a private contract (that is, entered

[[Page 114]]

into before the onset of the emergency medical condition or urgent 
medical condition), are furnished under the terms of the private 
contract.
    (d) Medicare may make payment for emergency care services or urgent 
care services furnished by a physician or practitioner who has properly 
opted-out when the services are furnished and the claim for services is 
made in accordance with this section. A physician or practitioner who 
has been excluded must comply with the regulations at Sec. 1001.1901 
(Scope and effect of exclusion) of this title when he or she furnishes 
emergency services to beneficiaries and may not bill and be paid for 
urgent care services.



Sec. 405.445  Renewal and early termination of opt-out.

    (a) A physician or practitioner may renew opt-out by filing an 
affidavit with each carrier with which he or she would file claims 
absent completion of opt-out, provided the affidavits are filed within 
30 days after the current opt-out period expires.
    (b) To properly terminate opt-out a physician or practitioner must:
    (1) Not have previously opted out of Medicare.
    (2) Notify all Medicare carriers, with which he or she filed an 
affidavit, of the termination of the opt-out no later than 90 days after 
the effective date of the opt-out period.
    (3) Refund to each beneficiary with whom he or she has privately 
contracted all payment collected in excess of:
    (i) The Medicare limiting charge (in the case of physicians); or
    (ii) The deductible and coinsurance (in the case of practitioners).
    (4) Notify all beneficiaries with whom the physician or practitioner 
entered into private contracts of the physician's or practitioner's 
decision to terminate opt-out and of the beneficiaries' right to have 
claims filed on their behalf with Medicare for the services furnished 
during the period between the effective date of the opt-out and the 
effective date of the termination of the opt-out period.
    (c) When the physician or practitioner properly terminates opt-out 
in accordance with paragraph (b), he or she will be reinstated in 
Medicare as if there had been no opt-out, and the provision of Sec. 
405.425 shall not apply unless the physician or practitioner 
subsequently properly opts out.
    (d) A physician or practitioner who has completed opt-out on or 
before January 1, 1999 may terminate opt-out during the 90 days 
following January 1, 1999 if he or she notifies all carriers to whom he 
or she would otherwise submit claims of the intent to terminate opt-out 
and complies with paragraphs (b)(3) and (4) of this section. Paragraph 
(c) of this section applies in these cases.



Sec. 405.450  Appeals.

    (a) A determination by CMS that a physician or practitioner has 
failed to properly opt-out, failed to maintain opt-out, failed to timely 
renew opt-out, failed to privately contract, or failed to properly 
terminate opt-out is an initial determination for purposes of Sec. 
405.803.
    (b) A determination by CMS that no payment can be made to a 
beneficiary for the services of a physician who has opted-out is an 
initial determination for purposes of Sec. 405.803.



Sec. 405.455  Application to Medicare+Choice contracts.

    An organization that has a contract with CMS to provide one or more 
Medicare+Choice (M+C) plans to beneficiaries (part 422 of this chapter):
    (a) Must acquire and maintain information from Medicare carriers on 
physicians and practitioners who have opted-out of Medicare.
    (b) Must make no payment directly or indirectly for Medicare covered 
services furnished to a Medicare beneficiary by a physician or 
practitioner who has opted-out of Medicare.
    (c) May make payment to a physician or practitioner who furnishes 
emergency or urgent care services to a beneficiary who has not 
previously entered into a private contract with the physician or 
practitioner in accordance with Sec. 405.440.

[[Page 115]]



          Subpart E_Criteria for Determining Reasonable Charges

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).

    Source: 32 FR 12599, Aug. 31, 1967, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977.



Sec. 405.500  Basis.

    Subpart E is based on the provisions of the following sections of 
the Act: Section 1814(b) provides for Part A payment on the basis of the 
lesser of a provider's reasonable costs or customary charges. Section 
1832 establishes the scope of benefits provided under the Part B 
supplementary medical insurance program. Section 1833(a) sets forth the 
amounts of payment for supplementary medical insurance services on the 
basis of the lesser of a provider's reasonable costs or customary 
charges. Section 1834(a) specifies how payments are made for the 
purchase or rental of new and used durable medical equipment for 
Medicare beneficiaries. Section 1834(b) provides for payment for 
radiologist services on a fee schedule basis. Section 1834(c) provides 
for payments and standards for screening mammography. Section 1842(b) 
sets forth the provisions for a carrier to enter into a contract with 
the Secretary and to make determinations with respect to Part B claims. 
Section 1842(h) sets forth the requirements for a physician or supplier 
to voluntarily enter into an agreement with the Secretary to become a 
participating physician or supplier. Section 1842(i) sets forth the 
provisions for the payment of Part B claims. Section 1848 establishes a 
fee schedule for payment of physician services. Section 1861(b) sets 
forth the inpatient hospital services covered by the Medicare program. 
Section 1861(s) sets forth medical and other health services covered by 
the Medicare program. Section 1861(v) sets forth the general authority 
under which CMS may establish limits on provider costs recognized as 
reasonable in determining Medicare program payments. Section 1861(aa) 
sets forth the rural health clinic services and Federally qualified 
health center services covered by the Medicare program. Section 1861(jj) 
defines the term ``covered osteoporosis drug.'' Section 1862(a)(14) 
lists services that are excluded from coverage. Section 1866(a) 
specifies the terms for provider agreements. Section 1881 authorizes 
special rules for the coverage of and payment for services furnished to 
patients with end-stage renal disease. Section 1886 sets forth the 
requirements for payment to hospitals for inpatient hospital services. 
Section 1887 sets forth requirements for payment of provider-based 
physicians and payment under certain percentage arrangements. Section 
1889 provides for Medicare and Medigap information by telephone.

[60 FR 63175, Dec. 8, 1995]



Sec. 405.501  Determination of reasonable charges.

    (a) Except as specified in paragraphs (b), (c), and (d) of this 
section, Medicare pays no more for Part B medical and other health 
services than the ``reasonable charge'' for such service. The reasonable 
charge is determined by the carriers (subject to any deductible and 
coinsurance amounts as specified in Sec. Sec. 410.152 and 410.160 of 
this chapter).
    (b) Part B of Medicare pays on the basis of ``reasonable cost'' (see 
part 413 of this chapter) for certain institutional services, certain 
services furnished under arrangements with institutions, and services 
furnished by entities that elect to be paid on a cost basis (including 
health maintenance organizations, rural health clinics, Federally 
qualified health centers and end-stage renal disease facilities).
    (c) Carriers will determine the reasonable charge on the basis of 
the criteria specified in Sec. 405.502, and the customary and 
prevailing charge screens in effect when the service was furnished. 
(Also see Sec. Sec. 415.55 through 415.70 and Sec. Sec. 415.100 
through 415.130 of this chapter, which pertain to the determination of 
reimbursement for services performed by hospital-based physicians.) 
However, when services are furnished more than 12 months before the 
beginning of the fee screen year (January 1 through December 30) in 
which a request for payment is made, payment is based on the customary 
and prevailing charge screens in effect for the fee screen year that 
ends immediately preceding the fee screen year in which

[[Page 116]]

the claim or request for payment is made.
    (d) Payment under Medicare Part B for durable medical equipment and 
prosthetic and orthotic devices is determined in accordance with the 
provisions of subpart D of part 414 of this chapter.

[47 FR 63274, Dec. 31, 1981, as amended at 51 FR 34978, Oct. 1, 1986; 51 
FR 37911, Oct. 27, 1986; 54 FR 9003, Mar. 2, 1989; 57 FR 24975, June 12, 
1992; 57 FR 33896, July 31, 1992; 57 FR 57688, Dec. 7, 1992; 60 FR 
63176, Dec. 8, 1995]



Sec. 405.502  Criteria for determining reasonable charges.

    (a) Criteria. The law allows for flexibility in the determination of 
reasonable charges to accommodate reimbursement to the various ways in 
which health services are furnished and charged for. The criteria for 
determining what charges are reasonable include:
    (1) The customary charges for similar services generally made by the 
physician or other person furnishing such services.
    (2) The prevailing charges in the locality for similar services.
    (3) In the case of physicians' services, the prevailing charges 
adjusted to reflect economic changes as provided under Sec. 405.504 of 
this subpart.
    (4) In the case of medical services, supplies, and equipment that 
are reimbursed on a reasonable charge basis (excluding physicians' 
services), the inflation-indexed charge as determined under Sec. 
405.509.
    (5) [Reserved]
    (6) In the case of medical services, supplies, and equipment 
(including equipment servicing) that the Secretary judges do not 
generally vary significantly in quality from one supplier to another, 
the lowest charge levels at which such services, supplies, and equipment 
are widely and consistently available in a locality.
    (7) Other factors that may be found necessary and appropriate with 
respect to a category of service to use in judging whether the charge is 
inherently reasonable. This includes special reasonable charge limits 
(which may be either upper or lower limits) established by CMS or a 
carrier if it determines that the standard rules for calculating 
reasonable charges set forth in this subpart result in the grossly 
deficient or excessive charges. The determination of these limits is 
described in paragraphs (g) and (h) of this section.
    (8) In the case of laboratory services billed by a physician but 
performed by an outside laboratory, the payment levels established in 
accordance with the criteria stated in Sec. 405.515.
    (9) Except as provided in paragraph (a)(10) of this section, in the 
case of services of assistants-at-surgery as defined in Sec. 405.580 in 
teaching and non-teaching settings, charges that are not more than 16 
percent of the prevailing charge in the locality, adjusted by the 
economic index, for the surgical procedure performed by the primary 
surgeon. Payment is prohibited for the services of an assistant-at-
surgery in surgical procedures for which CMS has determined that 
assistants-at-surgery on average are used in less than 5 percent of such 
procedures nationally.
    (10) In the case of services of assistants at surgery that meet the 
exception under Sec. 415.190(c)(2) or (c)(3) of this chapter because 
the physician is performing a unique, necessary, specialized medical 
service in the total care of a patient during surgery, reasonable 
charges consistent with prevailing practice in the carrier's service 
area rather than the special assistant at surgery rate.
    (b) Comparable services limitation. The law also specifies that the 
reasonable charge cannot be higher than the charge applicable for a 
comparable service under comparable circumstances to the carriers' own 
policyholders and subscribers.
    (c) Application of criteria. In applying these criteria, the 
carriers are to exercise judgment based on factual data on the charges 
made by physicians to patients generally and by other persons to the 
public in general and on special factors that may exist in individual 
cases so that determinations of reasonable charge are realistic and 
equitable.
    (d) Responsibility of Administration and carriers. Determinations by 
carriers of reasonable charge are not reviewed on a case-by-case basis 
by the Centers for Medicare & Medicaid Services, although the general 
procedures and performance of functions by carriers are

[[Page 117]]

evaluated. In making determinations, carriers apply the provisions of 
the law under broad principles issued by the Centers for Medicare & 
Medicaid Services. These principles are intended to assure overall 
consistency among carriers in their determinations of reasonable charge. 
The principles in Sec. Sec. 405.503 through 405.507 establish the 
criteria for making such determinations in accordance with the statutory 
provisions.
    (e) Determination of reasonable charges under the End-Stage Renal 
Disease (ESRD) Program--(1) General. Reasonable charges for renal-
related items and services (furnished in connection with transplantation 
or dialysis) must be related to costs and allowances that are reasonable 
when the treatments are furnished in an effective and economical manner.
    (2) Nonprovider (independent) dialysis facilities. Reasonable 
charges for renal-related items and services furnished before August 1, 
1983 must be determined related to costs and charges prior to July, 
1973, in accordance with the regulations at Sec. 405.541. Items and 
services related to outpatient maintenance dialysis that are furnished 
after that date are paid for in accordance with Sec. Sec. 405.544 and 
413.170 of this chapter.
    (3) Provider services and (hospital-based) dialysis facilities. 
Renal-related items and services furnished by providers, or by ESRD 
facilities based in hospitals, before August 1, 1983 are paid for under 
the provider reimbursement provisions found generally in part 413 of 
this chapter. Items and services related to outpatient maintenance 
dialysis that are furnished after that date are paid for in accordance 
with Sec. Sec. 405.544 and 413.170 of this chapter.
    (4) Physicians' services. Reasonable charges for renal-related 
physicians' services must be determined considering charges made for 
other services involving comparable physicians' time and skill 
requirements, in accordance with regulations at Sec. Sec. 405.542 and 
405.543.
    (5) Health maintenance organizations (HMOs). For special rules 
concerning the reimbursement of ESRD services furnished by risk-basis 
HMOs, or by facilities owned or operated by or related to such HMOs by 
common ownership or control, see Sec. Sec. 405.2042(b)(14) and 
405.2050(c).
    (f) Determining payments for certain physician services furnished in 
outpatient hospital settings--(1) General rule. If physician services of 
the type routinely furnished in physicians' offices are furnished in 
outpatient hospital settings before January 1, 1992, carriers determine 
the reasonable charge for those services by applying the limits 
described in paragraph (f)(5) of this section.
    (2) Definition. As used in this paragraph (f), outpatient settings 
means--
    (i) Hospital outpatient departments, including clinics and emergency 
rooms; and
    (ii) Comprehensive outpatient rehabilitation facilities.
    (3) Services covered by limits. The carrier establishes a list of 
services routinely furnished in physicians' offices in the area. The 
carrier has the discretion to determine which professional services are 
routinely furnished in physicians' offices, based on current medical 
practice in the area. Listed below are some examples of routine services 
furnished by office-based physicians.

                                Examples

    Review of recent history, determination of blood pressure, 
ausculation of heart and lungs, and adjustment of medication.
    Brief history and examination, and initiation of diagnostic and 
treatment programs.
    Treatment of an acute respiratory infection.

    (4) Services excluded from limits. The limits established under this 
paragraph do not apply to the following:
    (i) Rural health clinic services.
    (ii) Surgical services included on the ambulatory surgical center 
list of procedures published under Sec. 416.65(c) of this chapter.
    (iii) Services furnished in a hospital emergency room after the 
sudden onset of a medical condition manifesting itself by acute symptoms 
of sufficient severity (including severe pain) such that the absence of 
immediate medical attention could reasonably be expected to result in--
    (A) Placing the patient's health in serious jeopardy;
    (B) Serious impairment to bodily functions; or

[[Page 118]]

    (C) Serious dysfunction of any bodily organ or part.
    (iv) Anesthesiology services and diagnostic and therapeutic 
radiology services.
    (v) Federally qualified health center services paid under the rules 
in part 405 subpart X.
    (5) Methodology for developing limits--(i) Development of a charge 
base. The carrier establishes a charge base for each service identified 
as a routine office-based physician service. The charge base consists of 
the prevailing charge in the locality for each such service adjusted by 
the economic index. The carrier uses the prevailing charges that apply 
to services by nonspecialists in office practices in the locality in 
which the outpatient setting is located.
    (ii) Calculation of the outpatient limits. The carrier calculates 
the charge limit for each service by multiplying the charge base amount 
for each service by .60.
    (6) Application of limits. The reasonable charge for physician 
services of the type described in paragraph (f)(3) of this section that 
are furnished in an outpatient setting is the lowest of the actual 
charges, the customary charges in accordance with Sec. 405.503, the 
prevailing charges applicable to these services in accordance with Sec. 
405.504, or the charge limits calculated in paragraph (f)(5)(ii) of this 
section.
    (g) Determination of payment amounts in special circumstances.--(1) 
General. (i) For purposes of this paragraph (g), a ``category of items 
or services'' may consist of a single item or service or any number of 
items or services.
    (ii) CMS or a carrier may determine that the standard rules for 
calculating payment amounts set forth in this subpart for a category of 
items or services identified in section 1861(s) of the Act (other than 
physicians' services paid under section 1848 of the Act and those items 
and services for which payment is made under a prospective payment 
system, such as outpatient hospital services or home health services) 
will result in grossly deficient or excessive amounts. A payment amount 
will not be considered grossly excessive or deficient if it is 
determined that an overall payment adjustment of less than 15 percent is 
necessary to produce a realistic and equitable payment amount. For CMS-
initiated adjustments, CMS will publish in the Federal Register an 
analysis of payment adjustments that exceed $100 million per year in 
compliance with Executive Order 12866. If CMS makes adjustments that 
have a significant effect on a substantial number of small entities, it 
will publish an analysis in compliance with the Regulatory Flexibility 
Act.
    (iii) If CMS or the carrier determines that the standard rules for 
calculating payment amounts for a category of items or services will 
result in grossly deficient or excessive amounts, CMS, or the carrier, 
may establish special payment limits that are realistic and equitable 
for a category of items or services. If CMS makes a determination, it is 
considered a national determination. A carrier determination is one made 
by a carrier or intermediary or groups of carriers or intermediaries 
even if the determination applies to payment in all States.
    (iv) The limit on the payment amount is either an upper limit to 
correct a grossly excessive payment amount or a lower limit to correct a 
grossly deficient payment amount.
    (v) The limit is either a specific dollar amount or is based on a 
special method to be used in determining the payment amount.
    (vi) Except as provided in paragraph (h) of this section, a payment 
limit for a given year may not vary by more than 15 percent from the 
payment amount established for the preceding year.
    (vii) Examples of excessive or deficient payment amounts. Examples 
of the factors that may result in grossly deficient or excessive payment 
amounts include, but are not limited to, the following:
    (A) The marketplace is not competitive. This includes circumstances 
in which the marketplace for a category of items or services is not 
truly competitive because a limited number of suppliers furnish the item 
or service.
    (B) Medicare and Medicaid are the sole or primary sources of payment 
for a category of items or services.

[[Page 119]]

    (C) The payment amounts for a category of items or services do not 
reflect changing technology, increased facility with that technology, or 
changes in acquisition, production, or supplier costs.
    (D) The payment amounts for a category of items or services in a 
particular locality are grossly higher or lower than payment amounts in 
other comparable localities for the category of items or services, 
taking into account the relative costs of furnishing the category of 
items or services in the different localities.
    (E) Payment amounts for a category of items or services are grossly 
higher or lower than acquisition or production costs for the category of 
items or services.
    (F) There have been increases in payment amounts for a category of 
items or services that cannot be explained by inflation or technology.
    (G) The payment amounts for a category of items or services are 
grossly higher or lower than the payments made for the same category of 
items or services by other purchasers in the same locality.
    (H) A new technology exists which is not reflected in the existing 
payment allowances.
    (2) Establishing a limit. In establishing a payment limit for a 
category of items or services, CMS or a carrier considers the available 
information that is relevant to the category of items or services and 
establishes a payment amount that is realistic and equitable. The 
factors CMS or a carrier considers in establishing a specific dollar 
amount or special payment method for a category of items or services may 
include, but are not limited to, the following:
    (i) Price markup. Price markup is the relationship between the 
retail and wholesale prices or manufacturer's costs of a category of 
items or services. If information on a particular category of items or 
services is not available, CMS or a carrier may consider the price 
markup on a similar category of items or services and information on 
general industry pricing trends.
    (ii) Differences in charges. CMS or a carrier may consider the 
differences in charges for a category of items or services made to non-
Medicare and Medicare patients or to institutions and other large volume 
purchasers.
    (iii) Costs. CMS or a carrier may consider resources (for example, 
overhead, time, acquisition costs, production costs, and complexity) 
required to produce a category of items or services.
    (iv) Use. CMS or a carrier may impute a reasonable rate of use for a 
category of items or services and consider unit costs based on efficient 
use.
    (v) Payment amounts in other localities. CMS or a carrier may 
consider payment amounts for a category of items or services furnished 
in another locality.
    (3) Notification of limits.--(i) National limits. CMS publishes in 
the Federal Register proposed and final notices announcing a special 
payment limit described in paragraph (g) of this section before it 
adopts the limit. The notices set forth the criteria and circumstances, 
if any, under which a carrier may grant an exception to a payment limit 
for a category of items or services.
    (ii) Carrier-level limits. (A) A carrier proposing to establish a 
special payment limit for a category of items or services must inform 
the affected suppliers and Medicaid agencies of the proposed payment 
amounts and the factors it considered in proposing the particular limit, 
as described in paragraphs (g)(1) through (g)(4) of this section and 
must solicit comments. The notice must also consider the following:
    (1) The effects on the Medicare program, including costs, savings, 
assignment rates, beneficiary liability, and quality of care.
    (2) What entities would be affected, such as classes of providers or 
suppliers and beneficiaries.
    (3) How significantly would these entities be affected.
    (4) How would the adjustment affect beneficiary access to items or 
services.
    (B) Before publication of a final notice, the carrier must--
    (1) Evaluate the comments it receives on the proposed notice.
    (2) Notify CMS in writing of any final limits it plans to establish. 
CMS will acknowledge in writing to the carrier that it received the 
carrier's notification.

[[Page 120]]

    (3) After receipt of CMS' acknowledgement, inform the affected 
suppliers and State Medicaid agencies of any final limits it 
establishes.
    (C) The effective date for a final payment limit may apply to 
services furnished at least 60 days after the date that the carrier 
notifies affected suppliers and State Medicaid agencies of the final 
limit.
    (4) Use of valid and reliable data. In determining whether a payment 
amount is grossly excessive or deficient and in establishing an 
appropriate payment amount, valid and reliable data are used. To ensure 
the use of valid and reliable data, CMS or the carrier must meet the 
following criteria to the extent applicable:
    (i) Develop written guidelines for data collection and analysis.
    (ii) Ensure consistency in any survey to collect and analyze pricing 
data.
    (iii) Develop a consistent set of survey questions to use when 
requesting retail prices.
    (iv) Ensure that sampled prices fully represent the range of prices 
nationally.
    (v) Consider the geographic distribution of Medicare beneficiaries.
    (vi) Consider relative prices in the various localities to ensure 
that an appropriate mix of areas with high, medium, and low consumer 
prices was included.
    (vii) Consider criteria to define populous State, less populous 
State, urban area, and rural area.
    (viii) Consider a consistent approach in selecting retail outlets 
within selected cities.
    (ix) Consider whether the distribution of sampled prices from 
localities surveyed is fully representative of the distribution of the 
U.S. population.
    (x) Consider the products generally used by beneficiaries and 
collect prices of these products.
    (xi) When using wholesale costs, consider the cost of the services 
necessary to furnish a product to beneficiaries.
    (5) Review of market prices. If CMS or a carrier makes a payment 
adjustment of more than 15 percent under this paragraph (g), CMS or the 
carrier will review market prices in the years subsequent to the year 
that the initial reduction is effective in order to ensure that further 
reductions continue to be appropriate.
    (h) Special payment limit adjustments greater than 15 percent of the 
payment amount. In addition to applying the general rules under 
paragraphs (g)(1) through (g)(5) of this section, CMS applies the 
following rules in establishing a payment adjustment greater than 15 
percent of the payment amount for a category of items or services within 
a year:
    (1) Potential impact of special limit. CMS considers the potential 
impact on quality, access, beneficiary liability, assignment rates, and 
participation of suppliers.
    (2) Supplier consultation. Before making a determination that a 
payment amount for a category of items or services is not inherently 
reasonable by reason of its grossly excessive or deficient amount, CMS 
consults with representatives of the supplier industry likely to be 
affected by the change in the payment amount.
    (3) Publication of national limits. If CMS determines under this 
paragraph (h) to establish a special payment limit for a category of 
items or services, it publishes in the Federal Register the proposed and 
final notices of a special payment limit before it adopts the limit. The 
notices set forth the criteria and circumstances, if any, under which a 
carrier may grant an exception to the limit for the category of items or 
services.
    (i) Proposed notice. The proposed notice--
    (A) Explains the factors and data that CMS considered in determining 
that the payment amount for a category of items or services is grossly 
excessive or deficient;
    (B) Specifies the proposed payment amount or methodology to be 
established for a category of items or services;
    (C) Explains the factors and data that CMS considered in determining 
the payment amount or methodology, including the economic justification 
for a uniform fee or payment limit if it is proposed;
    (D) Explains the potential impacts of a limit on a category of items 
or services as described in paragraph (h)(1) of this section; and

[[Page 121]]

    (E) Allows no less than 60 days for public comment on the proposed 
payment limit for the category of items or services.
    (ii) Final notice. The final notice--
    (A) Explains the factors and data that CMS considered, including the 
economic justification for any uniform fee or payment limit established; 
and
    (B) Responds to the public comments.
    (i) Proposed notice. The proposed notice--
    (A) Explains the factors and data that CMS considered in determining 
that the payment amount for a category of items or services is grossly 
excessive or deficient;
    (B) Specifies the proposed payment amount or methodology to be 
established for a category of items or services;
    (C) Explains the factors and data that CMS considered in determining 
the payment amount or methodology, including the economic justification 
for a uniform fee or payment limit if it is proposed;
    (D) Explains the potential impacts of a limit on a category of items 
or services as described in paragraph (h)(1) of this section; and
    (E) Allows no less than 60 days for public comment on the proposed 
payment limit for the category of items or services.
    (ii) Final notice. The final notice--
    (A) Explains the factors and data that CMS considered, including the 
economic justification for any uniform fee or payment limit established; 
and
    (B) Responds to the public comments.
    (i) Paramedic intercept ambulance services. (1) CMS establishes its 
payment allowance on a carrier-wide basis by using the median allowance 
from all localities within an individual carrier's jurisdiction.
    (2) CMS's payment allowance is equal to the advanced life support 
rate minus 40 percent of the basic life support rate.
    (3) CMS bases payment on the lower of the actual charge or the 
amount described in paragraph (i)(1) and (i)(2) of this section.

(Secs. 1102, 1814(b), 1833(a), 1842(b), and (h), and 1871, 1903(i)(1) of 
the Social Security Act; 49 Stat. 647, as amended, 79 Stat. 296, 302, 
310, 331; 86 Stat. 1395, 1454; 42 U.S.C. 1302, 1395u(b), 1395hh, 
1396b(i)(1).

[32 FR 12599, Aug. 31, 1967]

    Editorial Note: For Federal Register citations affecting Sec. 
405.502, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



Sec. 405.503  Determining customary charges.

    (a) Customary charge defined. The term ``customary charges'' will 
refer to the uniform amount which the individual physician or other 
person charges in the majority of cases for a specific medical procedure 
or service. In determining such uniform amount, token charges for 
charity patients and substandard charges for welfare and other low 
income patients are to be excluded. The reasonable charge cannot, except 
as provided in Sec. 405.506, be higher than the individual physician's 
or other person's customary charge. The customary charge for different 
physicians or other persons may, of course, vary. Payment for covered 
services would be based on the actual charge for the service when, in a 
given instance, that charge is less than the amount which the carrier 
would otherwise have found to be within the limits of acceptable charges 
for the particular service. Moreover, the income of the individual 
beneficiary is not to be taken into account by the carrier in 
determining the amount which is considered to be a reasonable charge for 
a service rendered to him. There is no provision in the law for a 
carrier to evaluate the reasonableness of charges in light of an 
individual beneficiary's economic status.
    (b) Variation of charges. If the individual physician or other 
person varies his charges for a specific medical procedure or service, 
so that no one amount is charged in the majority of cases, it will be 
necessary for the carrier to exercise judgment in the establishment of a 
``customary charge'' for such physician or other person. In making this 
judgment, an important guide, to be utilized when a sufficient

[[Page 122]]

volume of data on the physician's or other person's charges is 
available, would be the median or midpoint of his charges, excluding 
token and substandard charges as well as exceptional charges on the high 
side. A significant clustering of charges in the vicinity of the median 
amount might indicate that a point of such clustering should be taken as 
the physician's or other person's ``customary'' charge. Use of relative 
value scales will help in arriving at a decision in such instances.
    (c) Use of relative value scales. If, for a particular medical 
procedure or service, the carrier is unable to determine the customary 
charge on the basis of reliable statistical data (for example, because 
the carrier does not yet have sufficient data or because the performance 
of the particular medical procedure or service by the physician or other 
person is infrequent), the carrier may use appropriate relative value 
scales to determine the customary charge for such procedure or service 
in relation to customary charges of the same physician or person for 
other medical procedures and services.
    (d) Revision of customary charge. A physician's or other person's 
customary charge is not necessarily a static amount. Where a physician 
or other person alters his charges, a revised pattern of charges for his 
services may develop. Where on the basis of adequate evidence, the 
carrier finds that the physician or other person furnishing services has 
changed his charge for a service to the public in general, the customary 
charge resulting from the revised charge for the service should be 
recognized as the customary charge in making determinations of 
reasonable charges for such service when rendered thereafter to 
supplementary insurance beneficiaries. If the new customary charge is 
not above the top of the range of prevailing charges (see Sec. 
405.504(a)), it should be deemed to be reasonable by the carrier, 
subject to the provisions of Sec. 405.508.



Sec. 405.504  Determining prevailing charges.

    (a) Ranges of charges. (1) In the case of physicians' services 
furnished beginning January 1, 1987, the prevailing charges for a 
nonparticipating physician as defined in this paragraph will be no 
higher than the same level that was set for services furnished during 
the previous calendar year for a physician who was a participating 
physician during that year. A nonparticipating physician is a physician 
who has not entered into an agreement with the Medicare program to 
accept payment on an assignment-related basis (in accordance with Sec. 
424.55 of this chapter) for all items and services furnished to 
individuals enrolled under Part B of Medicare during a given calendar 
year.
    (2) No charge for Part B medical or other health services may be 
considered to be reasonable if it exceeds the higher of:
    (i) The prevailing charge for similar services in the same locality 
in effect on December 31, 1970, provided such prevailing charge had been 
found acceptable by CMS; or
    (ii) The prevailing charge that, on the basis of statistical data 
and methodology acceptable to CMS, would cover:
    (A) 75 percent of the customary charges made for similar services in 
the same locality during the 12-month period of July 1 through June 30 
preceding the fee screen year (January 1 through December 31) in which 
the service was furnished; or
    (B) In the case of services furnished more than 12 months before the 
beginning of the fee screen year (January 1 through December 31) in 
which the claim or request for payment is submitted, 75 percent of the 
customary charges made for similar services in the same locality during 
the 12 month period of July 1 through June 30 preceding the fee screen 
year that ends immediately preceding the fee screen year in which the 
claim or request for payment is submitted.
    (3)(i) In the case of physicians' services, furnished before January 
1, 1992, each prevailing charge in each locality may not exceed the 
prevailing charge determined for the FY ending June 30, 1973 (without 
reference to the adjustments made in accordance with the economic 
stabilization program then in effect), except on the basis of 
appropriate economic index data that demonstrate the higher prevailing 
charge level is justified by:

[[Page 123]]

    (A) Changes in general earnings levels of workers that are 
attributable to factors other than increases in their productivity; and
    (B) changes in expenses of the kind incurred by physicians in office 
practice. The office-expense component and the earnings component of 
such index shall be given the relative weights shown in data on self-
employed physicians' gross incomes.

    Example. The available data indicate the office-expense and earnings 
components of the index should be given relative weights of 40 percent 
and 60 percent, respectively, and it is calculated that the aggregate 
increase in expenses of practice for a particular July through June 
period was 112 percent over the expenses of practice for calendar year 
1971 and the increase in earnings (less increases in workers' 
productivity was 110 percent over the earnings for calendar year 1971. 
The allowable increase in any prevailing charge that could be recognized 
during the next fee screen year would be 110.8 percent 
((.40x112)+(.60)x110)=110.8) above the prevailing charge recognized for 
fiscal year 1973.

    (ii)(A) If the increase in the prevailing charge in a locality for a 
particular physician service resulting from an aggregate increase in 
customary charges for that service does not exceed the index determined 
under paragraph (a)(3)(i) of this section, the increase is permitted and 
any portion of the allowable increase not used is carried forward and is 
a basis for justifying increases in that prevailing charge in the 
future. However, if the increase in the prevailing charge exceeds the 
allowable increase, the increase will be reduced to the allowable 
amount. Further increases will be justified only to the degree that they 
do not exceed further rises in the economic index. The prevailing charge 
for physicians' services furnished during the 15-month period beginning 
July 1, 1984 may not exceed the prevailing charge for physicians' 
services in effect for the 12-month period beginning July 1, 1983. The 
increase in prevailing charges for physicians' services for subsequent 
fee screen years similarly may not reflect the rise in the economic 
index that would have otherwise been provided for the period beginning 
July 1, 1984, and must be treated as having fully provided for the rise 
in the economic index which would have been otherwise taken into 
account.
    (B) Notwithstanding the provisions of paragraphs (a)(3)(i) and 
(ii)(A) of this section, the prevailing charge in the case of a 
physician service in a particular locality determined pursuant to 
paragraphs (a)(2) and (3)(i) of this section for the fiscal year 
beginning July 1, 1975, and for any subsequent fee screen years, if 
lower than the prevailing charge for the fiscal year ending June 30, 
1975, by reason of the application of economic index data, must be 
raised to such prevailing charge which was in effect for the fiscal year 
ending June 30, 1975. (If the amount paid on any claim processed by a 
carrier after the original reasonable charge update for the fiscal year 
beginning July 1, 1975, and prior to the adjustments required by the 
preceding sentence, was at least $1 less than the amount due pursuant to 
the preceding sentence, the difference between the amount previously 
paid and the amount due shall be paid within 6 months after December 31, 
1975; however, no payment shall be made on any claim where the 
difference between the amount previously and the amount due shall be 
paid within 6 months after December 31, 1975; however, no payment shall 
be made on any claim where the difference between the amount previously 
paid and the amount due is less than $1.)
    (iii) If, for any reason, a prevailing charge for a service in a 
locality has no precise counterpart in the carrier's charge data for 
calendar year 1971 (the data on which the prevailing charge calculations 
for fiscal year 1973 were based), the limit on the prevailing charge 
will be estimated, on the basis of data and methodology acceptable to 
CMS, to seek to produce the effect intended by the economic index 
criterion. The allowance or reduction of an increase in a prevailing 
charge for any individual medical item or service may affect the 
allowance or reduction of an increase in the prevailing charges for 
other items or services if, for example, the limit on the prevailing 
charge is estimated, or if the prevailing charges for more than one item 
or service are established through the use of a

[[Page 124]]

relative value schedule and dollar conversion factors.
    (b) Variation in range of prevailing charges. The range of 
prevailing charges in a locality may be different for physicians or 
other persons who engage in a specialty practice or service than for 
others. Existing differentials in the level of charges between different 
kinds of practice or service could, in some localities, lead to the 
development of more than one range of prevailing charges for application 
by the carrier in its determinations of reasonable charges. Carrier 
decisions in this respect should be responsive to the existing patterns 
of charges by physicians and other persons who render covered services, 
and should establish differentials in the levels of charges between 
different kinds of practice or service only where in accord with such 
patterns.
    (c) Re-evaluation and adjustment of prevailing charges. 
Determinations of prevailing charges by the carrier are to be re-
evaluated and adjusted from time to time on the basis of factual 
information about the charges made by physicians and other persons to 
the public in general. This information should be obtained from all 
possible sources including a carrier's experience with its own programs 
as well as with the supplementary medical insurance program.
    (d) Computation and issuance of the MEI after CY 1992--(1) For 
update years after CY 1992, the MEI is a physician input price index, in 
which the annual percent changes for the direct-labor price components 
are adjusted by an annual percent change in a 10-year moving average 
index of labor productivity in the nonfarm business sector.
    (2) The MEI is constructed, using as a base year, CY 1989 weights 
and annual percent changes in the economic price proxies as shown on the 
following chart:

   Medicare Economic Index Expenditure Categories, Weights, and Price
                                 Proxies
------------------------------------------------------------------------
                                  1989 weights
        Expense category             \1\,\2\         Price proxy \3\
                                    (percent)
------------------------------------------------------------------------
    Total......................           100.0
1. Physician's Own Time (net               54.2
 income, general earnings).
    a. Wages and Salaries......            45.3  Average hourly
                                                  earnings, total
                                                  private non-farm.\4\
    b. Fringe Benefits.........             8.8  Employment Cost Index,
                                                  fringe benefits,
                                                  private non-farm.\4\
2. Physician Practice Expense..            45.8
    a. Non-physician Employee              16.3
     Compensation.
        (1) Wages and Salaries.            13.8  Employment Cost Index,
                                                  wages and salaries
                                                  weighted for
                                                  occupational mix of
                                                  non-physician
                                                  employees.\4\
        (2) Fringe Benefits....             2.5  Employment Cost Index,
                                                  fringe benefits, white
                                                  collar.\4\
    b. Office Expense..........            10.3  CPI-U, housing.
    c. Medical Materials and                5.2  PPI, ethical drugs;
     Supplies.                                    PPI, surgical
                                                  appliances and
                                                  supplies; and CPI-U
                                                  medical equipment and
                                                  supplies (equally
                                                  weighted).
    d. Professional Liability               4.8  CMS survey of change in
     Insurance.                                   average liability
                                                  premiums for $100,000/
                                                  $300,000 liability
                                                  coverage among 9 major
                                                  insurers.
    e. Medical Equipment.......             2.3  PPI, medical
                                                  instruments and
                                                  equipment.
    f. Other Professional                   6.9
     Expense.
        (1) Professional Car...             1.4  CPI-U, private
                                                  transportation.
        (2) Other..............             5.5  CPI-U, all items less
                                                  food and energy.
------------------------------------------------------------------------
\1\ Sources: Martin L. Gonzalez, ed.: Physician Marketplace Statistics,
  Fall, 1990. Center for Health Policy Research, Chicago, American
  Medical Association, 1990; Mark Holoweiko, ``Practice Expenses Take
  the Leap of the Decade,'' Medical Economics, November 12, 1990; and
  CMS, OACT special study.
\2\ Due to rounding, weights may not sum to 100.0%
\3\ All price proxies are for annual percent changes for the 12 months
  ending June 30th.
\4\ Annual percent change values for Physicians' Own Time and Non-
  physician Employee Compensation are net of the change in the 10-year
  moving average of output per man-hour to exclude changes in non-farm
  business sector labor productivity.

    (3) If there is no methodological change, CMS publishes a notice in 
the Federal Register to announce the annual increase in the MEI before 
the beginning of the update year to which it applies. If there are 
changes in the base year weights or price proxies, or if

[[Page 125]]

there are any other MEI methodological changes, they are published in 
the Federal Register with an opportunity for public comment.

[32 FR 12600, Aug. 31, 1967, as amended at 40 FR 25447, June 16, 1975; 
42 FR 18275, Apr. 6, 1977. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 43 FR 4430, Feb. 2, 1978; 47 FR 63274, Dec. 31, 1982; 51 
FR 34978, Oct. 1, 1986; 53 FR 6648, Mar. 2, 1988; 57 FR 55912, Nov. 25, 
1992]



Sec. 405.505  Determination of locality.

    ``Locality'' is the geographical area for which the carrier is to 
derive the reasonable charges or fee schedule amounts for services or 
items. Usually, a locality may be a State (including the District of 
Columbia, a territory, or a Commonwealth), a political or economic 
subdivision of a State, or a group of States. It should include a cross 
section of the population with respect to economic and other 
characteristics. Where people tend to gravitate toward certain 
population centers to obtain medical care or service, localities may be 
recognized on a basis constituting medical services areas (interstate or 
otherwise), comparable in concept to ``trade areas.'' Localities may 
differ in population density, economic level, and other major factors 
affecting charges for services. Carriers therefore shall delineate 
localities on the basis of their knowledge of local conditions. However, 
distinctions between localities are not to be so finely made that a 
locality includes only a very limited geographic area whose population 
has distinctly similar income characteristics (e.g., a very rich or very 
poor neighborhood within a city).

[57 FR 27305, June 18, 1992]



Sec. 405.506  Charges higher than customary or prevailing charges or lowest 

charge levels.

    A charge which exceeds the customary charge of the physician or 
other person who rendered the medical or other health service, or the 
prevailing charge in the locality, or an applicable lowest charge level 
may be found to be reasonable, but only where there are unusual 
circumstances, or medical complications requiring additional time, 
effort or expense which support an additional charge, and only if it is 
acceptable medical or medical service practice in the locality to make 
an extra charge in such cases. The mere fact that the physician's or 
other person's customary charge is higher than prevailing would not 
justify a determination that it is reasonable.

(Secs. 1102, 1842(b) and 1871, 1903(i)(1) of the Social Security Act; 49 
Stat. 647, 79 Stat. 302, 310, 331; 86 Stat. 1395, 1454; (42 U.S.C. 1302, 
1395u(b), 1395hh, 1396b(i)(1)))

[43 FR 32300, July 26, 1978]



Sec. 405.507  Illustrations of the application of the criteria for determining 

reasonable charges.

    The following examples illustrate how the general criteria on 
customary charges and prevailing charges might be applied in determining 
reasonable charges under the supplementary medical insurance program. 
Basically, these examples demonstrate that, except where the actual 
charge is less, reasonable charges will reflect current customary 
charges of the particular physician or other person within the ranges of 
the current prevailing charges in the locality for that type and level 
of service:

    The prevailing charge for a specific medical procedure ranges from 
$80 to $100 in a certain locality.
    Doctor A's bill is for $75 although he customarily charges $80 for 
the procedure.
    Doctor B's bill is his customary charge of $85
    Doctor C's bill is his customary charge of $125
    Doctor D's bill is for $100, although he customarily charges $80, 
and there are no special circumstances in the case.
    The reasonable charge for Doctor A would be limited to $75 since 
under the law the reasonable charge cannot exceed the actual charge, 
even if it is lower than his customary charge and below the prevailing 
charges for the locality.
    The reasonable charge for Doctor B would be $85, because it is his 
customary charge and it falls within the range of prevailing charges for 
that locality.
    The reasonable charge for Doctor C could not be more than $100, the 
top of the range of prevailing charges.
    The reasonable charge for Doctor D would be $80, because that is his 
customary charge. Even though his actual charge of $100 falls within the 
range of prevailing charges, the reasonable charge cannot exceed his 
customary charge in the absence of special circumstances.

[[Page 126]]



Sec. 405.508  Determination of comparable circumstances; limitation.

    (a) Application of limitation. The carrier may not in any case make 
a determination of reasonable charge which would be higher than the 
charge upon which it would base payment to its own policyholders for a 
comparable service in comparable circumstances. The charge upon which it 
would base payment, however, does not necessarily mean the amount the 
carrier would be obligated to pay. Under certain circumstances, some 
carriers pay amounts on behalf of individuals who are their 
policyholders, which are below the customary charges of physicians or 
other persons to other individuals. Payment under the supplementary 
medical insurance program would not be limited to these lower amounts.
    (b) When comparability exists. ``Comparable circumstances,'' as used 
in the Act and this subpart, refers to the circumstances under which 
services are rendered to individuals and the nature of the carrier's 
health insurance programs and the method it uses to determine the 
amounts of payments under these programs. Generally, comparability would 
exist where:
    (1) The carrier bases payment under its program on the customary 
charges, as presently constituted, of physicians or other persons and on 
current prevailing charges in a locality, and
    (2) The determination does not preclude recognition of factors such 
as speciality status and unusual circumstances which affect the amount 
charged for a service.
    (c) Responsibility for determining comparability. Responsibility for 
determining whether or not a carrier's program has comparability will in 
the first instance fall upon the carrier in reporting pertinent 
information about its programs to the Centers for Medicare & Medicaid 
Services. When the pertinent information has been reported, the Centers 
for Medicare & Medicaid Services will advise the carrier whether any of 
its programs have comparability.



Sec. 405.509  Determining the inflation-indexed charge.

    (a) Definition. For purposes of this section, inflation-indexed 
charge means the lowest of the fee screens used to determine reasonable 
charges (as determined in Sec. 405.503 for the customary charge, Sec. 
405.504 for the prevailing charge, this section for the inflation-
indexed charge, and Sec. 405.511 for the lowest charge level) for 
services, supplies, and equipment reimbursed on a reasonable charge 
basis (excluding physicians' services), that is in effect on December 31 
of the previous fee screen year, updated by the inflation adjustment 
factor, as described in paragraph (b) of this section.
    (b) Application of inflation adjustment factor to determine 
inflation-indexed charge. (1) For fee screen years beginning on or after 
January 1, 1987, the inflation-indexed charge is determined by updating 
the fee screen used to determine the reasonable charges in effect on 
December 31 of the previous fee screen year by application of an 
inflation adjustment factor, that is, the annual change in the level of 
the consumer price index for all urban consumers, as compiled by the 
Bureau of Labor Statistics, for the 12-month period ending on June 30 of 
each year.
    (2) For services, supplies, and equipment furnished from October 1, 
1985 through December 31, 1986 the inflation adjustment factor is zero.
    (c) The inflation-indexed charge does not apply to any services, 
supplies, or equipment furnished after December 31, 1991, that are 
covered under or limited by the fee schedule for physicians' services 
established under section 1848 of the Act and part 415 of this chapter. 
These services are subject to the Medicare Economic Index described in 
Sec. 415.30 of this chapter.

[51 FR 34979, Oct. 1, 1986; 51 FR 37911, Oct. 27, 1986, as amended at 56 
FR 59621, Nov. 25, 1991]



Sec. 405.511  Reasonable charges for medical services, supplies, and 

equipment.

    (a) General rule. (1) A charge for any medical service, supply, or 
equipment (including equipment servicing) that in the judgment of CMS 
generally does not vary significantly in quality from one supplier to 
another (and that is

[[Page 127]]

identified by a notice published in the Federal Register) may not be 
considered reasonable if it exceeds:
    (i) The customary charge of the supplier (see Sec. 405.503);
    (ii) The prevailing charge in the locality (see Sec. 405.504);
    (iii) The charge applicable for a comparable service and under 
comparable circumstances to the policyholders or subscribers of the 
carrier (see Sec. 405.508);
    (iv) The lowest charge level at which the item or service is widely 
and consistently available in the locality (see paragraph (c) of this 
section); or
    (v) The inflation-indexed charge, as determined under Sec. 405.509, 
in the case of medical services, supplies, and equipment that are 
reimbursed on a reasonable charge basis (excluding physicians' 
services).
    (2) In the case of laboratory services, paragraph (a)(1) of this 
section is applicable to services furnished by physicians in their 
offices, by independent laboratories (see Sec. 405.1310(a)) and to 
services furnished by a hospital laboratory for individuals who are 
neither inpatients nor outpatients of a hospital. Allowance of 
additional charges exceeding the lowest charge level can be approved by 
the carrier on the basis of unusual circumstances or medical 
complications in accordance with Sec. 405.506.
    (b) Public notice of items and services subject to the lowest charge 
level rule. Before the Secretary determines that lowest charge levels 
should be established for an item or service, notice of the proposed 
determination will be published with an opportunity for public comment. 
The descriptions or specifications of items or services in the notice 
will be in sufficient detail to permit a determination that items or 
services conforming to the descriptions will not vary significantly in 
quality.
    (c) Calculating the lowest charge level. The lowest charge level at 
which an item or service is widely and consistently available in a 
locality is calculated by the carrier in accordance with instructions 
from CMS as follows:
    (1) For items or services furnished on or before December 31, 1986. 
(i) A lowest charge level is calculated for each identified item or 
service in January and July of each year.
    (ii) The lowest charge level for each identified item or service is 
set at the 25th percentile of the charges (incurred or submitted on 
claims processed by the carrier) for that item or service, in the 
locality designated by the carrier for this purpose, during the second 
calendar quarter preceding the determination date. Accordingly, the 
January calculations will be based on charges for the July through 
September quarter of the previous calendar year, and the July 
calculations will be based on charges for the January through March 
quarter of the same calendar year.
    (2) For items or services furnished on or after January 1, 1987. (i) 
A lowest charge level is calculated for each identified item or service 
in January of each year.
    (ii) The lowest charge level for each identified item or service is 
set at the 25th percentile of the charges (incurred or submitted on 
claims processed by the carrier) for that item or service, in the 
locality designated by the carrier for this purpose, during the 3-month 
period of July 1 through September 30 preceding the fee screen year 
(January 1 through December 31) for which the item or service was 
furnished.
    (3) Lowest charge levels for laboratory services. In setting lowest 
charge levels for laboratory services, the carrier will consider only 
charges made for laboratory services performed by physicians in their 
offices, by independent laboratories which meet coverage requirements, 
and for services furnished by a hospital laboratory for individuals who 
are neither inpatients nor outpatients of a hospital.
    (d) Locality. Subject to the approval of the Secretary, the carrier 
may designate its entire service area as the locality for purposes of 
this section, or may otherwise modify the localities used for 
calculating prevailing charges. (The modified locality for an item or 
service will also be used for calculating the prevailing charge for that 
item or service.)

(Secs. 1102, 1842(b) and 1871, 1903(i)(1) of the Social Security Act; 49 
Stat. 647, 79 Stat. 302, 310, 331, 86 Stat. 1395, 1454 (42 U.S.C. 1302, 
1395u(b), 1395hh, 1396b(i)(1)))

[43 FR 32300, July 26, 1978, as amended at 50 FR 40174, Oct. 1, 1985; 51 
FR 34979, Oct. 1, 1986]

[[Page 128]]



Sec. 405.512  Carriers' procedural terminology and coding systems.

    (a) General. Procedural terminology and coding systems are designed 
to provide physicians and third party payers with a common language that 
accurately describes the kinds and levels of services provided and that 
can serve as a basis for coverage and payment determinations.
    (b) Modification of terminology and/or coding systems. A carrier 
that wishes to modify its system of procedural terminology and coding 
shall submit its request to the Centers for Medicare & Medicaid Services 
with all pertinent data and information for approval before the revision 
is implemented. The Centers for Medicare & Medicaid Services will 
evaluate the proposal in the light of the guidelines specified in 
paragraph (c) of this section and such other considerations as may be 
pertinent, and consult with the Assistant Secretary for Health. The 
Centers for Medicare & Medicaid Services will approve such a revision if 
it determines that the potential advantages of the proposed new system, 
outweigh the disadvantages.
    (c) Guidelines. The following considerations and guidelines are 
taken into account in evaluating a carrier's proposal to change its 
system of procedural terminology and coding:
    (1) The rationale for converting to the new terminology and coding;
    (2) The estimated short-run and long-run impact on the cost of the 
health insurance program, other medical care costs, administrative 
expenses, and the reliability of the estimates;
    (3) The degree to which the conversion to the proposed new 
terminology and coding can be accomplished in a way that permits full 
implementation of the reasonable charge criteria in accordance with the 
provisions of this subpart;
    (4) The degree to which the proposed new terminology and coding are 
accepted by physicians in the carrier's area (physician acceptance is 
assumed only if a majority of the Medicare and non-Medicare bills and 
claims completed by physicians in the area and submitted to the carrier 
can reasonably be expected to utilize the proposed new terminology and 
coding);
    (5) The extent to which the proposed new terminology and coding 
system is used by the carrier in its non-Medicare business;
    (6) The clarity with which the proposed system defines its 
terminology and whether the system lends itself to:
    (i) Accurate determinations of coverage;
    (ii) Proper assessment of the appropriate level of payment; and
    (iii) Meeting the carrier's or Professional Standards Review 
Organizations' review needs and such other review needs as may be 
appropriate;
    (7) Compatibility of the new terminology and coding system with 
other systems that the carrier and other carriers may utilize in the 
administration of the Medicare program--e.g., its compatibility with 
systems and statistical requirements and with the historical data in the 
carrier's processing system; and
    (8) Compatibility of the proposed system with the carriers methods 
for determining payment under the fee schedule for physicians' services 
for services which are identified by a single element of terminology but 
which may vary in content.

[40 FR 7639, Feb. 21, 1975. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 59 FR 10298, Mar. 4, 1994]



Sec. 405.515  Reimbursement for clinical laboratory services billed by 

physicians.

    This section implements section 1842(h) of the Social Security Act, 
which places a limitation on reimbursement for markups on clinical 
laboratory services billed by physicians. If a physician's bill, or a 
request for payment for a physician's services, includes a charge for a 
laboratory test for which payment may be made under this part, the 
amount payable with respect to the test shall be determined as follows 
(subject to the coinsurance and deductible provisions at Sec. Sec. 
410.152 and 410.160 of this chapter):
    (a) If the bill or request for payment indicates that the test was 
personally performed or supervised either by the physician who submitted 
the bill (or for whose services the request for payment was made), or by 
another physician with whom that physician shares

[[Page 129]]

his or her practice, the payment will be based on the physician's 
reasonable charge for the test (as determined in accordance with Sec. 
405.502).
    (b) If the bill or request for payment indicates that the test was 
performed by an outside laboratory, and identifies both the laboratory 
and the amount the laboratory charged, payment for the test will be 
based on the lower of--
    (1) The laboratory's reasonable charge for the service (as 
determined in accordance with Sec. 405.502), or
    (2) The amount that the laboratory charged the physician for the 
service.
    (c) If the bill or request for payment does not indicate that the 
conditions specified in paragraph (a) of this section were met, and does 
not identify both the laboratory and the amount the laboratory charged, 
payment will be based on the lowest charge at which the carrier 
estimates the test could have been secured from a laboratory serving the 
physician's locality. The carrier will estimate this lowest amount twice 
a year by (i) obtaining lists of charges laboratories make to physicians 
from as many commercial laboratories serving the carrier's area as 
possible (including laboratories in other States from which tests may be 
obtained by physicians in the carrier's service area) and (ii) 
establishing a schedule of lowest prices based on this information. The 
carrier will take into consideration specific circumstances, such as a 
need for emergency services that may be costlier than routine services, 
in making the estimate in a particular case. However, in no case may 
this estimate be higher than the lowest customary charge for commercial 
laboratories, or when applicable to the laboratory service, the lowest 
charge level determined in accordance with Sec. 405.511, in the 
carrier's service area.
    (d) When a physician bills, in accordance with paragraph (b) or (c) 
of this section, for a laboratory test and indicates that it was 
performed by an independent laboratory, a nominal payment will also be 
made to the physician for collecting, handling, and shipping the 
specimen to the laboratory, if the physician bills for such a service.

[46 FR 42672, Aug. 24, 1981, as amended at 51 FR 41351, Nov. 14, 1986]



Sec. 405.517  Payment for drugs and biologicals that are not paid on a cost or 

prospective payment basis.

    (a) Applicability--(1) Payment for drugs and biologicals before 
January 1, 2004. Payment for a drug or biological that is not paid on a 
cost or prospective payment basis is determined by the standard 
methodology described in paragraph (b) of this section. Examples of when 
this procedure applies include a drug or biological furnished incident 
to a physician's service, a drug or biological furnished by an 
independent dialysis facility that is not included in the ESRD composite 
rate set forth in Sec. 413.170(c) of this chapter, and a drug or 
biological furnished as part of the durable medical equipment benefit.
    (2) Payment for drugs and biologicals on or after January 1, 2004. 
Effective January 1, 2004, payment for drugs and biologicals that are 
not paid on a cost or prospective payment basis are paid in accordance 
with Part 414, subpart I of this chapter.
    (3) Payment for drugs and biologicals on or after January 1, 2005. 
Effective January 1, 2005, payment for drugs and biologicals that are 
not paid on a cost or prospective payment basis are paid in accordance 
with part 414, subpart K of this chapter.
    (b) Methodology. Payment for a drug or biological described in 
paragraph (a) of this section is based on the lower of the actual charge 
on the Medicare claim for benefits or 95 percent of the national average 
wholesale price of the drug or biological.
    (c) Multiple-source drugs. For multiple-source drugs and 
biologicals, for purposes of this regulation, the average wholesale 
price is defined as the lesser of the median average wholesale price for 
all sources of the generic forms of the drug or biological or the lowest 
average wholesale price of the brand name forms of the drug or 
biological.

[63 FR 58905, Nov. 2, 1998, as amended at 69 FR 1116, Jan. 7, 2004; 69 
FR 66420, Nov. 15, 2004]

[[Page 130]]



Sec. 405.520  Payment for a physician assistant's, nurse practitioner's, and 

clinical nurse specialists' services and services furnished incident to their 

professional services.

    (a) General rule. A physician assistant's, nurse practitioner's, and 
clinical nurse specialists' services, and services and supplies 
furnished incident to their professional services, are paid in 
accordance with the physician fee schedule. The payment for a physician 
assistants' services may not exceed the limits at Sec. 414.52 of this 
chapter. The payment for a nurse practitioners' and clinical nurse 
specialists' services may not exceed the limits at Sec. 414.56 of this 
chapter.
    (b) Requirements. Medicare payment is made only if all claims for 
payment are made on an assignment-related basis in accordance with Sec. 
424.55 of this chapter, that sets forth, respectively, the conditions 
for coverage of physician assistants' services, nurse practitioners' 
services and clinical nurse specialists' services, and services and 
supplies furnished incident to their professional services.
    (c) Civil money penalties. Any person or entity who knowingly and 
willingly bills a Medicare beneficiary amounts in excess of the 
appropriate coinsurance and deductible is subject to a civil money 
penalty as described in Sec. Sec. 402.1(c)(11), 402.105(d)(2)(viii), 
and 402.107(b)(8) of this chapter.

[63 FR 58905, Nov. 2, 1998, as amended at 66 FR 49547, Sept. 28, 2001]



Sec. 405.534  Limitation on payment for screening mammography services.

    The provisions in paragraphs (a), (b), and (c) of this section apply 
for services provided from January 1, 1991 until December 31, 2001. 
Screening mammography services provided after December 31, 2001 are paid 
under the physician fee schedule in accordance with Sec. 414.2 of this 
chapter.
    (a) Basis and scope. This section implements section 1834(c) of the 
Act by establishing a limit on payment for screening mammography 
examinations. There are three categories of billing for screening 
mammography services. Those categories and the payment limitations on 
each are set forth in paragraphs (b) through (d) of this section.
    (b) Global or complete service billing representing both the 
professional and technical components of the procedure. If a fee is 
billed for a global service, the amount of payment subject to the 
deductible is equal to 80 percent of the least of the following:
    (1) The actual charge for the service.
    (2) The amount established for the global procedure for a diagnostic 
bilateral mammogram under the fee schedule for physicians' services set 
forth at part 414, subpart A.
    (3) The payment limit for the procedure. For screening mammography 
services furnished in CY 1994, the payment limit is $59.63. On January 1 
of each subsequent year, the payment limit is updated by the percentage 
increase in the Medicare Economic Index (MEI) and reflects the 
relationship between the relative value units for the professional and 
technical components of a diagnostic bilateral mammogram under the fee 
schedule for physicians' services.
    (c) Professional component billing representing only the physician's 
interpretation for the procedure. If the professional component of 
screening mammography services is billed separately, the amount of 
payment for that professional component, subject to the deductible, is 
equal to 80 percent of the least of the following:
    (1) The actual charge for the professional component of the service.
    (2) The amount established for the professional component of a 
diagnostic bilateral mammogram under the fee schedule for physicians' 
services.
    (3) The professional component of the payment limit for screening 
mammography services described in paragraph (b)(3) of this section.
    (d) Technical component billing representing other resources 
involved in furnishing the procedure. If the technical component of 
screening mammography services is billed separately, the amount of 
payment, subject to the deductible, is equal to 80 percent of the least 
of the following:
    (1) The actual charge for the technical component of the service.

[[Page 131]]

    (2) The amount established for the technical component of a 
diagnostic bilateral mammogram under the fee schedule for physicians' 
services.
    (3) The technical component of the payment limit for screening 
mammography services described in paragraph (b)(3) of this section.

[55 FR 53521, Dec. 31, 1990, as amended at 59 FR 49833, Sept. 30, 1994; 
66 FR 55328, Nov. 1, 2001]



Sec. 405.535  Special rule for nonparticipating physicians and suppliers 

furnishing screening mammography services before January 1, 2002.

    The provisions in this section apply for screening mammography 
services provided from January 1, 1991 until December 31, 2001. 
Screening mammography services provided after December 31, 2001 are 
physician services pursuant to Sec. 414.2 of this chapter paid under 
the physician fee schedule. If screening mammography services are 
furnished to a beneficiary by a nonparticipating physician or supplier 
that does not accept assignment, a limiting charge applies to the 
charges billed to the beneficiary. The limiting charge is the lesser of 
the following:
    (a) 115 percent of the payment limit set forth in Sec. 
405.534(b)(3), (c)(3), and (d)(3) (limitations on the global service, 
professional component, and technical component of screening mammography 
services, respectively).
    (b) The limiting charge for the global service, professional 
component, and technical component of a diagnostic bilateral mammogram 
under the fee schedule for physicians' services set forth at Sec. 
414.48(b) of this chapter.

[59 FR 49833, Sept. 30, 1994, as amended at 62 FR 59098, Oct. 31, 1997; 
66 FR 55328, Nov. 1, 2001]

Subpart F [Reserved]



      Subpart G_Reconsiderations and Appeals Under Medicare Part A

    Authority: Secs. 1102, 1155, 1869(b), 1871, 1872, and 1879 of the 
Social Security Act (42 U.S.C. 1302, 1320c-4, 1395ff(b), 1395hh, 1395ii, 
and 1395pp).

    Source: 37 FR 5814, Mar. 22, 1972, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977.



Sec. 405.701  Basis, purpose and definitions.

    (a) This subpart implements section 1869 of the Social Security Act. 
Section 1869(a) provides that the Secretary will make determinations 
about the following matters, and section 1869(b) provides for a hearing 
for an individual who is dissatisfied with the Secretary's determination 
as to:
    (1) Whether the individual is entitled to hospital insurance (part 
A) or supplementary medical insurance (part B) under title XVIII of the 
Act; or
    (2) The amount payable under hospital insurance.
    (b) This subpart establishes the procedures governing initial 
determinations, reconsidered determinations, hearings, and final agency 
review, and the reopening of determinations and decisions that are 
applicable to matters arising under paragraph (a) of this section.
    (c) Subparts J and R of 20 CFR part 404 (dealing with 
determinations, the administrative review process and representation of 
parties) are also applicable to matters arising under paragraph (a) of 
this section, except to the extent that specific provisions are 
contained in this subpart.
    (d) Definitions. As used in subpart G of this part, the term--
    Appellant designates the beneficiary, provider or other person or 
entity that has filed an appeal concerning a particular determination of 
benefits under Medicare part A. Designation as an appellant does not in 
itself convey standing to appeal the determination in question.
    Common issues of law and fact, with respect to the aggregation of 
claims by two or more appellants to meet the minimum amount in 
controversy needed for a hearing, occurs when the claims sought to be 
aggregated are denied or reduced for similar reasons and arise from a 
similar fact pattern material to the reason the claims are denied.
    Delivery of similar or related services, with respect to the 
aggregation of claims by two or more provider appellants to meet the 
minimum amount in

[[Page 132]]

controversy needed for a hearing, means like or coordinated services or 
items provided to the same beneficiary by the appellants.

[55 FR 11020, Mar. 26, 1990, as amended at 59 FR 12181, Mar. 16, 1994]



Sec. 405.702  Notice of initial determination.

    After a request for payment under part A of title XVIII of the Act 
is filed with the intermediary by or on behalf of the individual who 
received inpatient hospital services, extended care services, or home 
health services, and the intermediary has ascertained whether the items 
and services furnished are covered under part A of title XVIII, and 
where appropriate, ascertained and made payment of amounts due or has 
ascertained that no payments were due, the individual will be notified 
in writing of the initial determination in his case. In addition, if the 
items or services furnished such individual are not covered under part A 
of title XVIII by reason of Sec. 411.15(g) or Sec. 411.15(k) and 
payment may not be made for such items or services under Sec. 411.400 
only because the requirements of Sec. 411.400(a)(2) are not met, the 
provider of services which furnished such items or services will be 
notified in writing of the initial determination in such individual's 
case. These notices shall be mailed to the individual and the provider 
of services at their last known addresses and shall state in detail the 
basis for the determination. Such written notices shall also inform the 
individual and the provider of services of their right to 
reconsideration of the determination if they are dissatisfied with the 
determination.

[55 FR 11020, Mar. 26, 1990]



Sec. 405.704  Actions which are initial determinations.

    (a) Applications and entitlement of individuals. An initial 
determination with respect to an individual includes the following--
    (1) A determination with respect to entitlement to hospital 
insurance or supplementary medical insurance;
    (2) A disallowance of an individual's application for entitlement to 
hospital or supplementary medical insurance, if the individual fails to 
submit evidence requested by SSA to support the application. (SSA will 
specify in the initial determination the conditions of entitlement that 
the applicant failed to establish by not submitting the requested 
evidence);
    (3) A denial of a request for withdrawal of an application for 
hospital or supplementary medical insurance;
    (4) A denial of a request for cancellation of a ``request for 
withdrawal''; and
    (5) A determination as to whether an individual, previously 
determined to be entitled to hospital or supplementary medical 
insurance, is no longer entitled to such benefits, including a 
determination based on nonpayment of premiums.
    (b) Requests for payment by or on behalf of individuals. An initial 
determination with respect to an individual includes any determination 
made on the basis of a request for payment by or on behalf of the 
individual under part A of Medicare, including a determination with 
respect to:
    (1) The coverage of items and services furnished;
    (2) The amount of an applicable deductible;
    (3) The application of the coinsurance feature;
    (4) The number of days of inpatient hospital benefits utilized 
during a spell of illness or for purposes of the inpatient psychiatric 
hospital 190-day lifetime maximum;
    (5) The number of days of the 60-day lifetime reserve utilized for 
inpatient hospital coverage;
    (6) The number of days of posthospital extended care benefits 
utilized;
    (7) The number of home health visits utilized;
    (8) The physician certification requirement;
    (9) The request for payment requirement;
    (10) The beginning and ending of a spell of illness, including a 
determination made under the presumptions established under Sec. 
409.60(c)(2) of this chapter, as specified in Sec. 409.60(c)(4) of this 
chapter.
    (11) The medical necessity of services (See parts 466 and 473 of 
this chapter for provisions pertaining to initial and

[[Page 133]]

reconsidered determinations made by a QIO);
    (12) When services are excluded from coverage as custodial care 
(Sec. 411.15(g)) or as not reasonable and necessary (Sec. 411.15(k)), 
whether the individual or the provider of services who furnished the 
services, or both, knew or could reasonably have been expected to know 
that the services were excluded from coverage (see Sec. 411.402);
    (13) Any other issues having a present or potential effect on the 
amount of benefits to be paid under part A of Medicare, including a 
determination as to whether there has been an overpayment or 
underpayment of benefits paid under part A, and if so, the amount 
thereof; and
    (14) Whether a waiver of adjustment or recovery under sections 1870 
(b) and (c) of the Act is appropriate when an overpayment of hospital 
insurance benefits or supplementary medical insurance benefits 
(including a payment under section 1814(e) of the Act) has been made 
with respect to an individual.
    (c) Initial determination with respect to a provider of services. An 
initial determination with respect to a provider of services shall be a 
determination made on the basis of a request for payment filed by the 
provider under part A of Medicare on behalf of an individual who was 
furnished items or services by the provider, but only if the 
determination involves the following:
    (1) A finding by the intermediary that such items or services are 
not covered by reason of Sec. 411.15(g) or Sec. 411.15(k); and
    (2) A finding by the intermediary that either such individual or 
such provider of services, or both, knew or could reasonably have been 
expected to know that such items or services were excluded from coverage 
under the program.

[55 FR 11020, Mar. 26, 1990]



Sec. 405.705  Actions which are not initial determinations.

    An initial determination under Part A of Medicare does not include 
determinations relating to:
    (a) The reasonable cost of items or services furnished under Part A 
of Medicare;
    (b) Whether an institution or agency meets the conditions for 
participation in the program;
    (c) Whether an individual is qualified for use of the expedited 
appeals process as provided in Sec. 405.718;
    (d) An action regarding compromise of a claim arising under the 
Medicare program, or termination or suspension of collection action on 
such a claim under the Federal Claims Collection Act of 1966 (31 U.S.C. 
3711). See 20 CFR 404.515 for overpayment claims against an individual, 
Sec. 405.376 for overpayment claims against a provider, physician or 
other supplier, and Sec. 408.110 for claims concerning unpaid Medicare 
premiums;
    (e) The transfer or discharge of residents of skilled nursing 
facilities in accordance with Sec. 483.12 of this chapter; or
    (f) The preadmission screening and annual resident review processes 
required by part 483 subparts C and E of this chapter.

[45 FR 73932, Nov. 7, 1980; 46 FR 24565, May 1, 1981, as amended at 52 
FR 22454, June 12, 1987; 52 FR 48123, Dec. 18, 1987; 57 FR 56504, Nov. 
30, 1992; 61 FR 63749, Dec. 2, 1996]



Sec. 405.706  Decisions of utilization review committees.

    (a) General rule. A decision of a utilization review committee is a 
medical determination by a staff committee of the provider or a group 
similarly composed and does not constitute a determination by the 
Secretary within the meaning of section 1869 of the Act. The decision of 
a utilization review committee may be considered by CMS along with other 
pertinent medical evidence in determining whether or not an individual 
has the right to have payment made under Part A of title XVIII.
    (b) Applicability under the prospective payment system. CMS may 
consider utilization review committee decisions related to inpatient 
hospital services paid for under the prospective payment system (see 
part 412 of this chapter) only as those decisions concern:
    (1) The appropriateness of admissions resulting in payments under 
subparts D, E and G of part 412 of this chapter.
    (2) The covered days of care involved in determinations of outlier 
payments under Sec. 412.80(a)(1)(i) of this chapter; and

[[Page 134]]

    (3) The necessity of professional services furnished in high cost 
outliers under Sec. 412.80(a)(1)(ii) of this chapter.

[48 FR 39831, Sept. 1, 1983]



Sec. 405.708  Effect of initial determination.

    (a) The initial determination under Sec. 405.704 (a) or (b) shall 
be binding upon the individual on whose behalf payment under part A has 
been requested or, if such individual is deceased, upon the 
representative of such individual's estate, unless it is reconsidered in 
accordance with Sec. Sec. 405.710 through 405.717 or revised in 
accordance with Sec. 405.750. Such individual (or the representative of 
such individual's estate if the individual is deceased) shall be the 
party to such initial determination.
    (b) The initial determination under Sec. 405.704(c) shall be 
binding upon the provider of services unless it is reconsidered in 
accordance with Sec. Sec. 405.710 through 405.717 or revised in 
accordance with Sec. 405.750. Such provider of services shall be the 
party to such initial determination.

[55 FR 11021, Mar. 26, 1990, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.710  Right to reconsideration.

    (a) An individual who is a party to an initial determination, as 
specified in Sec. 405.704 (a) and (b), (or if such individual is 
deceased, the representative of such individual's estate) and who is 
dissatisfied with the initial determination may request a 
reconsideration of such determination in accordance with Sec. 405.711 
regardless of the amount in controversy.
    (b) A provider of services who is a party to an initial 
determination (as specified in Sec. 405.704(c)) and who is dissatisfied 
with such initial determination may request a reconsideration of such 
determination in accordance with Sec. 405.711, regardless of the amount 
in controversy, but only if the individual on whose behalf the request 
for payment was made has indicated in writing that he does not intend to 
request reconsideration of the intermediary's initial determination on 
such request for payment, or if the intermediary has made a finding (see 
Sec. 405.704(c)) that such individual did not know or could not 
reasonably have been expected to know that the expenses incurred for the 
items or services for which such request for payment was made were not 
reimbursable by reason of Sec. 411.15(g) or Sec. 411.15(k).

[55 FR 11021, Mar. 26, 1990]



Sec. 405.711  Time and place of filing request for reconsideration.

    The request for reconsideration shall be made in writing and filed 
at an office of the SSA or the CMS or, in the case of a qualified 
railroad retirement beneficiary (see 20 CFR 404.368) filed at an office 
of the Railroad Retirement Board, within 60 days after the date of 
receipt of notice of initial determination, unless such time is extended 
as provided in Sec. 405.712. A request for reconsideration which is 
filed with the intermediary which received the request for payment 
submitted on behalf of the individual is considered to have been filed 
with the CMS as of the date it is filed with the intermediary. For 
purposes of this section, the date of receipt of notice of the initial 
determination shall be presumed to be 5 days after the date of such 
notice, unless there is a reasonable showing to the contrary.

[41 FR 47917, Nov. 1, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 62 FR 25855, May 12, 1997]



Sec. 405.712  Extension of time to request reconsideration.

    If a party to an initial determination desires to file a request for 
reconsideration after the time for filing such request in accordance 
with Sec. 405.711 has passed, such party may file a petition with the 
SSA or the CMS or, in the case of a qualified railroad retirement 
beneficiary, with the Railroad Retirement Board, for an extension of 
time for the filing of such request. Such petition shall be in writing 
and shall state the reasons why the request for reconsideration was not 
filed within the required time. For good cause shown, the CMS may extend 
the time for filing the request for reconsideration.

[37 FR 5814, Mar. 22, 1972. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 62 FR 25855, May 12, 1997]

[[Page 135]]



Sec. 405.714  Withdrawal of request for reconsideration.

    A request for reconsideration may be withdrawn by the party to the 
initial determination who filed the request or by his representative 
provided that the withdrawal is made in writing and filed at an office 
of the SSA or the CMS or, in the case of a qualified railroad retirement 
beneficiary, with the Railroad Retirement Board prior to the date of the 
mailing of the notice of reconsidered determination. A withdrawal filed 
with the intermediary which received the request for payment submitted 
on behalf of the individual is considered to have been filed with the 
CMS as of the date it is filed with the intermediary.

[40 FR 1025, Jan. 6, 1975. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 62 FR 25855, May 12, 1997]



Sec. 405.715  Reconsidered determination.

    (a) In reconsidering an initial determination, the CMS shall review 
such initial determination, the evidence and findings upon which such 
determination was based, and any additional evidence submitted to the 
SSA or the CMS or otherwise obtained by the intermediary or the CMS; and 
shall make a determination affirming or revising, in whole or in part, 
such initial determination.
    (b) If the request for reconsideration is filed by an individual 
with respect to an initial determination specified in Sec. 
405.704(b)(12), the provider of services who furnished the items or 
services shall, prior to the making of the reconsidered determination, 
be made a party thereto. If pursuant to Sec. 405.710(b) a request for 
reconsideration is filed by a provider of services with respect to an 
individual determination under Sec. 405.704(c), the individual who was 
furnished the items or services shall, prior to the making of the 
reconsidered determination, be made a party thereto.

[55 FR 11021, Mar. 26, 1990, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.716  Notice of reconsidered determination.

    Written notice of the reconsidered determination shall be mailed by 
the CMS to the parties and their representatives at their last known 
addresses. Such notice shall state the specific reasons for the 
reconsidered determination and shall advise the parties of their right 
to a hearing if the amount in controversy is $100 or more, or, if 
appropriate, advise them of the requirements for use of the expedited 
appeals process (see Sec. 405.718).

[40 FR 53387, Nov. 18, 1975. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.717  Effect of a reconsidered determination.

    The reconsidered determination is binding upon all parties unless--
    (a) A request for a hearing is filed with SSA or CMS within 60 days 
after the date of receipt of notice of the reconsidered determination by 
the parties (for purposes of this section, the date of receipt of notice 
of the reconsidered determination is presumed to be 5 days after the 
date of the notice, unless it is shown that the notice was received 
earlier or later); or
    (b) The reconsidered determination is revised in accordance with 
Sec. 405.750; or
    (c) The expedited appeals process is used in accordance with Sec. 
405.718.

[62 FR 25852, May 12, 1997]



Sec. 405.718  Expedited appeals process.

    (a) Conditions for use of expedited appeals process (EAP). A party 
may use the EAP to request court review in place of an administrative 
law judge (ALJ) hearing or Departmental Appeals Board (DAB) review if 
the following conditions are met:
    (1) CMS has made a reconsideration determination; an ALJ has made a 
hearing decision; or DAB review has been requested, but a final decision 
has not been issued.
    (2) The filing entity is a party referred to in Sec. 405.718(d).
    (3) The party has filed a request for an ALJ hearing in accordance 
with Sec. 405.722, or DAB review in accordance with 20 CFR 404.968.
    (4) The amount remaining in controversy is $1,000 or more.
    (5) If there is more than one party to the reconsideration 
determination or hearing decision, each party concurs, in writing, with 
the request for the EAP.

[[Page 136]]

    (b) Content of the request for EAP. The request for the EAP:
    (1) Alleges that there are no material issues of fact in dispute; 
and
    (2) Asserts that the only factor precluding a decision favorable to 
the party is a statutory provision that is unconstitutional or a 
regulation, national coverage decision under section 1862(a)(1) of the 
Act, or CMS Ruling that is invalid.
    (c) Place and time for requesting an EAP--(1) Place for filing 
request. The person must file a written request--
    (i) At an office of SSA or CMS; or
    (ii) If the person is in the Philippines, at the Veterans 
Administration Regional Office or with an ALJ; or
    (iii) If the person is a qualified railroad retirement beneficiary, 
at an office of the Railroad Retirement Board.
    (2) Time of filing request. The party may file a request for the 
EAP--
    (i) If the party has requested a hearing, at any time prior to 
receipt of the notice of the ALJ's decision;
    (ii) Within 60 days after the date of receipt of notice of the ALJ's 
decision or dismissal, unless the time is extended in accordance with 
the standards set out in 20 CFR 404.925(c). For purposes of this 
section, the date of receipt of the notice is presumed to be 5 days 
after the date on the notice, unless it is shown that the notice was 
received later; or
    (iii) If the party has requested DAB review, at any time prior to 
receipt of notice of the Board's decision.
    (d) Parties to the EAP. The parties to the EAP are the persons who 
were parties to the reconsideration determination and, if appropriate, 
to the hearing.
    (e) Determination on request for EAP. (1) For EAP requests initiated 
at the ALJ level, an ALJ determines whether all conditions of paragraphs 
(a) and (b) of this section are met.
    (2) If a hearing decision has been issued, the DAB determines 
whether all conditions of paragraphs (a) and (b) of this section are 
met.
    (f) ALJ or DAB certification for the EAP. If the party meets the 
requirements for the EAP, the ALJ or the DAB, as appropriate, certifies 
the case in writing stating that:
    (1) The facts involved in the claim are not in dispute;
    (2) Except as indicated in paragraph (f)(3) of this section, CMS's 
interpretation of the law is not in dispute;
    (3) The sole issue(s) in dispute is the constitutionality of a 
statutory provision or the validity of a regulation, CMS Ruling, or 
national coverage decision based on section 1862(a)(1) of the Act.
    (4) Except for the provision challenged, the right(s) of the party 
is established; and
    (5) The determination or decision made by the ALJ or DAB is final 
for purposes of seeking judicial review.
    (g) Effect of ALJ or DAB certification. (1) Following the issuance 
of the certification described in paragraph (f) of this section, the 
party waives completion of the remaining steps of the administrative 
appeals process.
    (2) The 60-day period for filing a civil suit in a Federal district 
court begins on the date of receipt of the ALJ or DAB certification.
    (h) Effect of a request for EAP that does not result in 
certification. If a request for the EAP does not meet all the conditions 
for use of the process, the ALJ or DAB so advises the party and treats 
the request as a request for hearing or DAB review, as appropriate.

[62 FR 25852, May 12, 1997]



Sec. 405.720  Hearing; right to hearing.

    A person has a right to a hearing regarding any initial 
determination made under Sec. 405.704 if:
    (a) Such initial determination has been reconsidered by the CMS;
    (b) Such person was a party to the reconsidered determination;
    (c) Such person or his representative has filed a written request 
for a hearing in accordance with the procedure described in Sec. 
405.722; and
    (d) The amount in controversy is $100 or more.

[40 FR 1025, Jan. 6, 1975. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 62 FR 25855, May 12, 1997]



Sec. 405.722  Time and place of filing request for a hearing.

    The request for a hearing shall be made in writing and filed at an 
office of the SSA or the CMS or with a ALJ, or, in the case of a 
qualified railroad retirement beneficiary, at an office of

[[Page 137]]

the Railroad Retirement Board. Such request must be filed within 60 days 
after the date of receipt of notice of the reconsidered determination by 
such individual, except where the time is extended as provided in 20 CFR 
404.933(c). For purposes of this section, the date of receipt of notice 
of the reconsidered determination shall be presumed to be 5 days after 
the date of such notice, unless there is a reasonable showing to the 
contrary.

[45 FR 73933, Nov. 7, 1980, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.724  Departmental Appeals Board (DAB) review.

    Regulations beginning at 20 CFR 404.967 regarding SSA Appeals 
Council Review are also applicable to DAB review of matters addressed by 
this subpart.

[62 FR 25852, May 12, 1997]



Sec. 405.730  Court review.

    (a) To the extent authorized by sections 1869, 1876(c)(5)(B), and 
1879(d) of the Act, a party to a Departmental Appeals Board (DAB) 
decision or an ALJ decision if the DAB does not review the ALJ decision, 
may obtain a court review if the amount remaining in controversy is 
$1,000 or more. A party may obtain court review by filing a civil action 
in a district court of the United States in accordance with the 
provisions of section 205(g) of the Act. The filing procedure is set 
forth at 20 CFR 422.210.
    (b) A party to a reconsidered determination or an ALJ hearing 
decision may obtain a court review if the amount in controversy is 
$1,000 or more, and he or she requests and meets the conditions for the 
expedited appeals process set forth in Sec. 405.718.

[62 FR 25852, May 12, 1997]



Sec. 405.732  Review of a national coverage determination (NCD).

    (a) General rule. (1) An NCD is a determination by the Secretary for 
whether or not a particular item or service is covered nationally under 
title XVIII of the Act.
    (2) An NCD does not include a determination of what code, if any, is 
assigned to a particular item or service covered under title XVIII or a 
determination for the amount of payment made for a particular item or 
service.
    (3) NCDs are made under section 1862(a)(1) of the Act or other 
applicable provisions of the Act.
    (4) An NCD is binding on all Medicare carriers, fiscal 
intermediaries, QIOs, HMOs, CMPs, HCPPs, the Medicare Appeals Council, 
and ALJs.
    (b) Review by ALJ. (1) An ALJ may not disregard, set aside, or 
otherwise review an NCD.
    (2) An ALJ may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD has been applied correctly to the claim.
    (c) Review by Court. For initial determinations and NCD challenges 
under section 1862(a)(1) of the Act, arising before October 1, 2002, a 
court's review of an NCD is limited to whether the record is incomplete 
or otherwise lacks adequate information to support the validity of the 
decision, unless the case has been remanded to the Secretary to 
supplement the record regarding the NCD. In these cases, the court may 
not invalidate an NCD except upon review of the supplemental record.

[68 FR 63715, Nov. 7, 2003]



Sec. 405.740  Principles for determining the amount in controversy.

    (a) Individual appellants. For the purpose of determining whether an 
individual appellant meets the minimum amount in controversy needed for 
a hearing ($100), the following rules apply:
    (1) The amount in controversy is computed as the actual amount 
charged the individual for the items and services in question, less any 
amount for which payment has been made by the intermediary and less any 
deductible and coinsurance amounts applicable in the particular case.
    (2) A single beneficiary may aggregate claims from two or more 
providers to meet the $100 hearing threshold and a single provider may 
aggregate claims for services provided to one or more beneficiaries to 
meet the $100 hearing threshold.

[[Page 138]]

    (3) In either of the circumstances specified in paragraph (a)(2) of 
this section, two or more claims may be aggregated by an individual 
appellant only if the claims have previously been reconsidered and a 
request for hearing has been made within 60 days after receipt of the 
reconsideration determination(s).
    (4) When requesting a hearing, the appellant must specify in his or 
her appeal request the specific claims to be aggregated.
    (b) Two or more appellants. As specified below, under section 
1869(b)(2) of the Act, two or more appellants may aggregate their claims 
together to meet the minimum amount in controversy needed for a hearing 
($100). The right to aggregate under this statutory provision applies to 
claims for items and services furnished on or after January 1, 1987.
    (1) The aggregate amount in controversy is computed as the actual 
amount charged the individual(s) for the items and services in question, 
less any amount for which payment has been made by the intermediary and 
less any deductible and coinsurance amounts applicable in the particular 
case.
    (2) In determining the amount in controversy, two or more appellants 
may aggregate their claims together under the following circumstances:
    (i) Two or more beneficiaries may combine claims representing 
services from the same or different provider(s) if the claims involve 
common issues of law and fact;
    (ii) Two or more providers may combine their claims if the claims 
involve the delivery of similar or related services to the same 
beneficiary; or
    (iii) Two or more providers may combine their claims if the claims 
involve common issues of law and fact with respect to services furnished 
to two or more beneficiaries.
    (iv) In any of the circumstances specified in paragraphs (b)(2)(i) 
through (b)(2)(iii) of this section, the claims may be aggregated only 
if the claims have previously been reconsidered and a request for 
hearing has been made within 60 days after receipt of the 
reconsideration determination(s). Moreover, in the request for hearing, 
the appellants must specify the claims that they seek to aggregate.
    (c) The determination as to whether the amount in controversy is 
$100 or more is made by the administrative law judge (ALJ).
    (d) In determining the amount in controversy under paragraph (b) of 
this section, the ALJ also makes the determination as to what 
constitutes ``similar or related services'' or ``common issues of law 
and fact.''
    (e) When a civil action is filed by either an individual appellant 
or two or more appellants, the Secretary may assert that the aggregation 
principles contained in this subpart may be applied to determine the 
amount in controversy for judicial review ($1000).
    (f) Notwithstanding the provisions of paragraphs (a)(1) and (b)(1) 
of this section, when payment is made for certain excluded services 
under Sec. 411.400 of this chapter or the liability of the beneficiary 
for those services is limited under Sec. 411.402 of this chapter, the 
amount in controversy is computed as the amount that would have been 
charged the beneficiary for the items or services in question, less any 
deductible and coinsurance amounts applicable in the particular case, 
had such expenses not been paid pursuant to Sec. 411.400 of this 
chapter or had such liability not been limited pursuant to Sec. 411.402 
of this chapter.
    (g) Under this subpart, an appellant may not combine part A and part 
B claims together to meet the requisite amount in controversy for a 
hearing. HMO, CMP and HCPP appellants under part 417 of this chapter may 
combine part A and part B claims together to meet the requisite amounts 
in controversy for a hearing.

[59 FR 12181, Mar. 16, 1994]



Sec. 405.745  Amount in controversy ascertained after reconsideration.

    For the purpose of determining whether a party to a reconsidered 
determination is entitled to a hearing, the amount in controversey after 
the reconsideration action rather than the amount in controversy 
initially at issue shall be controlling.

[40 FR 1026, Jan. 6, 1975. Redesignated at 42 FR 52826, Sept. 30, 1977]

[[Page 139]]



Sec. 405.747  Dismissal of request for hearing; amount in controversy less 

than $100.

    The ALJ shall, without holding a hearing, dismiss the request for 
hearing if the request for hearing plainly shows that less than $100 is 
in controversy. If a hearing is held and the ALJ finds that the amount 
in controversy is less than $100, the ALJ shall dismiss the request for 
hearing and will not rule on the substantive issues involved in the 
appeal.

[37 FR 5814, Mar. 23, 1972. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 62 FR 25855, May 12, 1997]



Sec. 405.750  Time period for reopening initial, revised, or reconsidered 

determinations and decisions or revised decisions of an ALJ or the 

Departmental Appeals Board (DAB); binding effect of determination and 

decisions.

    (a) Reopenings concerning applications and entitlement. A 
determination, or decision, or revised determination or decision made by 
the SSA concerning any matter under Sec. 405.704(a), may be reopened 
and revised under 20 CFR 404.988 (Conditions for reopening).
    (b) Reopenings concerning a request for payment. An initial, 
revised, or reconsidered determination of CMS, or a decision or revised 
decision of an ALJ or of the DAB, with respect to an individual's right 
concerning a request for payment under Medicare Part A, which is 
otherwise binding under 20 CFR 404.955 or 404.981 and Sec. Sec. 405.708 
or 405.717 of this subpart may be reopened:
    (1) Within 12 months from the date of the notice of the initial or 
reconsidered determination to the party to such determination;
    (2) After such 12-month period, but within 4 years after the date of 
the notice of the initial determination to the individual, upon 
establishment of good cause for reopening such determination or decision 
(see 20 CFR 404.988(b) and 404.989); or
    (3) At any time, when:
    (i) Such initial, revised, or reconsidered determination or such 
decision or revised decision is unfavorable, in whole or in part, to the 
party thereto, but only for the purpose of correcting clerical error or 
error on the face of the evidence on which such determination or 
decision was based; or
    (ii) Such initial, revised, or reconsidered determination or such 
decision or revised decision was procured by fraud or similar fault of 
the beneficiary or some other person.

[45 FR 73933, Nov. 7, 1980, as amended at 61 FR 32348, June 24, 1996; 62 
FR 25853, 25855, May 12, 1997]



Sec. 405.753  Appeal of a categorization of a device.

    (a) CMS's acceptance of the FDA categorization of a device as an 
experimental/investigational (Category A) device under Sec. 405.203 is 
a national coverage decision under section 1862(a)(1) of the Act.
    (b) CMS's acceptance of the FDA categorization of a device as an 
experimental/investigational (Category A) device under Sec. 405.203 is 
an aspect of an initial determination that, under section 1862 of the 
Act, payment may not be made.
    (c) In accordance with section 1869(b)(3)(A) of the Act, CMS's 
acceptance of the FDA categorization of a device as an experimental/
investigational (Category A) device under Sec. 405.203 may not be 
reviewed by an administrative law judge.

[60 FR 48424, Sept. 19, 1995]



           Subpart H_Appeals Under the Medicare Part B Program

    Authority: Secs. 1102, 1842(b)(3)(C), 1869(b), and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395u(b)(3)(C), 1395ff(b), and 
1395hh).

    Source: 32 FR 18028, Dec. 16, 1967, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977.



Sec. 405.801  Part B appeals--general description.

    (a) The Medicare carrier makes an initial determination when a 
request for payment for Part B benefits is submitted. If an individual 
beneficiary is dissatisfied with the initial determination, he or she 
may request, and the carrier will perform, a review of the claim. 
Following the carrier's review determination, the beneficiary may obtain 
a carrier hearing if the amount remaining in controversy is at least 
$100.

[[Page 140]]

The beneficiary is also entitled to a carrier hearing without the 
benefit of a review determination when the initial request for payment 
is not being acted upon with reasonable promptness (as defined in Sec. 
405.802). Following the carrier hearing, the beneficiary may obtain a 
hearing before an ALJ if the amount remaining in controversy is at least 
$500. If the beneficiary is dissatisfied with the decision of the ALJ, 
he or she may request the Departmental Appeals Board (DAB) to review the 
case. Following the action of the DAB, the beneficiary may file suit in 
Federal district court if the amount remaining in controversy is at 
least $1,000.
    (b) The rights of a beneficiary under paragraph (a) of this section 
to appeal the carrier's initial determination are granted also to--
    (1) A physician or supplier that furnishes services to a beneficiary 
and that accepts an assignment from the beneficiary, or
    (2) A physician who meets the conditions of section 1842(l)(1)(A) of 
the Act pertaining to refund requirements for nonparticipating 
physicians who have not taken assignment on the claim(s) at issue.
    (c) Procedures governing the determinations by SSA as to whether an 
individual has met basic Part B entitlement requirements are covered in 
subpart G of this part and 20 CFR part 404, subpart J. Subparts J and R 
of 20 CFR part 404 are also applicable to ALJ, DAB, and judicial review 
conducted under subpart H, except to the extent that specific provisions 
are contained in this subpart.

[62 FR 25853, May 12, 1997]



Sec. 405.802  Definitions.

    As used in subpart H of this part, the term--
    After receipt of the notice means 5 days after the date on the 
notice, unless it is shown that the notice was received earlier or 
later.
    Appellant designates the beneficiary, assignee or other person or 
entity that has filed an appeal concerning a particular determination of 
benefits under Medicare part B. Designation as an appellant does not in 
itself convey standing to appeal the determination in question.
    Assignee means a physician or supplier who furnishes services to a 
beneficiary under Medicare part B and who has accepted a valid 
assignment executed by the beneficiary.
    Assignment means the transfer by the assignor of his or her claim 
for payment to the assignee in return for the latter's promise not to 
charge more for his or her services than the carrier finds to be the 
reasonable charge or other approved amount.
    Assignor means a beneficiary under Medicare part B whose physician 
or supplier has taken assignment of a claim.
    Carrier means an organization which has entered into a contract with 
the Secretary pursuant to section 1842 of the Act and which is 
authorized to make determinations with respect to part B of title XVIII 
of the Act. For purposes of this subpart, the term carrier also refers 
to an intermediary that has entered into a contract with the Secretary 
under section 1816 of the Act and is authorized to make determinations 
with respect to part B provider services, as specified in Sec. 421.5(c) 
of this chapter.
    Common issues of law and fact, with respect to the aggregation of 
claims by two or more appellants to meet the minimum amount in 
controversy needed for an ALJ hearing, occurs when the claims sought to 
be aggregated are denied or reduced for similar reasons and arise from a 
similar fact pattern material to the reason the claims are denied.
    Delivery of similar or related services, with respect to the 
aggregation of claims by two or more physician/supplier appellants to 
meet the minimum amount in controversy needed for an ALJ hearing, means 
like or coordinated services or items provided to the same beneficiary 
by the appellants.
    Prospective provider means any of the entities specified in the 
definition of provider under Sec. 498.2 of this chapter that seeks to 
be approved for coverage of its services by Medicare.
    Prospective supplier means any of the listed entities specified in 
the definition of supplier specified in this section that seeks to be 
approved for coverage of its services under Medicare.

[[Page 141]]

    Provider means either of the following:
    (1) Any of the following entities that have in effect an agreement 
to participate in Medicare:
    (i) Hospital.
    (ii) Transplant center.
    (iii) Critical access hospital (CAH).
    (iv) Skilled nursing facility (SNF).
    (v) Comprehensive outpatient rehabilitation facility (CORF).
    (vi) Home health agency (HHA).
    (vii) Hospice.
    (viii) Religious nonmedical health care institution (RNHCI).
    (2) Any of the following entities that have in effect an agreement 
to participate in Medicare but only to furnish outpatient physical 
therapy or outpatient speech pathology services.
    (i) Clinic.
    (ii) Rehabilitation agency.
    (iii) Public health agency.
    Representative means an individual meeting the conditions described 
in Sec. Sec. 405.870 through 405.871.
    Supplier means any of the following entities:
    (1) An independent laboratory.
    (2) Supplier of durable medical equipment Prosthetics, orthotics, or 
supplies (DMEPOS).
    (3) Ambulance service provider.
    (4) Independent diagnostic testing facility.
    (5) Physician or other practitioner such as physician assistant.
    (6) Physical therapist in independent practice.
    (7) Clinical laboratories.
    (8) Supplier of portable X-ray services.
    (9) Rural health clinic (RHC).
    (10) Federally qualified health center (FQHC).
    (11) Ambulatory surgical center (ASC).
    (12) An entity approved by CMS to furnish outpatient diabetes self-
management training.
    (13) End-stage renal disease (ESRD) treatment facility that is 
approved by CMS as meeting the conditions for coverage of its services.
    With reasonable promptness means within a period of 60 consecutive 
days after the receipt by the carrier of a request for payment.

[59 FR 12182, Mar. 16, 1994, as amended at 62 FR 25853, May 12, 1997; 73 
FR 36459, June 27, 2008]



Sec. 405.803  Initial determination.

    (a) Carriers make initial determinations regarding claims for 
benefits under Medicare Part B.
    (b) An initial determination for purposes of this subpart includes 
determinations such as the following:
    (1) Whether services furnished are covered.
    (2) Whether the deductible has been met.
    (3) Whether the receipted bill or other evidence of payment is 
acceptable.
    (4) Whether the charges for services furnished are reasonable.
    (5) If the services furnished to a beneficiary by a physician or a 
supplier pursuant to an assignment under Sec. 424.55 of this chapter 
are not covered because they are determined to be not reasonable and 
necessary under Sec. 411.15(k) of this chapter, whether the 
beneficiary, physician or supplier, or a physician who meets the 
requirements of Sec. 411.408, knew or could reasonably have been 
expected to know at the time the services were furnished that the 
services were not covered.
    (c) The following are not initial determinations for purposes of 
this subpart:
    (1) Any issue or factor for which SSA or CMS has sole 
responsibility, for example, whether an independent laboratory meets the 
conditions for coverage of services; whether a Medicare overpayment 
claim should be compromised, or collection action terminated or 
suspended.
    (2) Any issue or factor which relates to hospital insurance benefits 
under Medicare Part A.

[62 FR 25853, May 12, 1997]



Sec. 405.804  Notice of initial determination.

    After a carrier has made an initial determination on a request for 
payment written notice of this determination shall be mailed to each 
party to the determination at his last known

[[Page 142]]

address. The notice of the determination shall inform each party to the 
determination of his right to have such determination reviewed.



Sec. 405.805  Parties to the initial determination.

    The parties to the initial determination (see Sec. 405.803) may be 
any party described in Sec. 405.802.

[64 FR 52670, Sept. 30, 1999]



Sec. 405.806  Effect of Initial Determination.

    The initial determination is binding upon all parties to the claim 
for benefits unless the determination is--
    (a) Reviewed in accordance with Sec. Sec. 405.810 through 405.812; 
or
    (b) Revised as a result of a reopening in accordance with Sec. 
405.841.

[62 FR 25853, May 12, 1997]



Sec. 405.807  Request for review of initial determination.

    (a) General. A party to an initial determination by a carrier, that 
is dissatisfied with the initial determination and wants to appeal the 
matter, may request that the carrier review the determination. The 
request for review by the party to an initial determination must clearly 
indicate that he or she is dissatisfied with the initial determination 
and wants to appeal the matter. The request for review does not 
constitute a waiver of the party's right to a hearing (under Sec. 
405.815) after the review.
    (b) Place and method of filing a request. A request by a party for a 
carrier to review the initial determination may be made in one of the 
following ways:
    (1) In writing and filed at an office of the carrier, SSA, or CMS.
    (2) By telephone to the telephone number designated by the carrier 
as the appropriate number for the receipt of requests for review.
    (c) Time of filing request. (1) The carrier must provide a period of 
6 months after the date of the notice of the initial determination 
within which the party to the initial determination may request a 
review.
    (2) The carrier may, upon request by the party, extend the period 
for requesting the review of the initial determination.

[64 FR 52670, Sept. 30, 1999]



Sec. 405.808  Parties to the review.

    The parties to the review (as provided for in Sec. 405.807(a)) 
shall be the persons who were parties to the carrier's initial 
determination as described in Sec. 405.805, and any other party whose 
rights with respect to the particular claim being reviewed may be 
affected by such review.

[39 FR 12097, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977]



Sec. 405.809  Opportunity to submit evidence.

    The parties to the review (as provided for in Sec. 405.807(a)) 
shall have a reasonable opportunity to submit written evidence and 
contentions as to fact or law relative to the claim at issue.

[39 FR 12097, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977]



Sec. 405.810  Review determination.

    Subject to the provisions of Sec. Sec. 405.807 through 405.809, the 
carrier shall review the claim in dispute and, upon the basis of the 
evidence of record, shall make a separate determination affirming or 
revising in whole or in part the findings and determination in question.

[39 FR 12097, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977]



Sec. 405.811  Notice of review determination.

    Written notice of the review determination is mailed to a party at 
his or her last known address. The review determination states the basis 
of the determination and advises the party of his or her right to a 
carrier hearing when the amount in controversy is $100 or more as 
determined in accordance with Sec. 405.817. The notice states the place 
and manner of requesting a carrier hearing as well as the time limit 
under which a hearing must be requested (see Sec. 405.821).

[59 FR 12182, Mar. 16, 1994]

[[Page 143]]



Sec. 405.812  Effect of review determination.

    The review determination is binding upon all parties to the review 
unless a carrier hearing decision is issued pursuant to a request for 
hearing made in accordance with Sec. 405.821 or is revised as a result 
of reopening in accordance with Sec. 405.841.

[59 FR 12182, Mar. 16, 1994, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.815  Amount in controversy for carrier hearing, ALJ hearing and 

judicial review.

    Any party designated in Sec. 405.822 is entitled to a carrier 
hearing after a review determination has been made by the carrier if the 
amount remaining in controversy is $100 or more and the party meets the 
requirements of Sec. 405.821 of this subpart. To be entitled to a 
hearing before an ALJ following the carrier hearing, the amount 
remaining in controversy must be $500 or more, and for judicial review 
following the ALJ hearing and Departmental Appeals Board Review, the 
amount remaining in controversy must be $1000 or more.

[59 FR 12182, Mar. 16, 1994, as amended at 61 FR 32348, June 24, 1996]



Sec. 405.817  Principles for determining amount in controversy.

    (a) Individual appellants. For the purpose of determining whether an 
individual appellant meets the minimum amount in controversy needed for 
a carrier hearing ($100) or ALJ hearing ($500), the following rules 
apply:
    (1) The amount in controversy is computed as the actual amount 
charged the individual for the items and services in question, less any 
amount for which payment has been made by the carrier and less any 
deductible and coinsurance amounts applicable in the particular case.
    (2) A single beneficiary may aggregate claims from two or more 
physicians/suppliers to meet the $100 or $500 thresholds. A single 
physician/supplier may aggregate claims from two or more beneficiaries 
to meet the $100 or $500 threshold levels of appeal.
    (3) In either of the circumstances specified in paragraph (a)(2) of 
this section, two or more claims may be aggregated by an individual 
appellant to meet the amount in controversy for a carrier hearing only 
if the claims have previously been reviewed and a request for hearing 
has been made within six months after the date of the review 
determination(s).
    (4) In either of the circumstances specified in paragraph (a)(2) of 
this section, two or more claims may be aggregated by an individual 
appellant to meet the amount in controversy for an ALJ hearing only if 
the claims have previously been decided by a carrier hearing officer and 
a request for an ALJ hearing has been made within 60 days after receipt 
of the carrier hearing officer decision(s).
    (5) When requesting a carrier hearing or an ALJ hearing, the 
appellant must specify in his or her appeal request the specific claims 
to be aggregated.
    (b) Two or more appellants. As specified in this paragraph, under 
section 1869(b)(2) of the Act, two or more appellants may aggregate 
their claims together to meet the minimum amount in controversy needed 
for an ALJ hearing ($500). The right to aggregate under this statutory 
provision applies to claims for items and services furnished on or after 
January 1, 1987.
    (1) The aggregate amount in controversy is computed as the actual 
amount charged the individual(s) for the items and services in question, 
less any amount for which payment has been made by the carrier and less 
any deductible and coinsurance amounts applicable in the particular 
case.
    (2) In determining the amount in controversy, two or more appellants 
may aggregate their claims together under the following circumstances:
    (i) Two or more beneficiaries may combine claims representing 
services from the same or different physician(s) or supplier(s) if the 
claims involve common issues of law and fact;
    (ii) Two or more physicians/suppliers may combine their claims if 
the claims involve the delivery of similar or related services to the 
same beneficiary;
    (iii) Two or more physicians/suppliers may combine their claims if 
the claims involve common issues of law and fact with respect to 
services furnished to two or more beneficiaries.

[[Page 144]]

    (iv) In any of the circumstances specified in paragraphs (b)(2)(i) 
through (b)(2)(iii) of this section, the claims may be aggregated only 
if the claims have previously been decided by a carrier hearing 
officer(s) and a request for ALJ hearing has been made within 60 days 
after receipt of the carrier hearing officer decision(s). Moreover, in a 
request for ALJ hearing, the appellants must specify the claims that 
they seek to aggregate.
    (c) The determination as to whether the amount in controversy is 
$100 or more is made by the carrier hearing officer. The determination 
as to whether the amount in controversy is $500 or more is made by the 
ALJ.
    (d) In determining the amount in controversy under paragraph (b) of 
this section, the ALJ will also make the determination as to what 
constitutes ``similar or related services'' or ``common issues of law 
and fact.''
    (e) When a civil action is filed by either an individual appellant 
or two or more appellants, the Secretary may assert that the aggregation 
principles contained in this subpart may be applied to determine the 
amount in controversy for judicial review ($1000).
    (f) Notwithstanding the provisions of paragraphs (a)(1) and (b)(1) 
of this section, when payment is made for certain excluded services 
under Sec. 411.400 of this chapter or the liability of the beneficiary 
for those services is limited under Sec. 411.402 of this chapter, the 
amount in controversy is computed as the amount that would have been 
charged the beneficiary for the items or services in question, less any 
deductible and coinsurance amounts applicable in the particular case, 
had such expenses not been paid under Sec. 411.400 of this chapter or 
had such liability not been limited under Sec. 411.402 of this chapter.
    (g) Under this subpart, an appellant may not combine part A and part 
B claims together to meet the requisite amount in controversy for a 
carrier hearing or ALJ hearing. HMO, CMP and HCPP appellants under part 
417 of this chapter may combine part A and part B claims together to 
meet the requisite amount in controversy for a hearing.

[59 FR 12182, Mar. 16, 1994]



Sec. 405.821  Request for carrier hearing.

    (a) A request for a carrier hearing is any clear expression in 
writing by a claimant asking for a hearing to adjudicate a claim when 
not acted upon with reasonable promptness or by a party to a review 
determination who states, in effect, that he or she is dissatisfied with 
the carrier's review determination and wants further opportunity to 
appeal the matter to the carrier.
    (b) The hearing request must be filed at an office of the carrier or 
at an office of SSA or CMS.
    (c) Except when a carrier hearing is held because the carrier did 
not act upon a claim with reasonable promptness, a party to the review 
determination may request a carrier hearing within six months after the 
date of the notice of the review determination. The carrier may, upon 
request by the party affected, extend the period for filing the request 
for hearing.

[59 FR 12183, Mar. 16, 1994, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.822  Parties to a carrier hearing.

    The parties to a hearing shall be the persons who were parties to 
the carrier's review determination (Sec. 405.808) which is in question. 
Any other person may be made a party if that person's rights with 
respect to supplementary medical insurance benefits may be prejudiced by 
the decision.

[39 FR 12097, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 59 FR 12183, Mar. 16, 1994]



Sec. 405.823  Carrier hearing officer.

    Any hearing provided for in this subpart shall be conducted by a 
hearing officer designated by the appropriate official of the carrier.

[39 FR 12097, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977, 
and amended at 59 FR 12183, Mar. 16, 1994]



Sec. 405.824  Disqualification of carrier hearing officer.

    A hearing officer shall not conduct a hearing in any case in which 
he is prejudiced or partial with respect to any party, or if he has any 
interest in the matter before him. Notice of any objection with respect 
to the hearing officer

[[Page 145]]

who will conduct the hearing shall be made by the objecting party at his 
earliest opportunity. The hearing officer shall consider such objection 
and shall, at his discretion, withdraw. If the hearing officer 
withdraws, the appropriate official of the carrier shall designate 
another hearing officer to conduct the hearing. If the hearing officer 
does not withdraw, the objecting party may present his objections to the 
carrier for consideration at any time prior to the issuance of a 
decision. The carrier shall review the request and take appropriate 
action. The fact that a hearing officer is an employee of the carrier 
may not serve as prima facie cause for disqualification.

[32 FR 18028, Dec. 16, 1967. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 59 FR 12183, Mar. 16, 1994]



Sec. 405.825  Location of carrier hearing.

    (a) Time and place. The hearing officer shall fix a time and place 
for the hearing reasonably convenient to the requesting party and not 
inconsistent with the public interest.
    (b) Adjournment or postponement. The hearing officer may, for a good 
and sufficient reason, fix a new time and/or place for the hearing; he 
may change the time and place for the hearing or adjourn the hearing on 
his own motion upon reasonable notification to the parties.

[32 FR 18028, Dec. 16, 1967. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 59 FR 12183, Mar. 16, 1994]



Sec. 405.826  Notice of carrier hearing.

    The notice of hearing is to include notice of the time and place of 
the hearing; information as to the specific issues to be determined; and 
the matters on which findings will be made and conclusions will be 
reached. The notice is to contain sufficient information about the 
hearing procedure (including the party's right to representation) for 
effective preparation for the hearing.

[32 FR 18028, Dec. 16, 1967. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 59 FR 12183, Mar. 16, 1994]



Sec. 405.830  Conduct of the carrier hearing.

    (a) General. Hearings shall be open to the parties and to such other 
persons as the hearing officer deems necessary and proper for the 
orderly and efficient conduct of the hearing. The hearing officer shall 
inquire fully into the matters at issue and shall receive in evidence 
the testimony of witnesses and any documents which are relevant and 
material to such matters. The parties shall be provided an opportunity 
to enter any objection to the inclusion of any document. The order in 
which evidence and allegations shall be presented and the procedure at 
the hearing, except as this subpart otherwise expressly provides, shall 
be at the discretion of the hearing officer and of such nature as to 
afford the parties a proper hearing.
    (b) Evidence. Evidence may be received at the hearing even though 
inadmissible under rules of evidence applicable to court procedures.
    (c) Witnesses. The hearing officer may examine the witnesses and 
shall allow the parties or their representatives to do so. If the 
hearing officer conducts the examination of a witness, he may allow the 
parties to suggest matters upon which they desire the witness to be 
questioned, and the hearing officer shall question the witness with 
respect to such matters if they are relevant and material to any issue 
pending for decision before him.
    (d) Oral argument and written allegations. The parties, upon their 
request shall be allowed a reasonable time for the presentation of oral 
argument or for the filing of briefs or other written statements or 
allegations of facts or law.
    (e) Consolidated issues. When one or more new issues are raised at 
any time after a request for hearing has been made, but before the 
mailing of notice of the decision, the hearing officer may, at his 
discretion, consider the issues along with the other issues pending 
before him on the same request for hearing.

[32 FR 18028, Dec. 16, 1967. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 59 FR 12183, Mar. 16, 1994]

[[Page 146]]



Sec. 405.831  Waiver of right to appear at carrier hearing and present 

evidence.

    If all parties waive their right to appear before the hearing 
officer and present evidence and contentions personally or by 
representative, it shall not be necessary for the hearing officer to 
give notice of or conduct a formal hearing as provided in Sec. Sec. 
405.825 through 405.830. A waiver of the right to appear is to be in 
writing and filed with the hearing officer or the carrier. Such waiver 
may be withdrawn by a party at any time prior to the mailing of notice 
of the decision in the case. Even though all of the parties have filed a 
waiver of the right to appear and present evidence and contentions at a 
hearing before the hearing officer, the hearing officer may, 
nevertheless, give notice of a time and place and conduct a hearing as 
provided in Sec. Sec. 405.825 through 405.830, if he believes that the 
personal appearance and testimony of the party or parties would assist 
him to ascertain the facts at issue in the case. For purposes of this 
section, failure of the parties to appear shall not be cause for a 
finding of abandonment and the hearing officer shall make his decision 
on the basis of all evidence adduced.

[32 FR 18028, Dec. 16, 1967. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 62 FR 25855, May 12, 1997]



Sec. 405.832  Dismissal of request for carrier hearing.

    (a) By application of party. With the approval of the hearing 
officer, a request for a hearing may be withdrawn or dismissed at any 
time prior to the mailing of notice of the decision upon the application 
of the party or parties filing the request for such hearing. A party may 
request a dismissal by filing a written notice of such request with the 
carrier, the hearing officer or orally stating such request at the 
hearing. The dismissal of a request for hearing shall be binding unless 
vacated (see paragraph (d) of this section).
    (b) Dismissal by abandonment of party. A hearing officer may dismiss 
a request for hearing upon abandonment by the party or parties who filed 
the request. A party shall be deemed to have abandoned a request for 
hearing, other than where personal appearance is waived in accordance 
with Sec. 405.831, if neither the party nor his representative appears 
at the time and place fixed for the hearing and within 10 days after the 
mailing of a notice to him by the hearing officer to show cause, such 
party does not show good and sufficient cause for such failure to appear 
and failure to notify the hearing officer prior to the time fixed for 
hearing that he cannot appear.
    (c) Dismissal for cause. The hearing officer may, on his own motion, 
dismiss a hearing request, either entirely or as to any stated issue, 
under either of the following circumstances:
    (1) Where the party requesting a hearing is not a proper party under 
Sec. 405.822 or does not otherwise have a right to a hearing under 
section 1842(b)(3)(C) of the Act; or
    (2) Where the party who filed the hearing request dies and there is 
no information before the hearing officer showing that an individual who 
is not a party may be prejudiced by the carrier's determination.
    (d) Dismissal without prejudice. The hearing officer may on his own 
motion dismiss without prejudice a hearing request where the amount in 
controversy is less than $100.
    (e) Vacation of dismissal. A hearing officer may, on request of a 
party and for good and sufficient cause shown, vacate any dismissal of a 
request for hearing at any time within 6 months from the date of mailing 
notice of the dismissal to the party requesting the hearing at his last 
known address.

[32 FR 18028, Dec. 16, 1967, as amended at 39 FR 12098, Apr. 3, 1974. 
Redesignated at 42 FR 52826, Sept. 30, 1977, as amended at 59 FR 12183, 
Mar. 16, 1994; 62 FR 25855, May 12, 1997]



Sec. 405.833  Record of carrier hearing.

    A complete record of the proceedings at the carrier hearing is made. 
The testimony is transcribed and copies of other documentary evidence 
are reproduced in any case when directed by the hearing officer, the 
carrier, or CMS. The record will also be transcribed and reproduced at 
the request of any party to the hearing provided the requesting party 
bears the cost.

[62 FR 25853, May 12, 1997]

[[Page 147]]



Sec. 405.834  Carrier hearing officer's decision.

    (a) As soon as practicable after the close of a carrier hearing, the 
carrier hearing officer issues a decision in the case based upon the 
evidence presented at the hearing or otherwise included in the hearing 
record. The decision is issued as a written notice to the parties and 
contains--
    (1) Findings of fact,
    (2) A statement of reasons, and
    (3) Notification to the parties of their right to an ALJ hearing 
when the amount remaining in controversy is at least $500.
    (b) A copy of the decision is mailed to the parties to the hearing 
at their last known addresses.

[62 FR 25854, May 12, 1997]



Sec. 405.835  Effect of carrier hearing officer's decision.

    The carrier hearing officer's decision is binding upon all parties 
to the hearing unless--
    (a) A request for an ALJ hearing is filed in accordance with Sec. 
405.855, or
    (b) The decision is revised in accordance with Sec. 405.841.

[62 FR 25854, May 12, 1997]



Sec. 405.836  Authority of the carrier hearing officer.

    The carrier hearing officer, in adjudicating Medicare Part B claims, 
complies with all of the provisions of, and regulations issued under, 
title XVIII of the Act, as well as with CMS Rulings, national coverage 
decisions, and other policy statements, instructions, and guides issued 
by CMS.

[62 FR 25854, May 12, 1997]



Sec. 405.841  Reopening initial or review determination of the carrier, and 

decision of a carrier hearing officer.

    An initial or review determination of a carrier or a decision of a 
hearing officer may be reopened by such carrier or hearing officer:
    (a) Within 12 months from the date of the notice of such initial or 
review determination or decision to the party to such determination or 
decision; or
    (b) After such 12-month period, but within 4 years from the date of 
the notice of the initial determination to the party to such 
determination, upon establishment of good cause for reopening such 
determination or decision (see 20 CFR 404.988(b) and 404.989); or
    (c) At any time, when:
    (1) Such initial or review determination or decision was procured by 
fraud or similar fault of the beneficiary or some other person, or
    (2) Such initial or review determination or decision is unfavorable, 
in whole or in part, to the party thereto, but only for the purpose of 
correcting a clerical error or error on the face of the evidence on 
which such determination or decision was based.

[39 FR 12098, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 59 FR 12183, Mar. 16, 1994; 62 FR 25855, May 12, 1997]



Sec. 405.842  Notice of reopening and revision.

    (a) Notice. When any determination or decision is reopened as 
provided in Sec. 405.841, notice of such reopening shall be mailed to 
the parties to such determination or decision at their last known 
addresses. A notice of revision following a reopening of a decision, 
shall be mailed to the parties and shall state the basis for the revised 
determination or decision.
    (b) Effect of revised determination. The revision of a determination 
(see Sec. 405.841) shall be binding upon all parties thereto unless a 
party files a written request for a hearing with respect to a revised 
determination when the amount in controversy is $100 or more.

[32 FR 18028, Dec. 16, 1967, as amended at 39 FR 12098, Apr. 3, 1974. 
Redesignated at 42 FR 52826, Sept. 30, 1977; 62 FR 25855, May 12, 1997]



Sec. 405.850  Change of ruling or legal precedent.

    Change of a legal interpretation or administrative ruling upon which 
a determination or decision was made shall not be considered as good and 
sufficient reason for reopening the determination or decision.



Sec. 405.853  Expedited appeals process.

    (a) Conditions for use of expedited appeals process (EAP). A party 
may use the EAP set forth in Sec. 405.718 of this chapter to request 
court review in

[[Page 148]]

place of the ALJ hearing or Departmental Appeals Board (DAB) review if 
the following conditions are met:
    (1) The carrier hearing officer has made a decision; an ALJ has made 
a hearing decision; or DAB review has been requested, but a final 
decision has not been issued.
    (2) The filing entity is a party referred to in Sec. 405.718(d) of 
this chapter.
    (3) The party has filed a request for an ALJ hearing in accordance 
with Sec. 405.855, or DAB review in accordance with 20 CFR 404.968.
    (4) The amount remaining in controversy is $1,000 or more.
    (5) If there is more than one party to the hearing decision, each 
party concurs, in writing, with the request for an EAP.
    (b) Content of the request for EAP. The request for an EAP:
    (1) Alleges that there are no material issues of fact in dispute; 
and
    (2) Asserts that the only factor precluding a decision favorable to 
the party is a statutory provision that is unconstitutional or a 
regulation, national coverage decision under section 1862(a)(1) of the 
Act, or CMS Ruling that is invalid.

[62 FR 25854, May 12, 1997]



Sec. 405.855  ALJ hearing.

    (a) Right to hearing. A party to the carrier hearing has a right to 
a hearing before an ALJ if--
    (1) The party files a written request for an ALJ hearing within 60 
days after receipt of the notice of the carrier hearing decision; and
    (2) The amount remaining in controversy is $500 or more.
    (b) Place of filing hearing request. The request for an ALJ hearing 
must be made in writing and filed with the carrier that issued the 
decision, a Social Security office, or, in the case of a qualified 
railroad retirement beneficiary, an office of the Railroad Retirement 
Board.
    (c) Effect of ALJ hearing decision. (1) An ALJ's decision is binding 
on all parties to the hearing unless--
    (i) The DAB reviews the ALJ decision;
    (ii) The DAB does not review the ALJ decision, and the party 
requests judicial review;
    (iii) The decision is revised by the DAB or an ALJ in accordance 
with the provisions of Sec. 405.750 of this chapter; or
    (iv) The expedited appeals process is used.

[62 FR 25854, May 12, 1997]



Sec. 405.856  Departmental Appeals Board (DAB) review.

    Regulations beginning at 20 CFR 404.967 regarding SSA Appeals 
Council Review are applicable to DAB review of matters addressed by this 
subpart.

[62 FR 25854, May 12, 1997]



Sec. 405.857  Court review.

    (a) General rule. To the extent authorized by sections 1869, 
1876(c)(5)(B), and 1879(d) of the Act, a party to a DAB decision, or an 
ALJ decision if the DAB does not review the ALJ's decision, may obtain a 
court review if the amount remaining in controversy is $1,000 or more. A 
party may obtain court review by filing a civil action in a district 
court of the United States in accordance with the provisions of section 
205(g) of the Act. The filing procedure is set forth in 20 CFR 422.210.
    (b) Prohibition against court review of certain Part B regulations 
or instructions. Under section 1869(b)(4) of the Act, a court may not 
review a regulation or instruction that relates to a method of payment 
under Part B if the regulation was promulgated, or the instruction 
issued, before January 1, 1981.

[62 FR 25854, May 12, 1997]



Sec. 405.860  Review of a national coverage determination (NCD).

    (a) General rule. (1) An NCD is a determination by the Secretary for 
whether or not a particular item or service is covered nationally under 
title XVIII of the Act.
    (2) An NCD does not include a determination of what code, if any, is 
assigned to a particular item or service covered under title XVIII or a 
determination for the amount of payment made for a particular item or 
service.
    (3) NCDs are made under section 1862(a)(1) of the Act or other 
applicable provisions of the Act.
    (4) An NCD is binding on all Medicare carriers, fiscal 
intermediaries, QIOs,

[[Page 149]]

HMOs, CMPs, HCPPs, the Medicare Appeals Council, and ALJs.
    (b) Review by ALJ. (1) An ALJ may not disregard, set aside, or 
otherwise review an NCD.
    (2) An ALJ may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD is applied correctly to the claim.
    (c) Review by Court. For initial determinations and NCD challenges 
under section 1862(a)(1) of the Act, arising before October 1, 2002, a 
court's review of an NCD is limited to whether the record is incomplete 
or otherwise lacks adequate information to support the validity of the 
decision, unless the case is remanded to the Secretary to supplement the 
record regarding the NCD. In these cases, the court may not invalidate 
an NCD except upon review of the supplemental record.

[68 FR 63716, Nov. 7, 2003]



Sec. 405.870  Appointment of representative.

    A party to an initial determination, informal review or hearing as 
provided in Sec. Sec. 405.803 through 405.934, may appoint as his 
representative in any such proceeding any person qualified under Sec. 
405.871. Where the representative is an attorney, in the absence of 
information to the contrary, his representation that he has such 
authority shall be accepted as evidence of the attorney's authority to 
represent a party.



Sec. 405.871  Qualifications of representatives.

    Any individual may be appointed to act as representative in 
accordance with Sec. 405.870, unless he is disqualified or suspended 
from acting as a representative in proceedings before the SSA or the CMS 
or unless otherwise prohibited by law.

[39 FR 12098, Apr. 3, 1974. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 62 FR 25855, May 12, 1997]



Sec. 405.872  Authority of representatives.

    A representative, appointed and qualified as provided in Sec. Sec. 
405.870 and 405.871, may make or give, on behalf of the party he 
represents, any request or notice relative to any proceeding before the 
carrier including review and hearing. A representative shall be entitled 
to present evidence and allegations as to facts and law in any 
proceeding affecting the party he represents and to obtain information 
with respect to the claim of such party to the same extent as such 
party. Notice to any party or any action, determination, or decision, or 
request to any party for the production of evidence, shall be sent to 
the representative of such party.



Sec. 405.874  Appeals of CMS or a CMS contractor.

    A CMS contractor's (that is, a carrier, Fiscal Intermediary or 
Medicare Administrative Contractor (MAC)) determination that a provider 
or supplier fails to meet the requirements for Medicare billing 
privileges.
    (a) Denial of a provider or supplier enrollment application. If CMS 
or a CMS contractor denies a provider's or supplier's enrollment 
application, CMS or the CMS contractor must notify the provider or 
supplier by certified mail. The notice must include the following:
    (1) The reason for the denial in sufficient detail to allow the 
provider or supplier to understand the nature of its deficiencies.
    (2) The right to appeal in accordance with part 498 of this chapter.
    (3) The address to which the written appeal must be mailed.
    (b) Revocation of Medicare billing privileges--(1) Notice of 
revocation. If CMS or a CMS contractor revokes a provider's or 
supplier's Medicare billing privileges, CMS or a CMS contractor must 
notify the supplier by certified mail. The notice must include the 
following:
    (i) The reason for the revocation in sufficient detail for the 
provider or supplier to understand the nature of its deficiencies.
    (ii) The right to appeal in accordance with part 498 of this 
chapter.
    (iii) The address to which the written appeal must be mailed.
    (2) Effective date of revocation. The revocation of a provider's or 
supplier's billing privileges is effective 30 days after CMS or the CMS 
contractor mails the notice of its determination to the provider or 
supplier. A revocation

[[Page 150]]

based on a Federal exclusion or debarment is effective with the date of 
the exclusion or debarment.
    (3) Payment after revocation. Medicare does not pay and the CMS 
contractor rejects claims for services submitted with a service date on 
or after the effective date of a provider's or supplier's revocation.
    (c) Appeal rights. (1) A provider or supplier may appeal the initial 
determination to deny a provider or supplier's enrollment application, 
or if applicable, to revoke current billing privileges by following the 
procedures specified in part 498 of this chapter.
    (2) The reconsideration of a determination to deny or revoke a 
provider or supplier's Medicare billing privileges will be handled by a 
CMS Regional Office or a contractor hearing officer not involved in the 
initial determination.
    (3) Providers and suppliers have the opportunity to submit evidence 
related to the enrollment action. Providers and suppliers must, at the 
time of their request, submit all evidence that they want to be 
considered.
    (4) If supporting evidence is not submitted with the appeal request, 
the contractor contacts the provider or supplier to try to obtain the 
evidence.
    (5) If the provider or supplier fails to submit this evidence before 
the contractor issues its decision, the provider or supplier is 
precluded from introducing new evidence at higher levels of the appeals 
process.
    (d) Impact of reversal of contractor determinations on claims 
processing. (1) Claims for services furnished to Medicare beneficiaries 
during a period in which the supplier billing privileges were not 
effective are rejected.
    (2) If a supplier is determined not to have qualified for billing 
privileges in one period but qualified in another, Medicare contractors 
process claims for services furnished to beneficiaries during the period 
for which the supplier was Medicare-qualified. Subpart C of this part 
sets forth the requirements for the recovery of overpayments.
    (3) If a revocation of a supplier's billing privilege is reversed 
upon appeal, the supplier's billing privileges are reinstated back to 
the date that the revocation became effective.
    (4) If the denial of a supplier's billing privileges is reversed 
upon appeal and becomes binding, then the appeal decision establishes 
the date that the supplier's billing privileges become effective.
    (e) Reinstatement of provider or supplier billing privileges 
following corrective action. If a provider or supplier completes a 
corrective action plan and provides sufficient evidence to the CMS 
contractor that it has complied fully with the Medicare requirements, 
the CMS contractor may reinstate the provider's or supplier's billing 
privileges. The CMS contractor may pay for services furnished on or 
after the effective date of the reinstatement. The effective date is 
based on the date the provider or supplier is in compliance with all 
Medicare requirements. A CMS contractor's refusal to reinstate a 
supplier's billing privileges based on a corrective action plan is not 
an initial determination under part 498 of this chapter.
    (f) Effective date for DMEPOS supplier's billing privileges. If a 
CMS contractor, contractor hearing officer, or ALJ determines that a 
DMEPOS supplier's denied enrollment application meets the standards in 
Sec. 424.57 of this chapter and any other requirements that may apply, 
the determination establishes the effective date of the billing 
privileges as not earlier than the date the carrier made the 
determination to deny the DMEPOS supplier's enrollment application. 
Claims are rejected for services furnished before that effective date.
    (g) Submission of claims. A provider or supplier succeeding in 
having its enrollment application denial or billing privileges 
revocation reversed in a binding decision, or in having its billing 
privileges reinstated, may submit claims to the CMS contractor for 
services furnished during periods of Medicare qualification, subject to 
the limitations in Sec. 424.44 of this chapter, regarding the timely 
filing of claims. If the claims previously were filed timely but were 
rejected, they are considered filed timely upon resubmission. Previously 
denied claims for items or services rendered during a period of denial 
or revocation may be resubmitted to

[[Page 151]]

CMS within 1 year after the date of reinstatement or reversal.
    (h) Deadline for processing provider enrollment initial 
determinations. Contractors approve or deny complete provider or 
supplier enrollment applications to approval or denial within the 
following timeframes:
    (1) Initial enrollments. Contractors process new enrollment 
applications within 180 days of receipt.
    (2) Revalidation of existing enrollments. Contractors process 
revalidations within 180 days of receipt.
    (3) Change-of-information and reassignment of payment request. 
Contractors process change-of-information and reassignment of payment 
requests within 90 days of receipt.

[73 FR 36460, June 27, 2008]



Sec. 405.877  Appeal of a categorization of a device.

    (a) CMS's acceptance of the FDA categorization of a device as an 
experimental/investigational (Category A) device under Sec. 405.203 is 
a national coverage decision under section 1862(a)(1) of the Act.
    (b) CMS's acceptance of the FDA categorization of a device as an 
experimental/investigational (Category A) device under Sec. 405.203 is 
an aspect of an initial determination that, under section 1862 of the 
Act, payment may not be made.
    (c) In accordance with section 1869(b)(3)(A) of the Act, CMS's 
acceptance of the FDA categorization of a device as an experimental/
investigational (Category A) device under Sec. 405.203 may not be 
reviewed by an administrative law judge.

[60 FR 48424, Sept. 19, 1995]



   Subpart I_Determinations, Redeterminations, Reconsiderations, and 

           Appeals Under Original Medicare (Part A and Part B)

    Source: 70 FR 11472, Mar. 8, 2005, unless otherwise noted.



Sec. 405.900  Basis and scope.

    (a) Statutory basis. This subpart is based on the provisions of 
sections 1869 (a) through (e) and (g) of the Act.
    (b) Scope. This subpart establishes the requirements for appeals of 
initial determinations for benefits under Part A or Part B of Medicare, 
including the following:
    (1) The initial determination of whether an individual is entitled 
to benefits under Part A or Part B. (Regulations governing 
reconsiderations of these initial determinations are at 20 CFR, part 
404, subpart J).
    (2) The initial determination of the amount of benefits available to 
an individual under Part A or Part B.
    (3) Any other initial determination relating to a claim for benefits 
under Part A or Part B, including an initial determination made by a 
quality improvement organization under section 1154(a)(2) of the Act or 
by an entity under contract with the Secretary (other than a contract 
under section 1852 of the Act) to administer provisions of titles XVIII 
or XI of the Act.



Sec. 405.902  Definitions.

    For the purposes of this subpart, the term--
    ALJ means an Administrative Law Judge of the Department of Health 
and Human Services.
    Appellant means the beneficiary, assignee or other person or entity 
that has filed and pursued an appeal concerning a particular initial 
determination. Designation as an appellant does not in itself convey 
standing to appeal the determination in question.
    Appointed representative means an individual appointed by a party to 
represent the party in a Medicare claim or claim appeal.
    Assignee means:
    (1) A supplier that furnishes items or services to a beneficiary and 
has accepted a valid assignment of a claim or
    (2) A provider or supplier that furnishes items or services to a 
beneficiary, who is not already a party, and has accepted a valid 
assignment of the right to appeal a claim executed by the beneficiary.
    Assignment of a claim means the transfer by a beneficiary of his or 
her claim for payment to the supplier in

[[Page 152]]

return for the latter's promise not to charge more for his or her 
services than what the carrier finds to be the Medicare-approved amount, 
as provided in Sec. 424.55 and Sec. 424.56 of this chapter.
    Assignment of appeal rights means the transfer by a beneficiary of 
his or her right to appeal under this subpart to a provider or supplier 
who is not already a party, as provided in section 1869(b)(1)(C) of the 
Act.
    Assignor means a beneficiary whose provider of services or supplier 
has taken assignment of a claim or an appeal of a claim.
    Authorized representative means an individual authorized under State 
or other applicable law to act on behalf of a beneficiary or other party 
involved in the appeal. The authorized representative will have all of 
the rights and responsibilities of a beneficiary or party, as 
applicable, throughout the appeals process.
    Beneficiary means an individual who is enrolled to receive benefits 
under Medicare Part A or Part B.
    Carrier means an organization that has entered into a contract with 
the Secretary in accordance to section 1842 of the Act and is authorized 
to make determinations for Part B of title XVIII of the Act.
    Clean claim means a claim that has no defect or impropriety 
(including any lack of required substantiating documentation) or 
particular circumstance requiring special treatment that prevents timely 
payment from being made on the claim under title XVIII within the time 
periods specified in sections 1816(c) and 1842(c) of the Act.
    Family member means for purposes of the QIC reconsideration panel 
under Sec. 405.968 the following persons as they relate to the 
physician or healthcare provider.
    (1) The spouse (other than a spouse who is legally separated from 
the physician or health care professional under a decree of divorce or 
separate maintenance);
    (2) Children (including stepchildren and legally adopted children);
    (3) Grandchildren;
    (4) Parents; and
    (5) Grandparents.
    Fiscal Intermediary means an organization that has entered into a 
contract with CMS in accordance with section 1816 of the Act and is 
authorized to make determinations and payments for Part A of title XVIII 
of the Act, and Part B provider services as specified in Sec. 421.5(c) 
of this chapter.
    MAC stands for the Medicare Appeals Council within the Departmental 
Appeals Board of the U.S. Department of Health and Human Services.
    Party means an individual or entity listed in Sec. 405.906 that has 
standing to appeal an initial determination and/or a subsequent 
administrative appeal determination.
    Provider means a hospital, critical access hospital, skilled nursing 
facility, comprehensive outpatient rehabilitation facility, home health 
agency, or hospice that has in effect an agreement to participate in 
Medicare, or clinic, rehabilitation agency, or public health agency that 
has in effect a similar agreement, but only to furnish outpatient 
physical therapy or speech pathology services, or a community mental 
health center that has in effect a similar agreement but only to furnish 
partial hospitalization services.
    Qualified Independent Contractor (QIC) means an entity which 
contracts with the Secretary in accordance with section 1869 of the Act 
to perform reconsiderations under Sec. 405.960 through Sec. 405.978.
    Quality Improvement Organization (QIO) means an entity that 
contracts with the Secretary in accordance with sections 1152 and 1153 
of the Act and 42 CFR subchapter F, to perform the functions described 
in section 1154 of the Act and 42 CFR subchapter F, including expedited 
determinations as described in Sec. 405.1200 through Sec. 405.1208.
    Reliable evidence means evidence that is relevant, credible, and 
material.
    Remand means to vacate a lower level appeal decision, or a portion 
of the decision, and return the case, or a portion of the case, to that 
level for a new decision.
    Similar fault means to obtain, retain, convert, seek, or receive 
Medicare funds to which a person knows or should reasonably be expected 
to know that he or she or another for whose benefit Medicare funds are 
obtained,

[[Page 153]]

retained, converted, sought, or received is not legally entitled. This 
includes, but is not limited to, a failure to demonstrate that he or she 
filed a proper claim as defined in part 411 of this chapter.
    Supplier means, unless the context otherwise requires, a physician 
or other practitioner, a facility, or other entity (other than a 
provider of services) that furnishes items or services under Medicare.
    Vacate means to set aside a previous action.



Sec. 405.904  Medicare initial determinations, redeterminations and appeals: 

General description.

    (a) General overview--(1) Entitlement appeals. The SSA makes an 
initial determination on an application for Medicare benefits and/or 
entitlement of an individual to receive Medicare benefits. A beneficiary 
who is dissatisfied with the initial determination may request, and SSA 
will perform, a reconsideration in accordance with 20 CFR part 404, 
subpart J if the requirements for obtaining a reconsideration are met. 
Following the reconsideration, the beneficiary may request a hearing 
before an Administrative Law Judge (ALJ) under this subpart (42 CFR part 
405, subpart I). If the beneficiary obtains a hearing before an ALJ and 
is dissatisfied with the decision of the ALJ, he or she may request the 
Medicare Appeals Council (MAC) to review the case. Following the action 
of the MAC, the beneficiary may be entitled to file suit in Federal 
district court.
    (2) Claim appeals. The Medicare contractor makes an initial 
determination when a claim for Medicare benefits under Part A or Part B 
is submitted. A beneficiary who is dissatisfied with the initial 
determination may request that the contractor perform a redetermination 
of the claim if the requirements for obtaining a redetermination are 
met. Following the contractor's redetermination, the beneficiary may 
request, and the Qualified Independent Contractor (QIC) will perform, a 
reconsideration of the claim if the requirements for obtaining a 
reconsideration are met. Following the reconsideration, the beneficiary 
may request, and the ALJ will conduct a hearing if the amount remaining 
in controversy and other requirements for an ALJ hearing are met. If the 
beneficiary is dissatisfied with the decision of the ALJ, he or she may 
request the MAC to review the case. If the MAC reviews the case and 
issues a decision, and the beneficiary is dissatisfied with the 
decision, the beneficiary may file suit in Federal district court if the 
amount remaining in controversy and the other requirements for judicial 
review are met.
    (b) Non-beneficiary appellants. In general, the procedures described 
in paragraph (a) of this section are also available to parties other 
than beneficiaries either directly or through a representative acting on 
a party's behalf, consistent with the requirements of this subpart I. A 
provider generally has the right to judicial review only as provided 
under section 1879(d) of the Act; that is, when a determination involves 
a finding that services are not covered because--
    (1) They were custodial care (see Sec. 411.15(g) of this chapter); 
they were not reasonable and necessary (see Sec. 411.15(k) of this 
chapter); they did not qualify as covered home health services because 
the beneficiary was not confined to the home or did not need skilled 
nursing care on an intermittent basis (see Sec. 409.42(a) and (c)(1) of 
this chapter); or they were hospice services provided to a non-
terminally ill individual (see Sec. 418.22 of this chapter); and
    (2) Either the provider or the beneficiary, or both, knew or could 
reasonably be expected to know that those services were not covered 
under Medicare.



Sec. 405.906  Parties to the initial determinations, redeterminations, 

reconsiderations, hearings and reviews.

    (a) Parties to the initial determination. The parties to the initial 
determination are the following individuals and entities:
    (1) A beneficiary who files a claim for payment under Medicare Part 
A or Part B or has had a claim for payment filed on his or her behalf, 
or in the case of a deceased beneficiary, when there is no estate, any 
person obligated to make or entitled to receive payment in accordance 
with part 424, subpart E of this chapter. Payment by a third party

[[Page 154]]

payer does not entitle that entity to party status.
    (2) A supplier who has accepted assignment for items or services 
furnished to a beneficiary that are at issue in the claim.
    (3) A provider of services who files a claim for items or services 
furnished to a beneficiary.
    (b) Parties to the redetermination, reconsideration, hearing and 
MAC. The parties to the redetermination, reconsideration, hearing, and 
MAC review are--
    (1) The parties to the initial determination in accordance with 
paragraph (a) of this section, except under paragraph (a)(1) of this 
section where a beneficiary has assigned appeal rights under Sec. 
405.912;
    (2) A State agency in accordance with Sec. 405.908;
    (3) A provider or supplier that has accepted an assignment of appeal 
rights from the beneficiary according to Sec. 405.912;
    (4) A non-participating physician not billing on an assigned basis 
who, in accordance with section 1842(l) of the Act, may be liable to 
refund monies collected for services furnished to the beneficiary 
because those services were denied on the basis of section 1862(a)(1) of 
the Act; and
    (5) A non-participating supplier not billing on an assigned basis 
who, in accordance with sections 1834(a)(18) and 1834(j)(4) of the Act, 
may be liable to refund monies collected for items furnished to the 
beneficiary.
    (c) Appeals by providers and suppliers when there is no other party 
available. If a provider or supplier is not already a party to the 
proceeding in accordance with paragraphs (a) and (b) of this section, a 
provider of services or supplier may appeal an initial determination 
relating to services it rendered to a beneficiary who subsequently dies 
if there is no other party available to appeal the determination.



Sec. 405.908  Medicaid State agencies.

    When a beneficiary is enrolled to receive benefits under both 
Medicare and Medicaid, the Medicaid State agency may file a request for 
an appeal with respect to a claim for items or services furnished to a 
dually eligible beneficiary only for services for which the Medicaid 
State agency has made payment, or for which it may be liable. A Medicaid 
State agency is considered a party only when it files a timely 
redetermination request with respect to a claim for items or services 
furnished to a beneficiary in accordance with 42 CFR parts 940 through 
958. If a State agency files a request for redetermination, it may 
retain party status at the QIC, ALJ, MAC, and judicial review levels.



Sec. 405.910  Appointed representatives.

    (a) Scope of representation. An appointed representative may act on 
behalf of an individual or entity in exercising his or her right to an 
initial determination or appeal. Appointed representatives do not have 
party status and may take action only on behalf of the individual or 
entity that they represent.
    (b) Persons not qualified. A party may not name as an appointed 
representative, an individual who is disqualified, suspended, or 
otherwise prohibited by law from acting as a representative in any 
proceedings before DHHS, or in entitlement appeals, before SSA.
    (c) Completing a valid appointment. For purposes of this subpart, an 
appointment of representation must:
    (1) Be in writing and signed and dated by both the party and 
individual agreeing to be the representative;
    (2) Provide a statement appointing the representative to act on 
behalf of the party, and in the case of a beneficiary, authorizing the 
adjudicator to release identifiable health information to the appointed 
representative.
    (3) Include a written explanation of the purpose and scope of the 
representation;
    (4) Contain both the party's and appointed representative's name, 
phone number, and address;
    (5) Identify the beneficiary's Medicare health insurance claim 
number;
    (6) Include the appointed representative's professional status or 
relationship to the party;
    (7) Be filed with the entity processing the party's initial 
determination or appeal.
    (d) Curing a defective appointment of representative. (1) If any one 
of the

[[Page 155]]

seven elements named in paragraph (c) of this section is missing from 
the appointment, the adjudicator should contact the party and provide a 
description of the missing documentation or information.
    (2) Unless the defect is cured, the prospective appointed 
representative lacks the authority to act on behalf of the party, and is 
not entitled to obtain or receive any information related to the appeal, 
including the appeal decision.
    (e) Duration of appointment. (1) Unless revoked, an appointment is 
considered valid for 1 year from the date that the Appointment of 
Representative (AOR) form or other conforming written instrument 
contains the signatures of both the party and the appointed 
representative.
    (2) To initiate an appeal within the 1-year time frame, the 
representative must file a copy of the AOR form, or other conforming 
written instrument, with the appeal request. Unless revoked, the 
representation is valid for the duration of an individual's appeal of an 
initial determination.
    (3) For an initial determination of a Medicare Secondary Payer 
recovery claim, an appointment signed in connection with the party's 
efforts to make a claim for third party payment is valid from the date 
that appointment is signed for the duration of any subsequent appeal, 
unless the appointment is specifically revoked.
    (f) Appointed representative fees--(1) General rule. An appointed 
representative for a beneficiary who wishes to charge a fee for services 
rendered in connection with an appeal before the Secretary must obtain 
approval of the fee from the Secretary. Services rendered below the ALJ 
level are not considered proceedings before the Secretary.
    (2) No fees or costs against trust funds. No award of attorney or 
any other representative's fees or any costs in connection with an 
appeal may be made against the Medicare trust funds.
    (3) Special rules for providers and suppliers. A provider or 
supplier that furnished the items or services to a beneficiary that are 
the subject of the appeal may represent that beneficiary in an appeal 
under this subpart, but the provider or supplier may not charge the 
beneficiary any fee associated with the representation. If a provider or 
supplier furnishes services or items to a beneficiary, the provider or 
supplier may not represent the beneficiary on the issues described in 
section 1879(a)(2) of the Act, unless the provider or supplier waives 
the right to payment from the beneficiary for the services or items 
involved in the appeal.
    (4) Special rules for purposes of third party payment. The Secretary 
does not review fee arrangements made by a beneficiary for purposes of 
making a claim for third party payment (as defined in 42 CFR 411.21) 
even though the representation may ultimately include representation for 
a Medicare Secondary Payer recovery claim.
    (5) Reasonableness of representative fees. In determining the 
reasonableness of a representative's fee, the Secretary will not apply 
the test specified in sections 206(a)(2) and (a)(3) of the Act.
    (g) Responsibilities of an appointed representative. (1) An 
appointed representative has an affirmative duty to--
    (i) Inform the party of the scope and responsibilities of the 
representation;
    (ii) Inform the party of the status of the appeal and the results of 
actions taken on behalf of the party, including, but not limited to, 
notification of appeal determinations, decisions, and further appeal 
rights;
    (iii) Disclose to a beneficiary any financial risk and liability of 
a non-assigned claim that the beneficiary may have;
    (iv) Not act contrary to the interest of the party; and
    (v) Comply with all laws and CMS regulations, CMS Rulings, and 
instructions.
    (2) An appeal request filed by a provider or supplier described in 
paragraph (f)(3) of this section must also include a statement signed by 
the provider or supplier stating that no financial liability is imposed 
on the beneficiary in connection with that representation. If 
applicable, the appeal request must also include a signed statement that 
the provider or supplier waives the right to payment from the 
beneficiary for services or items regarding issues described in section 
1879(a)(2) of the Act.

[[Page 156]]

    (h) Authority of an appointed representative. An appointed 
representative may, on behalf of the party--
    (1) Obtain appeals information about the claim to the same extent as 
the party;
    (2) Submit evidence;
    (3) Make statements about facts and law; and
    (4) Make any request, or give, or receive, any notice about the 
appeal proceedings.
    (i) Notice or request to an appointed representative--(1) Initial 
determinations. When a contractor takes an action or issues an initial 
determination, it sends the action or notice to the party.
    (2) Appeals. When a contractor, QIC, ALJ, or the MAC takes an action 
or issues a redetermination, reconsideration, or appeal decision, in 
connection with an initial determination, it sends notice of the action 
to the appointed representative.
    (3) The contractor, QIC, ALJ or MAC sends any requests for 
information or evidence regarding a claim that is appealed to the 
appointed representative. The contractor sends any requests for 
information or evidence regarding an initial determination to the party.
    (4) For initial determinations and appeals involving Medicare 
Secondary Payer recovery claims, the adjudicator sends notices and 
requests to both the beneficiary and the appointed representative.
    (j) Effect of notice or request to an appointed representative. A 
notice or request sent to the appointed representative has the same 
force and effect as if was sent to the party.
    (k) Information available to the appointed representative. An 
appointed representative may obtain any and all appeals information 
applicable to the claim at issue that is available to the party.
    (l) Delegation of appointment by appointed representative. An 
appointed representative may not designate another individual to act as 
the appointed representative of the party unless--
    (1) The appointed representative provides written notice to the 
party of the appointed representative's intent to delegate to another 
individual. The notice must include:
    (i) The name of the designee; and
    (ii) The designee's acceptance to be obligated and comply with the 
requirements of representation under this subpart.
    (2) The party accepts the designation as evidenced by a written 
statement signed by the party. This signed statement is not required 
when the appointed representative and designee are attorneys in the same 
law firm or organization.
    (m) Revoking the appointment of representative. (1) A party may 
revoke an appointment of representative without cause at any time.
    (2) Revocation. Revocation is not effective until the adjudicator 
receives a signed, written statement from the party.
    (3) Death of the party. (i) The death of a party terminates the 
authority of the appointed representative, except as specified in 
paragraph (m)(3)(ii) of this section.
    (ii) A party's death does not terminate an appeal that is in 
progress if another individual or entity may be entitled to receive or 
obligated to make payment for the items or services that are the subject 
of the appeal. The appointment of representative remains in effect for 
the duration of the appeal except for MSP recovery claims.



Sec. 405.912  Assignment of appeal rights.

    (a) Who may be an assignee. Only a provider, or supplier that--
    (1) Is not a party to the initial determination as defined in Sec. 
405.906; and
    (2) Furnished an item or service to the beneficiary may seek 
assignment of appeal rights from the beneficiary for that item or 
service.
    (b) Who may not be an assignee. An individual or entity who is not a 
provider or supplier may not be an assignee. A provider or supplier that 
furnishes an item or service to a beneficiary may not seek assignment 
for that item or service when considered a party to the initial 
determination as defined in Sec. 405.906.
    (c) Requirements for a valid assignment of appeal right. The 
assignment of appeal rights must--
    (1) Be executed using a CMS standard form;

[[Page 157]]

    (2) Be in writing and signed by both the beneficiary assigning his 
or her appeal rights and by the assignee;
    (3) Indicate the item or service for which the assignment of appeal 
rights is authorized;
    (4) Contain a waiver of the assignee's right to collect payment from 
the assignor for the specific item or service that are the subject of 
the appeal except as set forth in paragraph (d)(2) of this section; and
    (5) Be submitted at the same time the request for redetermination or 
other appeal is filed.
    (d) Waiver of right to collect payment. (1) Except as specified in 
paragraph (d)(2) of this section, the assignee must waive the right to 
collect payment for the item or service for which the assignment of 
appeal rights is made. If the assignment is revoked under paragraph 
(g)(2) or (g)(3) of this section, the waiver of the right to collect 
payment nevertheless remains valid. A waiver of the right to collect 
payment remains in effect regardless of the outcome of the appeal 
decision.
    (2) The assignee is not prohibited from recovering payment 
associated with coinsurance or deductibles or when an advance 
beneficiary notice is properly executed.
    (e) Duration of a valid assignment of appeal rights. Unless revoked, 
the assignment of appeal rights is valid for all administrative and 
judicial review associated with the item or service as indicated on the 
standard CMS form, even in the event of the death of the assignor.
    (f) Rights of the assignee. When a valid assignment of appeal rights 
is executed, the assignor transfers all appeal rights involving the 
particular item or service to the assignee. These include, but are not 
limited to--
    (1) Obtaining information about the claim to the same extent as the 
assignor;
    (2) Submitting evidence;
    (3) Making statements about facts or law; and
    (4) Making any request, or giving, or receiving any notice about 
appeal proceedings.
    (g) Revocation of assignment. When an assignment of appeal rights is 
revoked, the rights to appeal revert to the assignor. An assignment of 
appeal rights may be revoked in any of the following ways:
    (1) In writing by the assignor. The revocation of assignment must be 
delivered to the adjudicator and the assignee, and is effective on the 
date of receipt by the adjudicator.
    (2) By abandonment if the assignee does not file an appeal of an 
unfavorable decision.
    (3) By act or omission by the assignee that is determined by an 
adjudicator to be contrary to the financial interests of the assignor.
    (h) Responsibilities of the assignee. Once the assignee files an 
appeal, the assignee becomes a party to the appeal. The assignee must 
meet all requirements for appeals that apply to any other party.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005]

                         Initial Determinations



Sec. 405.920  Initial determinations.

    After a claim is filed with the appropriate contractor in the manner 
and form described in subpart C of part 424 of this chapter, the 
contractor must--
    (a) Determine if the items and services furnished are covered or 
otherwise reimbursable under title XVIII of the Act;
    (b) Determine any amounts payable and make payment accordingly; and
    (c) Notify the parties to the initial determination of the 
determination in accordance with Sec. 405.921.



Sec. 405.921  Notice of initial determination.

    (a) Notice of initial determination sent to the beneficiary. (1) The 
notice must be written in a manner calculated to be understood by the 
beneficiary, and sent to the last known address of the beneficiary;
    (2) Content of the notice. The notice of initial determination must 
contain--
    (i) The reasons for the determination, including whether a local 
medical review policy, a local coverage determination, or national 
coverage determination was applied;
    (ii) The procedures for obtaining additional information concerning 
the contractor's determination, such as a

[[Page 158]]

specific provision of the policy, manual, law or regulation used in 
making the determination;
    (iii) Information on the right to a redetermination if the 
beneficiary is dissatisfied with the outcome of the initial 
determination and instructions on how to request a redetermination; and
    (iv) Any other requirements specified by CMS.
    (b) Notice of initial determination sent to providers and suppliers. 
(1) An electronic or paper remittance advice (RA) notice is the notice 
of initial determination sent to providers and suppliers that accept 
assignment. The electronic RA must comply with the format and content 
requirements of the standard adopted for national use by covered 
entities under the Health Insurance Portability and Accountability Act 
(HIPAA) and related CMS manual instructions. When a paper RA is mailed, 
it must comply with CMS manual instructions that parallel the HIPAA data 
content and coding requirements.
    (2) The notice of initial determination must contain:
    (i) The basis for any full or partial denial determination of 
services or items on the claim;
    (ii) Information on the right to a redetermination if the provider 
or supplier is dissatisfied with the outcome of the initial 
determination;
    (iii) All applicable claim adjustment reason and remark codes to 
explain the determination;
    (iv) The source of the RA and who may be contacted if the provider 
or supplier requires further information;
    (v) All content requirements of the standard adopted for national 
use by covered entities under HIPAA; and
    (vi) Any other requirements specified by CMS.



Sec. 405.922  Time frame for processing initial determinations.

    The contractor issues initial determinations on clean claims within 
30 days of receipt if they are submitted by or on behalf of the 
beneficiary who received the items and/or services; otherwise, interest 
must be paid at the rate specified at 31 U.S.C. 3902(a) for the period 
beginning on the day after the required payment date and ending on the 
date payment is made.



Sec. 405.924  Actions that are initial determinations.

    (a) Applications and entitlement of individuals. SSA makes initial 
determinations and processes reconsiderations with respect to an 
individual on the following:
    (1) A determination with respect to entitlement to hospital 
insurance or supplementary medical insurance under Medicare.
    (2) A disallowance of an individual's application for entitlement to 
hospital or supplementary medical insurance, if the individual fails to 
submit evidence requested by SSA to support the application. (SSA 
specifies in the initial determination the conditions of entitlement 
that the applicant failed to establish by not submitting the requested 
evidence).
    (3) A denial of a request for withdrawal of an application for 
hospital or supplementary medical insurance, or a denial of a request 
for cancellation of a request for withdrawal.
    (4) A determination as to whether an individual, previously 
determined as entitled to hospital or supplementary medical insurance, 
is no longer entitled to those benefits, including a determination based 
on nonpayment of premiums.
    (b) Claims made by or on behalf of beneficiaries. The Medicare 
contractor makes initial determinations regarding claims for benefits 
under Medicare Part A and Part B. A finding that a request for payment 
or other submission does not meet the requirements for a Medicare claim 
as defined in Sec. 424.32 of this chapter, is not considered an initial 
determination. An initial determination for purposes of this subpart 
includes, but is not limited to, determinations with respect to:
    (1) If the items and/or services furnished are covered under title 
XVIII;
    (2) In the case of determinations on the basis of section 1879(b) or 
(c) of the Act, if the beneficiary, or supplier who accepts assignment 
under Sec. 424.55 of this chapter knew, or could reasonably have 
expected to know at the time the items or services were furnished, that 
the items or services were not covered;

[[Page 159]]

    (3) In the case of determinations on the basis of section 1842(l)(1) 
of the Act, if the beneficiary or physician knew, or could reasonably 
have expected to know at the time the services were furnished, that the 
services were not covered;
    (4) Whether the deductible is met;
    (5) The computation of the coinsurance amount;
    (6) The number of days used for inpatient hospital, psychiatric 
hospital, or post-hospital extended care;
    (7) The number of home health visits used;
    (8) Periods of hospice care used;
    (9) Requirements for certification and plan of treatment for 
physician services, durable medical equipment, therapies, inpatient 
hospitalization, skilled nursing care, home health, hospice, and partial 
hospitalization services;
    (10) The beginning and ending of a spell of illness, including a 
determination made under the presumptions established under Sec. 
409.60(c)(2) of this chapter, and as specified in Sec. 409.60(c)(4) of 
this chapter;
    (11) The medical necessity of services, or the reasonableness or 
appropriateness of placement of an individual at an acute level of 
patient care made by the Quality Improvement Organization (QIO) on 
behalf of the contractor in accordance with Sec. 476.86(c)(1) of this 
chapter;
    (12) Any other issues having a present or potential effect on the 
amount of benefits to be paid under Part A or Part B of Medicare, 
including a determination as to whether there was an underpayment of 
benefits paid under Part A or Part B, and if so, the amount thereof;
    (13) If a waiver of adjustment or recovery under sections 1870(b) 
and (c) of the Act is appropriate:
    (i) When an overpayment of hospital insurance benefits or 
supplementary medical insurance benefits (including a payment under 
section 1814(e) of the Act) was made for an individual; or
    (ii) For a Medicare Secondary Payer recovery claim against a 
beneficiary or against a provider or supplier.
    (14) If a particular claim is not payable by Medicare based upon the 
application of the Medicare Secondary Payer provisions of section 
1862(b) of the Act.
    (15) Under the Medicare Secondary Payer provisions of sections 
1862(b) of the Act that Medicare has a recovery claim against a 
provider, supplier, or beneficiary for services or items that were 
already paid by the Medicare program, except when the Medicare Secondary 
Payer recovery claim against the provider or supplier is based upon 
failure to file a proper claim as defined in part 411 of this chapter 
because this action is a reopening.
    (c) Determinations by QIOs. An initial determination for purposes of 
this subpart also includes a determination made by a QIO that:
    (1) A provider can terminate services provided to an individual when 
a physician certified that failure to continue the provision of those 
services is likely to place the individual's health at significant risk; 
or
    (2) A provider can discharge an individual from the provider of 
services.



Sec. 405.926  Actions that are not initial determinations.

    Actions that are not initial determinations and are not appealable 
under this subpart include, but are not limited to--
    (a) Any determination for which CMS has sole responsibility, for 
example--
    (1) If an entity meets the conditions for participation in the 
program;
    (2) If an independent laboratory meets the conditions for coverage 
of services;
    (b) The coinsurance amounts prescribed by regulation for outpatient 
services under the prospective payment system;
    (c) Any issue regarding the computation of the payment amount of 
program reimbursement of general applicability for which CMS or a 
carrier has sole responsibility under Part B such as the establishment 
of a fee schedule set forth in part 414 of this chapter, or an inherent 
reasonableness adjustment pursuant to Sec. 405.502(g), and any issue 
regarding the cost report settlement process under Part A;
    (d) Whether an individual's appeal meets the qualifications for 
expedited access to judicial review provided in Sec. 405.990;

[[Page 160]]

    (e) Any determination regarding whether a Medicare overpayment claim 
must be compromised, or collection action terminated or suspended under 
the Federal Claims Collection Act of 1966, as amended;
    (f) Determinations regarding the transfer or discharge of residents 
of skilled nursing facilities in accordance with Sec. 483.12 of this 
chapter;
    (g) Determinations regarding the readmission screening and annual 
resident review processes required by subparts C and E of part 483 of 
this chapter;
    (h) Determinations for a waiver of Medicare Secondary Payer recovery 
under section 1862(b) of the Act;
    (i) Determinations for a waiver of interest;
    (j) Determinations for a finding regarding the general applicability 
of the Medicare Secondary Payer provisions (as opposed to the 
application of these provisions to a particular claim or claims for 
Medicare payment for benefits);
    (k) Determinations under the Medicare Secondary Payer provisions of 
section 1862(b) of the Act that Medicare has a recovery against an 
entity that was or is required or responsible (directly, as an insurer 
or self-insurer, as a third party administrator, as an employer that 
sponsors or contributes to a group health plan or a large group health 
plan, or otherwise,) to make payment for services or items that were 
already reimbursed by the Medicare program;
    (l) A contractor's, QIC's, ALJ's, or MAC's determination or decision 
to reopen or not to reopen an initial determination, redetermination, 
reconsideration, hearing decision, or review decision;
    (m) Determinations that CMS or its contractors may participate in or 
act as parties in an ALJ hearing or MAC review;
    (n) Determinations that a provider or supplier failed to submit a 
claim timely or failed to submit a timely claim despite being requested 
to do so by the beneficiary or the beneficiary's subrogee;
    (o) Determinations with respect to whether an entity qualifies for 
an exception to the electronic claims submission requirement under part 
424 of this chapter;
    (p) Determinations by the Secretary of sustained or high levels of 
payment errors in accordance with section 1893(f)(3)(A) of the Act;
    (q) A contractor's prior determination related to coverage of 
physicians' services;
    (r) Requests for anticipated payment under the home health 
prospective payment system under Sec. 409.43(c)(ii)(2) of this chapter; 
and
    (s) Claim submissions on forms or formats that are incomplete, 
invalid, or do not meet the requirements for a Medicare claim and 
returned or rejected to the provider or supplier.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005]



Sec. 405.927  Initial determinations subject to the reopenings process.

    Minor errors or omissions in an initial determination must be 
corrected only through the contractor's reopenings process under Sec. 
405.980(a)(3).



Sec. 405.928  Effect of the initial determination.

    (a) An initial determination described in Sec. 405.924(a) is 
binding unless it is revised or reconsidered in accordance with 20 CFR 
404.907, or revised as a result of a reopening in accordance with 20 CFR 
404.988.
    (b) An initial determination described in Sec. 405.924(b) is 
binding upon all parties to the initial determination unless--
    (1) A redetermination is completed in accordance with Sec. 405.940 
through Sec. 405.958; or
    (2) The initial determination is revised as a result of a reopening 
in accordance with Sec. 405.980.
    (c) An initial determination listed in Sec. 405.924(b) where a 
party submits a timely, valid request for redetermination under Sec. 
405.942 through Sec. 405.944 must be processed as a redetermination 
under Sec. 405.948 through Sec. 405.958 unless the initial 
determination involves a clerical error or other minor error or 
omission.

[[Page 161]]

                            Redeterminations



Sec. 405.940  Right to a redetermination.

    A person or entity that may be a party to a redetermination in 
accordance with Sec. 405.906(b) and that is dissatisfied with an 
initial determination may request a redetermination by a contractor in 
accordance with Sec. 405.940 through Sec. 405.958, regardless of the 
amount in controversy.



Sec. 405.942  Time frame for filing a request for a redetermination.

    (a) Time frame for filing a request. Except as provided in paragraph 
(b) of this section, any request for redetermination must be filed 
within 120 calendar days from the date a party receives the notice of 
the initial determination.
    (1) For purposes of this section, the date of receipt of the initial 
determination will be presumed to be 5 days after the date of the notice 
of initial determination, unless there is evidence to the contrary.
    (2) The request is considered as filed on the date it is received by 
the contractor.
    (b) Extending the time frame for filing a request. General rule. If 
the 120-day period in which to file a request for a redetermination has 
expired and a party shows good cause, the contractor may extend the time 
frame for filing a request for redetermination.
    (1) How to request an extension. A party may file a request for an 
extension of time for filing a request for a redetermination with the 
contractor. The party should include any evidence supporting the request 
for extension. The request for redetermination extension must--
    (i) Be in writing;
    (ii) State why the request for redetermination was not filed within 
the required time frame; and
    (iii) Meet the requirements of Sec. 405.944.
    (2) How the contractor determines if good cause exists. In 
determining if a party has good cause for missing a deadline to request 
a redetermination, the contractor considers--
    (i) The circumstances that kept the party from making the request on 
time;
    (ii) If the contractor's action(s) misled the party; and
    (iii) If the party had or has any physical, mental, educational, or 
linguistic limitations, including any lack of facility with the English 
language, that prevented the party from filing a timely request or from 
understanding or knowing about the need to file a timely request.
    (3) Examples of good cause. Examples of circumstances when good 
cause may be found to exist include, but are not limited to, the 
following situations:
    (i) The party was prevented by serious illness from contacting the 
contractor in person, in writing, or through a friend, relative, or 
other person; or
    (ii) The party had a death or serious illness in his or her 
immediate family; or
    (iii) Important records of the party were destroyed or damaged by 
fire or other accidental cause; or
    (iv) The contractor gave the party incorrect or incomplete 
information about when and how to request a redetermination; or
    (v) The party did not receive notice of the determination or 
decision; or
    (vi) The party sent the request to a Government agency in good faith 
within the time limit, and the request did not reach the appropriate 
contractor until after the time period to file a request expired.



Sec. 405.944  Place and method of filing a request for a redetermination.

    (a) Filing location. The request for redetermination must be filed 
with the contractor indicated on the notice of initial determination.
    (b) Content of redetermination request. The request for 
redetermination must be in writing and should be made on a standard CMS 
form. A written request that is not made on a standard CMS form is 
accepted if it contains the same required elements as follows:
    (1) The beneficiary's name;
    (2) The Medicare health insurance claim number;
    (3) Specific service(s) and/or item(s) for which the redetermination 
is being requested and the specific date(s) of the service;

[[Page 162]]

    (4) The name and signature of the party or the representative of the 
party.
    (c) Requests for redetermination by more than one party. If more 
than one party timely files a request for redetermination on the same 
claim before a redetermination is made on the first timely filed 
request, the contractor must consolidate the separate requests into one 
proceeding and issue one redetermination.



Sec. 405.946  Evidence to be submitted with the redetermination request.

    (a) Evidence submitted with the request. When filing the request for 
redetermination, a party must explain why it disagrees with the 
contractor's determination and should include any evidence that the 
party believes should be considered by the contractor in making its 
redetermination.
    (b) Evidence submitted after the request. When a party submits 
additional evidence after filing the request for redetermination, the 
contractor's 60-day decision-making time frame is automatically extended 
for up to 14 calendar days for each submission.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005]



Sec. 405.948  Conduct of a redetermination.

    A redetermination consists of an independent review of an initial 
determination. In conducting a redetermination, the contractor reviews 
the evidence and findings upon which the initial determination was 
based, and any additional evidence the parties submit or the contractor 
obtains on its own. An individual who was not involved in making the 
initial determination must make a redetermination. The contractor may 
raise and develop new issues that are relevant to the claims in the 
particular case.



Sec. 405.950  Time frame for making a redetermination.

    (a) General rule. The contractor mails, or otherwise transmits, 
written notice of the redetermination or dismissal to the parties to the 
redetermination at their last known addresses within 60 calendar days of 
the date the contractor receives a timely filed request for 
redetermination.
    (b) Exceptions. (1) If a contractor grants an appellant's request 
for an extension of the 120-day filing deadline made in accordance with 
Sec. 405.942(b), the 60-day decision-making time frame begins on the 
date the contractor receives the late-filed request for redetermination, 
or when the request for an extension is granted, whichever is later.
    (2) If a contractor receives from multiple parties timely requests 
for redetermination of a claim determination, consistent with Sec. 
405.944(c), the contractor must issue a redetermination or dismissal 
within 60 days of the latest filed request.
    (3) If a party submits additional evidence after the request for 
redetermination is filed, the contractor's 60-day decision-making time 
frame is extended for up to 14 calendar days for each submission, 
consistent with Sec. 405.946(b).

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005]



Sec. 405.952  Withdrawal or dismissal of a request for a redetermination.

    (a) Withdrawing a request. A party that files a request for 
redetermination may withdraw its request by filing a written and signed 
request for withdrawal. The request for withdrawal must contain a clear 
statement that the appellant is withdrawing the request for a 
redetermination and does not intend to proceed further with the appeal. 
The request must be received in the contractor's mailroom before a 
redetermination is issued. The appeal will proceed with respect to any 
other parties that have filed a timely request for redetermination.
    (b) Dismissing a request. A contractor dismisses a redetermination 
request, either entirely or as to any stated issue, under any of the 
following circumstances:
    (1) When the person or entity requesting a redetermination is not a 
proper party under Sec. 405.906(b) or does not otherwise have a right 
to a redetermination under section 1869(a) of the Act;

[[Page 163]]

    (2) When the contractor determines the party failed to make out a 
valid request for redetermination that substantially complies with Sec. 
405.944;
    (3) When the party fails to file the redetermination request within 
the proper filing time frame in accordance with Sec. 405.942;
    (4) When a beneficiary or the beneficiary's representative files a 
request for redetermination, but the beneficiary dies while the request 
is pending, and all of the following criteria apply:
    (i) The beneficiary's surviving spouse or estate has no remaining 
financial interest in the case. In deciding this issue, the contractor 
considers if the surviving spouse or estate remains liable for the 
services for which payment was denied or a Medicare contractor held the 
beneficiary liable for subsequent similar services under the limitation 
of liability provisions based on the denial of payment for services at 
issue;
    (ii) No other individual or entity with a financial interest in the 
case wishes to pursue the appeal; and
    (iii) No other party filed a valid and timely redetermination 
request under Sec. 405.942 and Sec. 405.944;
    (5) When a party filing the redetermination request submits a timely 
written request for withdrawal with the contractor; or
    (6) When the contractor has not issued an initial determination on 
the claim or the matter for which a redetermination is sought.
    (c) Notice of dismissal. A contractor mails or otherwise transmits a 
written notice of the dismissal of the redetermination request to the 
parties at their last known addresses. The notice states that there is a 
right to request that the contractor vacate the dismissal action.
    (d) Vacating a dismissal. If good and sufficient cause is 
established, a contractor may vacate its dismissal of a request for 
redetermination within 6 months from the date of the notice of 
dismissal.
    (e) Effect of dismissal. The dismissal of a request for 
redetermination is final and binding, unless it is modified or reversed 
by a QIC under Sec. 405.974(b) or vacated under paragraph (d) of this 
section.



Sec. 405.954  Redetermination.

    Upon the basis of the evidence of record, the contractor adjudicates 
the claim(s), and renders a redetermination affirming or reversing, in 
whole or in part, the initial determination in question.



Sec. 405.956  Notice of a redetermination.

    (a) Notification to parties--(1) General rule. Written notice of a 
redetermination affirming, in whole or in part, the initial 
determination must be mailed or otherwise transmitted to all parties at 
their last known addresses in accordance with the time frames 
established in Sec. 405.950. Written notice of a redetermination fully 
reversing the initial determination must be mailed or otherwise 
transmitted to the appellant in accordance with the time frames 
established in Sec. 405.950. If the redetermination results in issuance 
of supplemental payment to a provider or supplier, the Medicare 
contractor must also issue an electronic or paper RA notice to the 
provider or supplier.
    (2) Overpayment cases involving multiple beneficiaries who have no 
liability. In an overpayment case involving multiple beneficiaries who 
have no liability, the contractor may issue a written notice only to the 
appellant.
    (b) Content of the notice for affirmations, in whole or in part. For 
decisions that are affirmations, in whole or in part, of the initial 
determination, the redetermination must be written in a manner 
calculated to be understood by a beneficiary, and contain--
    (1) A clear statement indicating the extent to which the 
redetermination is favorable or unfavorable;
    (2) A summary of the facts, including, as appropriate, a summary of 
the clinical or scientific evidence used in making the redetermination;
    (3) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case;
    (4) A summary of the rationale for the redetermination in clear, 
understandable language;

[[Page 164]]

    (5) Notification to the parties of their right to a reconsideration 
and a description of the procedures that a party must follow in order to 
request a reconsideration, including the time frame within which a 
reconsideration must be requested;
    (6) A statement of any specific missing documentation that must be 
submitted with a request for a reconsideration, if applicable;
    (7) A statement that all evidence the appellant wishes to introduce 
during the claim appeals process should be submitted with the request 
for a reconsideration;
    (8) Notification that evidence not submitted to the QIC as indicated 
in paragraph (b)(6) of this section, is not considered at an ALJ hearing 
or further appeal, unless the appellant demonstrates good cause as to 
why that evidence was not provided previously; and
    (9) The procedures for obtaining additional information concerning 
the redetermination, such as specific provisions of the policy, manual, 
or regulation used in making the redetermination.
    (10) Any other requirements specified by CMS.
    (c) Content of the notice for a full reversal. For decisions that 
are full reversals of the initial determination, the redetermination 
must be in writing and contain--
    (1) A clear statement indicating that the redetermination is wholly 
favorable;
    (2) Any other requirements specified by CMS.
    (d) Exception for beneficiary appeal requests. (1) The notice must 
inform beneficiary appellants that the requirements of paragraph (b)(8) 
of this section are not applicable for purposes of beneficiary appeals.
    (2) This exception does not apply for appeal requests from 
beneficiaries who are represented by providers or suppliers.



Sec. 405.958  Effect of a redetermination.

    In accordance with section 1869 (a)(3)(D) of the Act, once a 
redetermination is issued, it becomes part of the initial determination. 
The redetermination is final and binding upon all parties unless--
    (a) A reconsideration is completed in accordance with Sec. 405.960 
through Sec. 405.978; or
    (b) The redetermination is revised as a result of a reopening in 
accordance with Sec. 405.980.

                             Reconsideration



Sec. 405.960  Right to a reconsideration.

    A person or entity that is a party to a redetermination made by a 
contractor as described under Sec. 405.940 through Sec. 405.958, and 
is dissatisfied with that determination, may request a reconsideration 
by a QIC in accordance with Sec. 405.962 through Sec. 405.966, 
regardless of the amount in controversy.



Sec. 405.962  Timeframe for filing a request for a reconsideration.

    (a) Timeframe for filing a request. Except as provided in paragraph 
(b) of this section, any request for a reconsideration must be filed 
within 180 calendar days from the date the party receives the notice of 
the redetermination.
    (1) For purposes of this section, the date of receipt of the 
redetermination will be presumed to be 5 days after the date of the 
notice of redetermination, unless there is evidence to the contrary.
    (2) For purposes of meeting the 180-day filing deadline, the request 
is considered as filed on the date it is received by the QIC.
    (b) Extending the time for filing a request--(1) General rule. A QIC 
may extend the 180-day timeframe for filing a request for 
reconsideration for good cause.
    (2) How to request an extension. A party to the redetermination must 
file its request for an extension of the time for filing the 
reconsideration request with its request for reconsideration. A party 
should include evidence to support the request for extension. The 
request for reconsideration and request for extension must--
    (i) Be in writing;
    (ii) State why the request for reconsideration was not filed within 
the required timeframe; and

[[Page 165]]

    (iii) Meet the requirements of Sec. 405.964.
    (3) How the QIC determines whether good cause exists. In determining 
whether a party has good cause for missing a deadline to request 
reconsideration, the QIC applies the good cause provisions contained in 
Sec. 405.942(b)(2) and (b)(3).



Sec. 405.964  Place and method of filing a request for a reconsideration.

    (a) Filing location. The request for reconsideration must be filed 
with the QIC indicated on the notice of redetermination.
    (b) Content of reconsideration request. The request for 
reconsideration must be in writing and should be made on a standard CMS 
form. A written request that is not made on a standard CMS form is 
accepted if it contains the same required elements, as follows:
    (1) The beneficiary's name;
    (2) Medicare health insurance claim number;
    (3) Specific service(s) and item(s) for which the reconsideration is 
requested and the specific date(s) of service;
    (4) The name and signature of the party or the representative of the 
party; and
    (5) The name of the contractor that made the redetermination.
    (c) Requests for reconsideration by more than one party. If more 
than one party timely files a request for reconsideration on the same 
claim before a reconsideration is made on the first timely filed 
request, the QIC must consolidate the separate requests into one 
proceeding and issue one reconsideration.



Sec. 405.966  Evidence to be submitted with the reconsideration request.

    (a) Evidence submitted with the request. When filing a request for 
reconsideration, a party should present evidence and allegations of fact 
or law related to the issue in dispute and explain why it disagrees with 
the initial determination, including the redetermination.
    (1) This evidence must include any missing documentation identified 
in the notice of redetermination, consistent with Sec. 405.956(b)(6).
    (2) Absent good cause, failure to submit all evidence, including 
documentation requested in the notice of redetermination prior to the 
issuance of the notice of reconsideration precludes subsequent 
consideration of that evidence.
    (b) Evidence submitted after the request. Each time a party submits 
additional evidence after filing the request for reconsideration, the 
QIC's 60-day decisionmaking timeframe is automatically extended by up to 
14 calendar days for each submission. This extension does not apply to 
timely submissions of documentation specifically requested by a QIC, 
unless the documentation was originally requested in the notice of 
redetermination.
    (c) Exception for beneficiaries and State Medicaid Agencies that 
file reconsideration requests. (1) Beneficiaries and State Medicaid 
Agencies that file requests for reconsideration are not required to 
comply with the requirements of paragraph (a) of this section. However, 
the automatic 14-day extension described in paragraph (b) of this 
section applies to each evidence submission made after the request for 
reconsideration is filed.
    (2) Beneficiaries who are represented by providers or suppliers must 
comply with the requirements of paragraph (a) of this section.



Sec. 405.968  Conduct of a reconsideration.

    (a) General rules. (1) A reconsideration consists of an independent, 
on-the-record review of an initial determination, including the 
redetermination and all issues related to payment of the claim. In 
conducting a reconsideration, the QIC reviews the evidence and findings 
upon which the initial determination, including the redetermination, was 
based, and any additional evidence the parties submit or that the QIC 
obtains on its own. If the initial determination involves a finding on 
whether an item or service is reasonable and necessary for the diagnosis 
or treatment of illness or injury (under section 1862(a)(1)(A) of the 
Act), a QIC's reconsideration must involve consideration by a panel of 
physicians or other appropriate health care professionals, and be based 
on clinical experience, the patient's medical records, and medical, 
technical, and scientific evidence of record to the extent applicable.

[[Page 166]]

    (b) Authority of the QIC. (1) National coverage determinations 
(NCDs), CMS Rulings, and applicable laws and regulations are binding on 
the QIC.
    (2) QICs are not bound by LCDs, LMRPs, or CMS program guidance, such 
as program memoranda and manual instructions, but give substantial 
deference to these policies if they are applicable to a particular case. 
A QIC may decline to follow a policy, if the QIC determines, either at a 
party's request or at its own discretion, that the policy does not apply 
to the facts of the particular case.
    (3) If a QIC declines to follow a policy in a particular case, the 
QIC's reconsideration explains the reasons why the policy was not 
followed.
    (4) A QIC's decision to decline to follow a policy under this 
section applies only to the specific claim being reconsidered and does 
not have precedential effect.
    (5) A QIC may raise and develop new issues that are relevant to the 
claims in a particular case provided that the contractor rendered a 
redetermination with respect to the claims.
    (c) Qualifications of the QIC's panel members. (1) Members of a 
QIC's panel who conduct reconsiderations must have sufficient medical, 
legal, and other expertise, including knowledge of the Medicare program.
    (2) When a redetermination is made with respect to whether an item 
or service is reasonable and necessary (section 1862(a)(1)(A) of the 
Act), the QIC designates a panel of physicians or other appropriate 
health care professionals to consider the facts and circumstances of the 
redetermination.
    (3) Where a claim pertains to the furnishing of treatment by a 
physician, or the provision of items or services by a physician, a 
reviewing professional must be a physician.
    (d) Disqualification of a QIC panel member. No physician or health 
care professional employed by or otherwise working for a QIC may review 
determinations regarding--
    (1) Health care services furnished to a patient if that physician or 
health care professional was directly responsible for furnishing those 
services; or
    (2) Health care services provided in or by an institution, 
organization, or agency, if that physician or health care professional 
or any member of the physician's family or health care professional's 
family has, directly or indirectly, a significant financial interest in 
that institution, organization, or agency (see the term family member as 
defined in Sec. 405.902).



Sec. 405.970  Timeframe for making a reconsideration.

    (a) General rule. Within 60 calendar days of the date the QIC 
receives a timely filed request for reconsideration or any additional 
time provided by paragraph (b) of this section, the QIC mails, or 
otherwise transmits to the parties at their last known addresses, 
written notice of--
    (1) The reconsideration;
    (2) Its inability to complete its review within 60 days in 
accordance with paragraphs (c) through (e) of this section; or
    (3) Dismissal.
    (b) Exceptions. (1) If a QIC grants an appellant's request for an 
extension of the 180-day filing deadline made in accordance with Sec. 
405.962(b), the QIC's 60-day decision-making timeframe begins on the 
date the QIC receives the late filed request for reconsideration, or 
when the request for an extension that meets the requirements of Sec. 
405.962(b) is granted, whichever is later.
    (2) If a QIC receives timely requests for reconsideration from 
multiple parties, consistent with Sec. 405.964(c), the QIC must issue a 
reconsideration, notice that it cannot complete its review, or dismissal 
within 60 days for each submission of the latest filed request.
    (3) Each time a party submits additional evidence after the request 
for reconsideration is filed, the QIC's 60-day decisionmaking timeframe 
is extended by up to 14 days for each submission, consistent with Sec. 
405.966(b).
    (c) Responsibilities of the QIC. Within 60 days of receiving a 
request for a reconsideration, or any additional time provided for under 
paragraph (b) of this section, a QIC must take one of the following 
actions:
    (1) Notify all parties of its reconsideration, consistent with Sec. 
405.976.
    (2) Notify the parties that it cannot complete the reconsideration 
by the deadline specified in paragraph (b) of

[[Page 167]]

this section and offer the appellant the opportunity to escalate the 
appeal to an ALJ. The QIC continues to process the reconsideration 
unless it receives a written request from the appellant to escalate the 
case to an ALJ after the adjudication period has expired.
    (d) Responsibilities of the appellant. If an appellant wishes to 
exercise the option of escalating the case to an ALJ, the appellant must 
notify the QIC in writing.
    (e) Actions following appellant's notice. (1) If the appellant fails 
to notify the QIC, or notifies the QIC that the appellant does not 
choose to escalate the case, the QIC completes its reconsideration and 
notifies the appellant of its action consistent with Sec. 405.972 or 
Sec. 405.976.
    (2) If the appellant notifies the QIC that the appellant wishes to 
escalate the case, the QIC must take one of the following actions within 
5 days of receipt of the notice or 5 days from the end of the applicable 
adjudication period under paragraph (a) or (b) of this section:
    (i) Complete its reconsideration and notify all parties of its 
decision consistent with Sec. 405.972 or Sec. 405.976.
    (ii) Acknowledge the escalation notice in writing and forward the 
case file to the ALJ hearing office.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005]



Sec. 405.972  Withdrawal or dismissal of a request for a reconsideration.

    (a) Withdrawing a request. An appellant that files a request for 
reconsideration may withdraw its request by filing a written and signed 
request for withdrawal. The request for withdrawal must--
    (1) Contain a clear statement that the appellant is withdrawing the 
request for reconsideration and does not intend to proceed further with 
the appeal.
    (2) Be received in the QIC's mailroom before the reconsideration is 
issued.
    (b) Dismissing a request. A QIC dismisses a reconsideration request, 
either entirely or as to any stated issue, under any of the following 
circumstances:
    (1) When the person or entity requesting reconsideration is not a 
proper party under Sec. 405.906(b) or does not otherwise have a right 
to a reconsideration under section 1869(b) of the Act;
    (2) When the QIC determines that the party failed to make out a 
valid request for reconsideration that substantially complies with Sec. 
405.964(a) and (b);
    (3) When the party fails to file the reconsideration request in 
accordance with the timeframes established in Sec. 405.962;
    (4) When a beneficiary or the beneficiary's representative files a 
request for reconsideration, but the beneficiary dies while the request 
is pending, and all of the following criteria apply:
    (i) The beneficiary's surviving spouse or estate has no remaining 
financial interest in the case. In deciding this issue, the QIC 
considers if the surviving spouse or estate remains liable for the 
services for which payment was denied or a Medicare contractor held the 
beneficiary liable for subsequent similar services under the limitation 
of liability provisions based on the denial of payment for services at 
issue;
    (ii) No other individual or entity with a financial interest in the 
case wishes to pursue the appeal; and
    (iii) No other party to the redetermination filed a valid and timely 
request for reconsideration under Sec. 405.962 and Sec. 405.964.
    (5) When a party filing for the reconsideration submits a written 
request of withdrawal to the QIC and satisfies the criteria set forth in 
paragraph (a) of this section before the reconsideration has been 
issued; or
    (6) When the contractor has not issued a redetermination on the 
initial determination for which a reconsideration is sought.
    (c) Notice of dismissal. A QIC mails or otherwise transmits written 
notice of the dismissal of the reconsideration request to the parties at 
their last known addresses. The notice states that there is a right to 
request that the contractor vacate the dismissal action. The appeal will 
proceed with respect to any other parties that have filed a timely 
request for reconsideration.
    (d) Vacating a dismissal. If good and sufficient cause is 
established, a QIC may vacate its dismissal of a request for 
reconsideration within 6 months of the date of the notice of dismissal.

[[Page 168]]

    (e) Effect of dismissal. The dismissal of a request for 
reconsideration is final and binding, unless it is modified or reversed 
by an ALJ under Sec. 405.1004 or vacated under paragraph (d) of this 
section.



Sec. 405.974  Reconsideration.

    (a) Reconsideration of a contractor determination. Except as 
provided in Sec. 405.972, upon the basis of the evidence of record, the 
QIC must issue a reconsideration affirming or reversing, in whole or in 
part, the initial determination, including the redetermination, in 
question.
    (b) Reconsideration of contractor's dismissal of a redetermination 
request. (1) A party to a contractor's dismissal of a request for 
redetermination has a right to have the dismissal reviewed by a QIC, if 
the party files a written request for review of the dismissal with the 
QIC within 60 days after receipt of the contractor's notice of 
dismissal.
    (i) For purposes of this section, the date of receipt of the 
contractor's notice of dismissal is presumed to be 5 days after the date 
of the notice of dismissal, unless there is evidence to the contrary.
    (ii) For purposes of meeting the 60-day filing deadline, the request 
is considered as filed on the date it is received by the QIC indicated 
on the notice of dismissal.
    (2) If the QIC determines that the contractor's dismissal was in 
error, it vacates the dismissal and remands the case to the contractor 
for a redetermination.
    (3) A QIC's reconsideration of a contractor's dismissal of a 
redetermination request is final and not subject to any further review.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]



Sec. 405.976  Notice of a reconsideration.

    (a) Notification to parties--(1) General rules. (i) Written notice 
of the reconsideration must be mailed or otherwise transmitted to all 
parties at their last known addresses, in accordance with the timeframes 
established in Sec. 405.970(a) or (b).
    (ii) The notice must be written in a manner reasonably calculated to 
be understood by a beneficiary.
    (iii) The QIC must promptly notify the entity responsible for 
payment of claims under Part A or Part B of its reconsideration. If the 
reconsideration results in issuance of supplemental payment to a 
provider or supplier, the Medicare contractor must also issue an 
electronic or paper RA notice to the provider or supplier.
    (2) Overpayment cases involving multiple beneficiaries who have no 
liability. In an overpayment case involving multiple beneficiaries who 
have no liability, the QIC may issue a written notice only to the 
appellant.
    (b) Content of the notice. The reconsideration must be in writing 
and contain--
    (1) A clear statement indicating whether the reconsideration is 
favorable or unfavorable;
    (2) A summary of the facts, including as appropriate, a summary of 
the clinical or scientific evidence used in making the reconsideration;
    (3) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies, apply to the facts of the case, including, 
where applicable, the rationale for declining to follow an LCD, LMRP, or 
CMS program guidance;
    (4) In the case of a determination on whether an item or service is 
reasonable or necessary under section 1862(a)(1)(A) of the Act, an 
explanation of the medical and scientific rationale for the decision;
    (5) A summary of the rationale for the reconsideration.
    (i) If the notice of redetermination indicated that specific 
documentation should be submitted with the reconsideration request, and 
the documentation was not submitted with the request for 
reconsideration, the summary must indicate how the missing documentation 
affected the reconsideration; and
    (ii) The summary must also specify that, consistent with Sec. 
405.956(b)(8) and Sec. 405.966(b), all evidence, including evidence 
requested in the notice of redetermination, that is not submitted prior 
to the issuance of the reconsideration will not be considered at an ALJ

[[Page 169]]

level, or made part of the administrative record, unless the appellant 
demonstrates good cause as to why the evidence was not provided prior to 
the issuance of the QIC's reconsideration. This requirement does not 
apply to beneficiaries, unless the beneficiary is represented by a 
provider or supplier or to State Medicaid Agencies;
    (6) Information concerning to the parties' right to an ALJ hearing, 
including the applicable amount in controversy requirement and 
aggregation provisions;
    (7) A statement of whether the amount in controversy needed for an 
ALJ hearing is met when the reconsideration is partially or fully 
unfavorable;
    (8) A description of the procedures that a party must follow in 
order to obtain an ALJ hearing of an expedited reconsideration, 
including the time frame under which a request for an ALJ hearing must 
be filed;
    (9) If appropriate, advice as to the requirements for use of the 
expedited access to judicial review process set forth in Sec. 405.990;
    (10) The procedures for obtaining additional information concerning 
the reconsideration, such as specific provisions of the policy, manual, 
or regulation used in making the reconsideration; and
    (11) Any other requirements specified by CMS.



Sec. 405.978  Effect of a reconsideration.

    A reconsideration is final and binding on all parties, unless--
    (a) An ALJ decision is issued in accordance to a request for an ALJ 
hearing made in accordance with Sec. 405.1014;
    (b) A review entity issues a decision in accordance to a request for 
expedited access to judicial review under Sec. 405.990; or
    (c) The reconsideration is revised as a result of a reopening in 
accordance with Sec. 405.980.

                               Reopenings



Sec. 405.980  Reopenings of initial determinations, redeterminations, and 

reconsiderations, hearings and reviews.

    (a) General rules. (1) A reopening is a remedial action taken to 
change a final determination or decision that resulted in either an 
overpayment or underpayment, even though the final determination or 
decision may have been correct at the time it was made based on the 
evidence of record. That action may be taken by--
    (i) A contractor to revise the initial determination or 
redetermination;
    (ii) A QIC to revise the reconsideration;
    (iii) An ALJ to revise the hearing decision; or
    (iv) The MAC to revise the hearing or review decision.
    (2) If a contractor issues a denial of a claim because it did not 
receive requested documentation during medical review and the party 
subsequently requests a redetermination, the contractor must process the 
request as a reopening.
    (3) Notwithstanding paragraph (a)(4) of this section, a contractor 
must process clerical errors (which includes minor errors and omissions) 
as reopenings, instead of as redeterminations as specified in Sec. 
405.940. If the contractor receives a request for reopening and 
disagrees that the issue is a clerical error, the contractor must 
dismiss the reopening request and advise the party of any appeal rights, 
provided the timeframe to request an appeal on the original denial has 
not expired. For purposes of this section, clerical error includes human 
or mechanical errors on the part of the party or the contractor such 
as--
    (i) Mathematical or computational mistakes;
    (ii) Inaccurate data entry; or
    (iii) Denials of claims as duplicates.
    (4) When a party has filed a valid request for an appeal of an 
initial determination, redetermination, reconsideration, hearing, or MAC 
review, no adjudicator has jurisdiction to reopen an issue on a claim 
that is under appeal until all appeal rights for that issue are 
exhausted. Once the appeal rights for the issue have been exhausted, the 
contractor, QIC, ALJ, or MAC may reopen as set forth in this section.
    (5) The contractor's, QIC's, ALJ's, or MAC's decision on whether to 
reopen is final and not subject to appeal.

[[Page 170]]

    (6) A determination under the Medicare secondary payer provisions of 
section 1862(b) of the Act that Medicare has an MSP recovery claim for 
services or items that were already reimbursed by the Medicare program 
is not a reopening, except where the recovery claim is based upon a 
provider's or supplier's failure to demonstrate that it filed a proper 
claim as defined in part 411 of this chapter.
    (b) Time frames and requirements for reopening initial 
determinations and redeterminations initiated by a contractor. A 
contractor may reopen and revise its initial determination or 
redetermination on its own motion--
    (1) Within 1 year from the date of the initial determination or 
redetermination for any reason.
    (2) Within 4 years from the date of the initial determination or 
redetermination for good cause as defined in Sec. 405.986.
    (3) At any time if there exists reliable evidence as defined in 
Sec. 405.902 that the initial determination was procured by fraud or 
similar fault as defined in Sec. 405.902.
    (4) At anytime if the initial determination is unfavorable, in whole 
or in part, to the party thereto, but only for the purpose of correcting 
a clerical error on which that determination was based.
    (5) At any time to effectuate a decision issued under the coverage 
appeals process.
    (c) Time frame and requirements for reopening initial determinations 
and redeterminations requested by a party. (1) A party may request that 
a contractor reopen its initial determination or redetermination within 
1 year from the date of the initial determination or redetermination for 
any reason.
    (2) A party may request that a contractor reopen its initial 
determination or redetermination within 4 years from the date of the 
initial determination or redetermination for good cause in accordance 
with Sec. 405.986.
    (3) A party may request that a contractor reopen its initial 
determination at any time if the initial determination is unfavorable, 
in whole or in part, to the party thereto, but only for the purpose of 
correcting a clerical error on which that determination was based. Third 
party payer error does not constitute clerical error. See Sec. 
405.986(c).
    (d) Time frame and requirements for reopening reconsiderations, 
hearing decisions and reviews initiated by a QIC, ALJ, or the MAC. (1) A 
QIC may reopen its reconsideration on its own motion within 180 days 
from the date of the reconsideration for good cause in accordance with 
Sec. 405.986. If the QIC's reconsideration was procured by fraud or 
similar fault, then the QIC may reopen at any time.
    (2) An ALJ or the MAC may reopen a hearing decision on its own 
motion within 180 days from the date of the decision for good cause in 
accordance with Sec. 405.986. If the hearing decision was procured by 
fraud or similar fault, then the ALJ or the MAC may reopen at any time.
    (3) The MAC may reopen its review decision on its own motion within 
180 days from the date of the review decision for good cause in 
accordance with Sec. 405.986. If the MAC's decision was procured by 
fraud or similar fault, then the MAC may reopen at any time.
    (e) Time frames and requirements for reopening reconsiderations, 
hearing decisions, and reviews requested by a party. (1) A party to a 
reconsideration may request that a QIC reopen its reconsideration within 
180 days from the date of the reconsideration for good cause in 
accordance with Sec. 405.986.
    (2) A party to a hearing may request that an ALJ or the MAC reopen a 
hearing decision within 180 days from the date of the hearing decision 
for good cause in accordance with Sec. 405.986.
    (3) A party to a review may request that the MAC reopen its decision 
within 180 days from the date of the review decision for good cause in 
accordance with Sec. 405.986.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]



Sec. 405.982  Notice of a revised determination or decision.

    (a) When adjudicators initiate reopenings. When any determination or 
decision is reopened and revised as provided in Sec. 405.980, the 
contractor, QIC, ALJ, or the MAC must mail its revised determination or 
decision to the parties to that determination or decision at their last 
known address. In the case

[[Page 171]]

of a full or partial reversal resulting in issuance of a payment to a 
provider or supplier, a revised electronic or paper remittance advice 
notice must be issued by the Medicare contractor. An adverse revised 
determination or decision must state the rationale and basis for the 
reopening and revision and any right to appeal.
    (b) Reopenings initiated at the request of a party. The contractor, 
QIC, ALJ, or the MAC must mail its revised determination or decision to 
the parties to that determination or decision at their last known 
address. In the case of a full or partial reversal resulting in issuance 
of a payment to a provider or supplier, a revised electronic or paper 
remittance advice notice must be issued by the Medicare contractor. An 
adverse revised determination or decision must state the rationale and 
basis for the reopening and revision and any right to appeal.



Sec. 405.984  Effect of a revised determination or decision.

    (a) Initial determinations. The revision of an initial determination 
is binding upon all parties unless a party files a written request for a 
redetermination that is accepted and processed in accordance with Sec. 
405.940 through Sec. 405.958.
    (b) Redeterminations. The revision of a redetermination is binding 
upon all parties unless a party files a written request for a QIC 
reconsideration that is accepted and processed in accordance with Sec. 
405.960 through Sec. 405.978.
    (c) Reconsiderations. The revision of a reconsideration is binding 
upon all parties unless a party files a written request for an ALJ 
hearing that is accepted and processed in accordance with Sec. 405.1000 
through Sec. 405.1064.
    (d) ALJ Hearing decisions. The revision of a hearing decision is 
binding upon all parties unless a party files a written request for a 
MAC review that is accepted and processed in accordance with Sec. 
405.1100 through Sec. 405.1130.
    (e) MAC review. The revision of a MAC review is binding upon all 
parties unless a party files a civil action in which a Federal district 
court accepts jurisdiction and issues a decision.
    (f) Appeal of only the portion of the determination or decision 
revised by the reopening. Only the portion of the initial determination, 
redetermination, reconsideration, or hearing decision revised by the 
reopening may be subsequently appealed.
    (g) Effect of a revised determination or decision. A revised 
determination or decision is binding unless it is appealed or otherwise 
reopened.



Sec. 405.986  Good cause for reopening.

    (a) Establishing good cause. Good cause may be established when--
    (1) There is new and material evidence that--
    (i) Was not available or known at the time of the determination or 
decision; and
    (ii) May result in a different conclusion; or
    (2) The evidence that was considered in making the determination or 
decision clearly shows on its face that an obvious error was made at the 
time of the determination or decision.
    (b) Change in substantive law or interpretative policy. A change of 
legal interpretation or policy by CMS in a regulation, CMS ruling, or 
CMS general instruction, or a change in legal interpretation or policy 
by SSA in a regulation, SSA ruling, or SSA general instruction in 
entitlement appeals, whether made in response to judicial precedent or 
otherwise, is not a basis for reopening a determination or hearing 
decision under this section. This provision does not preclude 
contractors from conducting reopenings to effectuate coverage decisions 
issued under the authority granted by section 1869(f) of the Act.
    (c) Third party payer error. A request to reopen a claim based upon 
a third party payer's error in making a primary payment determination 
when Medicare processed the claim in accordance with the information in 
its system of records or on the claim form does not constitute good 
cause for reopening.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]

[[Page 172]]

                   Expedited Access to Judicial Review



Sec. 405.990  Expedited access to judicial review.

    (a) Process for expedited access to judicial review. (1) For 
purposes of this section, a ``review entity'' means an entity of up to 
three reviewers who are ALJs or members of the Departmental Appeals 
Board (DAB), as determined by the Secretary.
    (2) In order to obtain expedited access to judicial review (EAJR), a 
review entity must certify that the Medicare Appeals Council (MAC) does 
not have the authority to decide the question of law or regulation 
relevant to the matters in dispute and that there is no material issue 
of fact in dispute.
    (3) A party may make a request for EAJR only once with respect to a 
question of law or regulation for a specific matter in dispute in an 
appeal.
    (b) Conditions for making the expedited appeals request. (1) A party 
may request EAJR in place of an ALJ hearing or MAC review if the 
following conditions are met:
    (i) A QIC has made a reconsideration determination and the party has 
filed a request for--
    (A) An ALJ hearing in accordance with Sec. 405.1002 and a final 
decision of the ALJ has not been issued;
    (B) MAC review in accordance with Sec. 405.1102 and a final 
decision of the MAC has not been issued; or
    (ii) The appeal has been escalated from the QIC to the ALJ level 
after the period described in Sec. 405.970(a) and Sec. 405.970(b) has 
expired, and the QIC does not issue a final action within the time frame 
described in Sec. 405.970(e).
    (2) The requestor is a party, as defined in paragraph (e) of this 
section.
    (3) The amount remaining in controversy meets the requirements of 
Sec. 405.1006(b) or (c).
    (4) If there is more than one party to the reconsideration, hearing, 
or MAC review, each party concurs, in writing, with the request for the 
EAJR.
    (5) There are no material issues of fact in dispute.
    (c) Content of the request for EAJR. The request for EAJR must--
    (1) Allege that there are no material issues of fact in dispute and 
identify the facts that the requestor considers material and that are 
not disputed; and
    (2) Assert that the only factor precluding a decision favorable to 
the requestor is--
    (i) A statutory provision that is unconstitutional, or a provision 
of a regulation or national coverage determination and specify the 
statutory provision that the requestor considers unconstitutional or the 
provision of a regulation or a national coverage determination that the 
requestor considers invalid, or
    (ii) A CMS Ruling that the requester considers invalid;
    (3) Include a copy of any QIC reconsideration and of any ALJ hearing 
decision that the requester has received;
    (4) If any QIC reconsideration or ALJ hearing decision was based on 
facts that the requestor is disputing, state why the requestor considers 
those facts to be immaterial; and
    (5) If any QIC reconsideration or ALJ hearing decision was based on 
a provision of a law, regulation, national coverage determination or CMS 
Ruling in addition to the one the requestor considers unconstitutional 
or invalid, a statement as to why further administrative review of how 
that provision applies to the facts is not necessary.
    (d) Place and time for an EAJR request--(1) Method and place for 
filing request. The requestor may include an EAJR request in his or her 
request for an ALJ hearing or MAC review, or, if an appeal is already 
pending with an ALJ or the MAC, file a written EAJR request with the ALJ 
hearing office or MAC where the appeal is being considered. The ALJ 
hearing office or MAC forwards the request to the review entity within 5 
calendar days of receipt.
    (2) Time of filing request. The party may file a request for the 
EAJR--
    (i) If the party has requested a hearing, at any time before receipt 
of the notice of the ALJ's decision; or
    (ii) If the party has requested MAC review, at any time before 
receipt of notice of the MAC's decision.
    (e) Parties to the EAJR. The parties to the EAJR are the persons or 
entities who were parties to the QIC's reconsideration determination 
and, if applicable, to the ALJ hearing.

[[Page 173]]

    (f) Determination on EAJR request. (1) The review entity described 
in paragraph (a) of this section will determine whether the request for 
EAJR meets all of the requirements of paragraphs (b), (c), and (d) of 
this section.
    (2) Within 60 days after the date the review entity receives a 
request and accompanying documents and materials meeting the conditions 
in paragraphs (b), (c), and (d) of this section, the review entity will 
issue either a certification in accordance to paragraph (g) of this 
section or a denial of the request.
    (3) A determination by the review entity either certifying that the 
requirements for EAJR are met pursuant to paragraph (g) of this section 
or denying the request is final and not subject to review by the 
Secretary.
    (4) If the review entity fails to make a determination within the 
time frame specified in paragraph (f)(2) of this section, then the 
requestor may bring a civil action in Federal district court within 60 
days of the end of the time frame.
    (g) Certification by the review entity. If a party meets the 
requirements for the EAJR, the review entity certifies in writing that--
    (1) The material facts involved in the claim are not in dispute;
    (2) Except as indicated in paragraph (g)(3) of this section, the 
Secretary's interpretation of the law is not in dispute;
    (3) The sole issue(s) in dispute is the constitutionality of a 
statutory provision, or the validity of a provision of a regulation, CMS 
Ruling, or national coverage determination;
    (4) But for the provision challenged, the requestor would receive a 
favorable decision on the ultimate issue (such as whether a claim should 
be paid); and
    (5) The certification by the review entity is the Secretary's final 
action for purposes of seeking expedited judicial review.
    (h) Effect of certification by the review entity. If an EAJR request 
results in a certification described in paragraph (g) of this section--
    (1) The party that requested the EAJR is considered to have waived 
any right to completion of the remaining steps of the administrative 
appeals process regarding the matter certified.
    (2) The requestor has 60 days, beginning on the date of the review 
entity's certification within which to bring a civil action in Federal 
district court.
    (3) The requestor must satisfy the requirements for venue under 
section 1869(b)(2)(C)(iii) of the Act, as well as the requirements for 
filing a civil action in a Federal district court under Sec. 
405.1136(a) and Sec. 405.1136(c) through Sec. 405.1136(f).
    (i) Rejection of EAJR. (1) If a request for EAJR request does not 
meet all the conditions set out in paragraphs (b), (c) and (d) of this 
section, or if the review entity does not certify a request for EAJR, 
the review entity advises in writing all parties that the request has 
been denied, and returns the request to the ALJ hearing office or the 
MAC, which will treat it as a request for hearing or for MAC review, as 
appropriate.
    (2) Whenever a review entity forwards a rejected EAJR request to an 
ALJ hearing office or the MAC, the appeal is considered timely filed and 
the 90-day decision making time frame begins on the day the request is 
received by the hearing office or the MAC.
    (j) Interest on any amounts in controversy. (1) If a provider or 
supplier is granted judicial review in accordance with this section, the 
amount in controversy, if any, is subject to annual interest beginning 
on the first day of the first month beginning after the 60-day period as 
determined in accordance with paragraphs (f)(4) or (h)(2) of this 
section, as applicable.
    (2) The interest is awarded by the reviewing court and payable to a 
prevailing party.
    (3) The rate of interest is equal to the rate of interest applicable 
to obligations issued for purchase by the Federal Supplementary Medical 
Insurance Trust Fund for the month in which the civil action authorized 
under this subpart is commenced.
    (4) No interest awarded in accordance with this paragraph shall be 
income or cost for purposes of determining reimbursement due to 
providers or suppliers under Medicare.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]

[[Page 174]]

                              ALJ Hearings



Sec. 405.1000  Hearing before an ALJ: General rule.

    (a) If a party is dissatisfied with a QIC's reconsideration or if 
the adjudication period specified in Sec. 405.970 for the QIC to 
complete its reconsideration has elapsed, the party may request a 
hearing.
    (b) A hearing may be conducted in-person, by video-teleconference 
(VTC), or by telephone. At the hearing, the parties may submit evidence 
(subject to the restrictions in Sec. 405.1018 and Sec. 405.1028), 
examine the evidence used in making the determination under review, and 
present and/or question witnesses.
    (c) In some circumstances, a representative of CMS or its 
contractor, including the QIC, QIO, fiscal intermediary or carrier, may 
participate in or join the hearing as a party. (see Sec. 405.1010 and 
Sec. 405.1012).
    (d) The ALJ issues a decision based on the hearing record.
    (e) If all parties to the hearing waive their right to appear at the 
hearing in person or by telephone or video-teleconference, the ALJ may 
make a decision based on the evidence that is in the file and any new 
evidence that is submitted for consideration.
    (f) The ALJ may require the parties to participate in a hearing if 
it is necessary to decide the case. If the ALJ determines that it is 
necessary to obtain testimony from a non-party, he or she may hold a 
hearing to obtain that testimony, even if all of the parties have waived 
the right to appear. In that event, however, the ALJ will give the 
parties the opportunity to appear when the testimony is given, but may 
hold the hearing even if none of the parties decide to appear.
    (g) An ALJ may also issue a decision on the record on his or her own 
initiative if the evidence in the hearing record supports a fully 
favorable finding.



Sec. 405.1002  Right to an ALJ hearing.

    (a) A party to a QIC reconsideration may request a hearing before an 
ALJ if--
    (1) The party files a written request for an ALJ hearing within 60 
days after receipt of the notice of the QIC's reconsideration.
    (2) The party meets the amount in controversy requirements of Sec. 
405.1006.
    (3) For purposes of this section, the date of receipt of the 
reconsideration is presumed to be 5 days after the date of the 
reconsideration, unless there is evidence to the contrary.
    (4) For purposes of meeting the 60-day filing deadline, the request 
is considered as filed on the date it is received by the entity 
specified in the QIC's reconsideration.
    (b) A party who files a timely appeal before a QIC and whose appeal 
continues to be pending before a QIC at the end of the period described 
in Sec. 405.970 has a right to a hearing before an ALJ if--
    (1) The party files a written request with the QIC to escalate the 
appeal to the ALJ level after the period described in Sec. 405.970(a) 
and (b) has expired and the party files the request in accordance with 
Sec. 405.970(d);
    (2) The QIC does not issue a final action within 5 days of receiving 
the request for escalation in accordance with Sec. 405.970(e)(2); and
    (3) The party has an amount remaining in controversy specified in 
Sec. 405.1006.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]



Sec. 405.1004  Right to ALJ review of QIC notice of dismissal.

    (a) A party to a QIC's dismissal of a request for reconsideration 
has a right to have the dismissal reviewed by an ALJ if--
    (1) The party files a written request for an ALJ review within 60 
days after receipt of the notice of the QIC's dismissal.
    (2) The party meets the amount in controversy requirements of Sec. 
405.1006.
    (3) For purposes of this section, the date of receipt of the QIC's 
dismissal is presumed to be 5 days after the date of the dismissal 
notice, unless there is evidence to the contrary.
    (4) For purposes of meeting the 60-day filing deadline, the request 
is considered as filed on the date it is received by the entity 
specified in the QIC's dismissal.

[[Page 175]]

    (b) If the ALJ determines that the QIC's dismissal was in error, he 
or she vacates the dismissal and remands the case to the QIC for a 
reconsideration.
    (c) An ALJ's decision regarding a QIC's dismissal of a 
reconsideration request is final and not subject to further review.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]



Sec. 405.1006  Amount in controversy required to request an ALJ hearing and 

judicial review.

    (a) Definitions. For the purposes of aggregating claims to meet the 
amount in controversy requirement for an ALJ hearing or judicial review:
    (1) ``Common issues of law and fact'' means the claims sought to be 
aggregated are denied, or payment is reduced, for similar reasons and 
arise from a similar fact pattern material to the reason the claims are 
denied or payment is reduced.
    (2) ``Delivery of similar or related services'' means like or 
coordinated services or items provided to one or more beneficiaries.
    (b) ALJ review. To be entitled to a hearing before an ALJ, the party 
must meet the amount in controversy requirements of this section.
    (1) For ALJ hearing requests, the required amount remaining in 
controversy must be $100 increased by the percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (U.S. city average) as measured from July 2003 to the July 
preceding the current year involved.
    (2) If the figure in paragraph (b)(1) of this section is not a 
multiple of $10, then it is rounded to the nearest multiple of $10. The 
Secretary will publish changes to the amount in controversy requirement 
in the Federal Register when necessary.
    (c) Judicial review. To be entitled to judicial review, a party must 
meet the amount in controversy requirements of this subpart at the time 
it requests judicial review.
    (1) For review requests, the required amount remaining in 
controversy must be $1,000 or more, adjusted as specified in paragraphs 
(b)(1) and (b)(2) of this section.
    (2) [Reserved]
    (d) Calculating the amount remaining in controversy. (1) The amount 
remaining in controversy is computed as the actual amount charged the 
individual for the items and services in question, reduced by--
    (i) Any Medicare payments already made or awarded for the items or 
services; and
    (ii) Any deductible and coinsurance amounts applicable in the 
particular case.
    (2) Notwithstanding paragraph (d)(1) of this section, when payment 
is made for items or services under section 1879 of the Act or Sec. 
411.400 of this chapter, or the liability of the beneficiary for those 
services is limited under Sec. 411.402 of this chapter, the amount in 
controversy is computed as the amount that the beneficiary would have 
been charged for the items or services in question if those expenses 
were not paid under Sec. 411.400 of this chapter or if that liability 
was not limited under Sec. 411.402 of this chapter, reduced by any 
deductible and coinsurance amounts applicable in the particular case.
    (e) Aggregating claims to meet the amount in controversy--
    (1) Appealing QIC reconsiderations to the ALJ level. Either an 
individual appellant or multiple appellants may aggregate two or more 
claims to meet the amount in controversy for an ALJ hearing if--
    (i) The claims were previously reconsidered by a QIC;
    (ii) The request for ALJ hearing lists all of the claims to be 
aggregated and is filed within 60 days after receipt of all of the 
reconsiderations being appealed; and
    (iii) The ALJ determines that the claims that a single appellant 
seeks to aggregate involve the delivery of similar or related services, 
or the claims that multiple appellants seek to aggregate involve common 
issues of law and fact. Part A and Part B claims may be combined to meet 
the amount in controversy requirements.
    (2) Aggregating claims that are escalated from the QIC level to the 
ALJ level. Either an individual appellant or multiple appellants may 
aggregate two or more claims to meet the amount in controversy for an 
ALJ hearing if--

[[Page 176]]

    (i) The claims were pending before the QIC in conjunction with the 
same request for reconsideration;
    (ii) The appellant(s) requests aggregation of the claims to the ALJ 
level in the same request for escalation; and
    (iii) The ALJ determines that the claims that a single appellant 
seeks to aggregate involve the delivery of similar or related services, 
or the claims that multiple appellants seek to aggregate involve common 
issues of law and fact. Part A and Part B claims may be combined to meet 
the amount in controversy requirements.
    (f) Content of request for aggregation. When an appellant(s) seeks 
to aggregate claims in a request for an ALJ hearing, the appellant(s) 
must--
    (1) Specify all of the claims the appellant(s) seeks to aggregate; 
and
    (2) State why the appellant(s) believes that the claims involve 
common issues of law and fact or delivery of similar or related 
services.



Sec. 405.1008  Parties to an ALJ hearing.

    (a) Who may request a hearing. Any party to the QIC's 
reconsideration may request a hearing before an ALJ. However, only the 
appellant (that is, the party that filed and maintained the request for 
reconsideration by a QIC) may request that the appeal be escalated to 
the ALJ level if the QIC does not complete its action within the time 
frame described in Sec. 405.970.
    (b) Who are parties to the ALJ hearing. The party who filed the 
request for hearing and all other parties to the reconsideration are 
parties to the ALJ hearing. In addition, a representative of CMS or its 
contractor may be a party under the circumstances described in Sec. 
405.1012.



Sec. 405.1010  When CMS or its contractors may participate in an ALJ hearing.

    (a) An ALJ may request, but may not require, CMS and/or one or more 
of its contractors, to participate in any proceedings before the ALJ, 
including the oral hearing, if any. CMS and/or one or more of its 
contractors, including a QIC, may also elect to participate in the 
hearing process.
    (b) If CMS or one or more of its contractors elects to participate, 
it advises the ALJ, the appellant, and all other parties identified in 
the notice of hearing of its intent to participate no later than 10 days 
after receiving the notice of hearing.
    (c) Participation may include filing position papers or providing 
testimony to clarify factual or policy issues in a case, but it does not 
include calling witnesses or cross-examining the witnesses of a party to 
the hearing.
    (d) When CMS or its contractor participates in an ALJ hearing, the 
agency or its contractor may not be called as a witness during the 
hearing.
    (e) CMS or its contractor must submit any position papers within the 
time frame designated by the ALJ.
    (f) The ALJ cannot draw any adverse inferences if CMS or a 
contractor decides not to participate in any proceedings before an ALJ, 
including the hearing.



Sec. 405.1012  When CMS or its contractors may be a party to a hearing.

    (a) CMS and/or one or more of its contractors, including a QIC, may 
be a party to an ALJ hearing unless the request for hearing is filed by 
an unrepresented beneficiary.
    (b) CMS and/or the contractor(s) advises the ALJ, appellant, and all 
other parties identified in the notice of hearing that it intends to 
participate as a party no later than 10 days after receiving the notice 
of hearing.
    (c) When CMS or one or more of its contractors participate in a 
hearing as a party, it may file position papers, provide testimony to 
clarify factual or policy issues, call witnesses or cross-examine the 
witnesses of other parties. CMS or its contractor(s) will submit any 
position papers within the time frame specified by the ALJ. CMS or its 
contractor(s), when acting as parties, may also submit additional 
evidence to the ALJ within the time frame designated by the ALJ.
    (d) The ALJ may not require CMS or a contractor to enter a case as a 
party or draw any adverse inferences if CMS or a contractor decides not 
to enter as a party.



Sec. 405.1014  Request for an ALJ hearing.

    (a) Content of the request. The request for an ALJ hearing must be 
made in

[[Page 177]]

writing. The request must include all of the following--
    (1) The name, address, and Medicare health insurance claim number of 
the beneficiary whose claim is being appealed.
    (2) The name and address of the appellant, when the appellant is not 
the beneficiary.
    (3) The name and address of the designated representatives if any.
    (4) The document control number assigned to the appeal by the QIC, 
if any.
    (5) The dates of service.
    (6) The reasons the appellant disagrees with the QIC's 
reconsideration or other determination being appealed.
    (7) A statement of any additional evidence to be submitted and the 
date it will be submitted.
    (b) When and where to file. The request for an ALJ hearing after a 
QIC reconsideration must be filed--
    (1) Within 60 days from the date the party receives notice of the 
QIC's reconsideration;
    (2) With the entity specified in the QIC's reconsideration. The 
appellant must also send a copy of the request for hearing to the other 
parties. Failure to do so will toll the ALJ's 90-day adjudication 
deadline until all parties to the QIC reconsideration receive notice of 
the requested ALJ hearing. If the request for hearing is timely filed 
with an entity other than the entity specified in the QIC's 
reconsideration, the deadline specified in Sec. 405.1016 for deciding 
the appeal begins on the date the entity specified in the QIC's 
reconsideration receives the request for hearing. If the request for 
hearing is filed with an entity, other than the entity specified in the 
QIC's reconsideration, the ALJ hearing office must notify the appellant 
of the date of receipt of the request and the commencement of the 90-day 
adjudication time frame.
    (c) Extension of time to request a hearing. (1) If the request for 
hearing is not filed within 60 calendar days of receipt of the QIC's 
reconsideration, an appellant may request an extension for good cause 
(See Sec. Sec. 405.942(b)(2) and 405.942(b)(3)).
    (2) Any request for an extension of time must be in writing, give 
the reasons why the request for a hearing was not filed within the 
stated time period, and must be filed with the entity specified in the 
notice of reconsideration.
    (3) If the ALJ finds there is good cause for missing the deadline, 
the time period for filing the hearing request will be extended. To 
determine whether good cause for late filing exists, the ALJ uses the 
standards set forth in Sec. 405.942(b)(2) and Sec. 405.942(b)(3).
    (4) If a request for hearing is not timely filed, the adjudication 
period in Sec. 405.1016 begins the date the ALJ grants the request to 
extend the filing deadline.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]



Sec. 405.1016  Time frames for deciding an appeal before an ALJ.

    (a) When a request for an ALJ hearing is filed after a QIC has 
issued a reconsideration, the ALJ must issue a decision, dismissal 
order, or remand to the QIC, as appropriate, no later than the end of 
the 90-day period beginning on the date the request for hearing is 
received by the entity specified in the QIC's notice of reconsideration, 
unless the 90-day period has been extended as provided in this subpart.
    (b) The adjudication period specified in paragraph (a) of this 
section begins on the date that a timely filed request for hearing is 
received by the entity specified in the QIC's reconsideration, or, if it 
is not timely filed, the date that the ALJ grants any extension to the 
filing deadline.
    (c) When an appeal is escalated to the ALJ level because the QIC has 
not issued a reconsideration determination within the period specified 
in Sec. 405.970, the ALJ must issue a decision, dismissal order, or 
remand to the QIC, as appropriate, no later than the end of the 180-day 
period beginning on the date that the request for escalation is received 
by the ALJ hearing office, unless the 180-day period is extended as 
provided in this subpart.
    (d) When CMS or its contractor is a party to an ALJ hearing and a 
party requests discovery under Sec. 405.1037 against another party to 
the hearing, the adjudication periods discussed in paragraphs (a) and 
(c) of this section are tolled.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005]

[[Page 178]]



Sec. 405.1018  Submitting evidence before the ALJ hearing.

    (a) Except as provided in this section, parties must submit all 
written evidence they wish to have considered at the hearing with the 
request for hearing (or within 10 days of receiving the notice of 
hearing).
    (b) If a party submits written evidence later than 10 days after 
receiving the notice of hearing, the period between the time the 
evidence was required to have been submitted and the time it is received 
is not counted toward the adjudication deadline specified in Sec. 
405.1016.
    (c) Any evidence submitted by a provider, supplier, or beneficiary 
represented by a provider or supplier that is not submitted prior to the 
issuance of the QIC's reconsideration determination must be accompanied 
by a statement explaining why the evidence was not previously submitted 
to the QIC, or a prior decision-maker (see Sec. 405.1028).
    (d) The requirements of this section do not apply to oral testimony 
given at a hearing, or to evidence submitted by an unrepresented 
beneficiary.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1020  Time and place for a hearing before an ALJ.

    (a) General. The ALJ sets the time and place for the hearing, and 
may change the time and place, if necessary.
    (b) Determining how appearances are made. The ALJ will direct that 
the appearance of an individual be conducted by videoteleconferencing 
(VTC) if the ALJ finds that VTC technology is available to conduct the 
appearance. The ALJ may also offer to conduct a hearing by telephone if 
the request for hearing or administrative record suggests that a 
telephone hearing may be more convenient for one or more of the parties. 
The ALJ, with the concurrence of the Managing Field Office ALJ, may 
determine that an in-person hearing should be conducted if--
    (1) VTC technology is not available; or
    (2) Special or extraordinary circumstances exist.
    (c) Notice of hearing. (1) The ALJ sends a notice of hearing to all 
parties that filed an appeal or participated in the reconsideration, any 
party who was found liable for the services at issue subsequent to the 
initial determination, the contractor that issued the initial 
determination, and the QIC that issued the reconsideration, advising 
them of the proposed time and place of the hearing.
    (2) The notice of hearing will require all parties to the ALJ 
hearing (and any potential participant from CMS or its contractor who 
wishes to attend the hearing) to reply to the notice by:
    (i) Acknowledging whether they plan to attend the hearing at the 
time and place proposed in the notice of hearing; or
    (ii) Objecting to the proposed time and/or place of the hearing.
    (d) A party's right to waive a hearing. A party may also waive the 
right to a hearing and request that the ALJ issue a decision based on 
the written evidence in the record. As provided in Sec. 405.1000, the 
ALJ may require the parties to attend a hearing if it is necessary to 
decide the case. If the ALJ determines that it is necessary to obtain 
testimony from a non-party, he or she may still hold a hearing to obtain 
that testimony, even if all of the parties have waived the right to 
appear. In those cases, the ALJ will give the parties the opportunity to 
appear when the testimony is given but may hold the hearing even if none 
of the parties decide to appear.
    (e) A party's objection to time and place of hearing. (1) If a party 
objects to the time and place of the hearing, the party must notify the 
ALJ at the earliest possible opportunity before the time set for the 
hearing.
    (2) The party must state the reason for the objection and state the 
time and place he or she wants the hearing to be held.
    (3) The request must be in writing.
    (4) The ALJ may change the time or place of the hearing if the party 
has good cause. (Section 405.1052(a)(2) provides the procedures the ALJ 
follows when a party does not respond to a notice of hearing and fails 
to appear at the time and place of the hearing.)
    (f) Good cause for changing the time or place. The ALJ can find good 
cause for changing the time or place of the

[[Page 179]]

scheduled hearing and reschedule the hearing if the information 
available to the ALJ supports the party's contention that--
    (1) The party or his or her representative is unable to attend or to 
travel to the scheduled hearing because of a serious physical or mental 
condition, incapacitating injury, or death in the family; or
    (2) Severe weather conditions make it impossible to travel to the 
hearing; or
    (3) Good cause exists as set forth in paragraph (g) of this section.
    (g) Good cause in other circumstances. (1) In determining whether 
good cause exists in circumstances other than those set forth in 
paragraph (f) of this section, the ALJ considers the party's reason for 
requesting the change, the facts supporting the request, and the impact 
of the proposed change on the efficient administration of the hearing 
process.
    (2) Factors evaluated to determine the impact of the change include, 
but are not limited to, the effect on processing other scheduled 
hearings, potential delays in rescheduling the hearing, and whether any 
prior changes were granted the party.
    (3) Examples of other circumstances a party might give for 
requesting a change in the time or place of the hearing include, but are 
not limited to, the following:
    (i) The party has attempted to obtain a representative but needs 
additional time.
    (ii) The party's representative was appointed within 10 days of the 
scheduled hearing and needs additional time to prepare for the hearing.
    (iii) The party's representative has a prior commitment to be in 
court or at another administrative hearing on the date scheduled for the 
hearing.
    (iv) A witness who will testify to facts material to a party's case 
is unavailable to attend the scheduled hearing and the evidence cannot 
be otherwise obtained.
    (v) Transportation is not readily available for a party to travel to 
the hearing.
    (vi) The party is unrepresented, and is unable to respond to the 
notice of hearing because of any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language) that he or she has.
    (h) Effect of rescheduling hearing. If a hearing is postponed at the 
request of the appellant for any of the above reasons, the time between 
the originally scheduled hearing date and the new hearing date is not 
counted toward the adjudication deadline specified in Sec. 405.1016.
    (i) A party's request for an in-person hearing. (1) If a party 
objects to a VTC hearing or to the ALJ's offer to conduct a hearing by 
telephone, the party must notify the ALJ at the earliest possible 
opportunity before the time set for the hearing and request an in-person 
hearing.
    (2) The party must state the reason for the objection and state the 
time or place he or she wants the hearing to be held.
    (3) The request must be in writing.
    (4) When a party's request for an in-person hearing is granted, the 
party is deemed to have waived the 90-day time frame specified in Sec. 
405.1016.
    (5) The ALJ may grant the request, with the concurrence of the 
Managing Field Office ALJ, upon a finding of good cause and will 
reschedule the hearing for a time and place when the party may appear in 
person before the ALJ.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1022  Notice of a hearing before an ALJ.

    (a) Issuing the notice. After the ALJ sets the time and place of the 
hearing, notice of the hearing will be mailed to the parties and other 
potential participants, as provided in Sec. 405.1020(c) at their last 
known addresses, or given by personal service, unless the parties have 
indicated in writing that they do not wish to receive this notice. The 
notice is mailed or served at least 20 days before the hearing.
    (b) Notice information. (1) The notice of hearing contains a 
statement of the specific issues to be decided and will inform the 
parties that they may designate a person to represent them during the 
proceedings.

[[Page 180]]

    (2) The notice must include an explanation of the procedures for 
requesting a change in the time or place of the hearing, a reminder 
that, if the appellant fails to appear at the scheduled hearing without 
good cause, the ALJ may dismiss the hearing request, and other 
information about the scheduling and conduct of the hearing.
    (3) The appellant will also be told if his or her appearance or that 
of any other party or witness is scheduled by VTC, telephone, or in 
person. If the ALJ has scheduled the appellant or other party to appear 
at the hearing by VTC, the notice of hearing will advise that the 
scheduled place for the hearing is a VTC site and explain what it means 
to appear at the hearing by VTC.
    (4) The notice advises the appellant or other parties that if they 
object to appearing by VTC or telephone, and wish instead to have their 
hearing at a time and place where they may appear in person before the 
ALJ, they must follow the procedures set forth at Sec. 405.1020(i) for 
notifying the ALJ of their objections and for requesting an in-person 
hearing.
    (c) Acknowledging the notice of hearing. (1) If the appellant, any 
other party to the reconsideration, or their representative does not 
acknowledge receipt of the notice of hearing, the ALJ hearing office 
attempts to contact the party for an explanation.
    (2) If the party states that he or she did not receive the notice of 
hearing, an amended notice is sent to him or her by certified mail or e-
mail, if available. (See Sec. 405.1052 for the procedures the ALJ 
follows in deciding if the time or place of a scheduled hearing will be 
changed if a party does not respond to the notice of hearing).



Sec. 405.1024  Objections to the issues.

    (a) If a party objects to the issues described in the notice of 
hearing, he or she must notify the ALJ in writing at the earliest 
possible opportunity before the time set for the hearing, and no later 
than 5 days before the hearing.
    (b) The party must state the reasons for his or her objections and 
send a copy of the objections to all other parties to the appeal.
    (c) The ALJ makes a decision on the objections either in writing or 
at the hearing.



Sec. 405.1026  Disqualification of the ALJ.

    (a) An ALJ cannot conduct a hearing if he or she is prejudiced or 
partial to any party or has any interest in the matter pending for 
decision.
    (b) If a party objects to the ALJ who will conduct the hearing, the 
party must notify the ALJ within 10 calendar days of the date of the 
notice of hearing. The ALJ considers the party's objections and decides 
whether to proceed with the hearing or withdraw.
    (c) If the ALJ withdraws, another ALJ will be appointed to conduct 
the hearing. If the ALJ does not withdraw, the party may, after the ALJ 
has issued an action in the case, present his or her objections to the 
MAC in accordance with Sec. 405.1100 et seq. The MAC will then consider 
whether the hearing decision should be revised or a new hearing held 
before another ALJ. If the case is escalated to the MAC after a hearing 
is held but before the ALJ issues a decision, the MAC considers the 
reasons the party objected to the ALJ during its review of the case and, 
if the MAC deems it necessary, may remand the case to another ALJ for a 
hearing and decision.



Sec. 405.1028  Prehearing case review of evidence submitted to the ALJ.

    (a) Examination of any new evidence. After a hearing is requested 
but before it is held, the ALJ will examine any new evidence submitted 
with the request for hearing (or within 10 days of receiving the notice 
of hearing) as specified in Sec. 405.1018, by a provider, supplier, or 
beneficiary represented by a provider or supplier to determine whether 
the provider, supplier, or beneficiary represented by a provider or 
supplier had good cause for submitting the evidence for the first time 
at the ALJ level.
    (b) Determining if good cause exists. An ALJ finds good cause, for 
example, when the new evidence is material to an issue addressed in the 
QIC's reconsideration and that issue was not identified as a material 
issue prior to the QIC's reconsideration.

[[Page 181]]

    (c) If good cause does not exist. If the ALJ determines that there 
was not good cause for submitting the evidence for the first time at the 
ALJ level, the ALJ must exclude the evidence from the proceeding and may 
not consider it in reaching a decision.
    (d) Notification to all parties. As soon as possible, but no later 
than the start of the hearing, the ALJ must notify all parties that the 
evidence is excluded from the hearing.



Sec. 405.1030  ALJ hearing procedures.

    (a) General rule. A hearing is open to the parties and to other 
persons the ALJ considers necessary and proper.
    (b) At the hearing. At the hearing, the ALJ fully examines the 
issues, questions the parties and other witnesses, and may accept 
documents that are material to the issues consistent with Sec. 405.1018 
and Sec. 405.1028.
    (c) Missing evidence. The ALJ may also stop the hearing temporarily 
and continue it at a later date if he or she believes that there is 
material evidence missing at the hearing. If the missing evidence is in 
the possession of the appellant, and the appellant is a provider, 
supplier, or a beneficiary represented by a provider or supplier, the 
ALJ must determine if the appellant had good cause for not producing the 
evidence earlier.
    (d) Good cause exists. If good cause exists, the ALJ considers the 
evidence in deciding the case and the adjudication period specified in 
Sec. 405.1016 is tolled from the date of the hearing to the date the 
evidence is submitted.
    (e) Good cause does not exist. If the ALJ determines that there was 
not good cause for not submitting the evidence sooner, the evidence is 
excluded.
    (f) Reopen the hearing. The ALJ may also reopen the hearing at any 
time before he or she mails a notice of the decision in order to receive 
new and material evidence pursuant to Sec. 405.986. The ALJ may decide 
when the evidence is presented and when the issues are discussed.



Sec. 405.1032  Issues before an ALJ.

    (a) General rule. The issues before the ALJ include all the issues 
brought out in the initial determination, redetermination, or 
reconsideration that were not decided entirely in a party's favor. (For 
purposes of this provision, the term ``party'' does not include a 
representative of CMS or one of its contractors that may be 
participating in the hearing.) However, if evidence presented before the 
hearing causes the ALJ to question a favorable portion of the 
determination, he or she notifies the parties before the hearing and may 
consider it an issue at the hearing.
    (b) New issues--(1) General. The ALJ may consider a new issue at the 
hearing if he or she notifies all of the parties about the new issue any 
time before the start of the hearing. The new issue may include issues 
resulting from the participation of CMS at the ALJ level of adjudication 
and from any evidence and position papers submitted by CMS for the first 
time to the ALJ. The ALJ or any party may raise a new issue; however, 
the ALJ may only consider a new issue if its resolution--
    (i) Could have a material impact on the claim or claims that are the 
subject of the request for hearing; and
    (ii) Is permissible under the rules governing reopening of 
determinations and decisions (see Sec. 405.980).
    (2) [Reserved]
    (c) Adding claims to a pending appeal. An ALJ cannot add any claim, 
including one that is related to an issue that is appropriately before 
an ALJ, to a pending appeal unless it has been adjudicated at the lower 
appeals levels and all parties are notified of the new issue(s) before 
the start of the hearing.



Sec. 405.1034  When an ALJ may remand a case to the QIC.

    (a) General. If an ALJ believes that the written record is missing 
information that is essential to resolving the issues on appeal and that 
information can be provided only by CMS or its contractors, then the ALJ 
may either:
    (1) Remand the case to the QIC that issued the reconsideration or
    (2) Retain jurisdiction of the case and request that the contractor 
forward the missing information to the appropriate hearing office.
    (b) ALJ remands a case to a QIC. Consistent with Sec. 405.1004 (b), 
the ALJ will remand a case to the appropriate QIC if

[[Page 182]]

the ALJ determines that a QIC's dismissal of a request for 
reconsideration was in error.
    (c) Relationship to local and national coverage determination 
appeals process. (1) The ALJ remands an appeal to the QIC that made the 
reconsideration if the appellant is entitled to relief pursuant to 42 
CFR 426.460(b)(1), 426.488(b), or 426.560(b)(1).
    (2) Unless the appellant is entitled to relief pursuant to 42 CFR 
426.460(b)(1), 426.488(b), or 426.560(b)(1), the ALJ applies the LCD or 
NCD in place on the date the item or service was provided.



Sec. 405.1036  Description of an ALJ hearing process.

    (a) The right to appear and present evidence. (1) Any party to a 
hearing has the right to appear before the ALJ to present evidence and 
to state his or her position. A party may appear by video-
teleconferencing (VTC), telephone, or in person as determined under 
Sec. 405.1020.
    (2) A party may also make his or her appearance by means of a 
representative, who may make the appearance by VTC, telephone, or in 
person, as determined under Sec. 405.1020.
    (3) Witness testimony may be given and CMS participation may also be 
accomplished by VTC, telephone, or in person, as determined under Sec. 
405.1020.
    (b) Waiver of the right to appear. (1) A party may send the ALJ a 
written statement indicating that he or she does not wish to appear at 
the hearing.
    (2) The appellant may subsequently withdraw his or her waiver at any 
time before the notice of the hearing decision is issued; however, by 
withdrawing the waiver the appellant agrees to an extension of the 
adjudication period as specified in Sec. 405.1016 that may be necessary 
to schedule and hold the hearing.
    (3) Other parties may withdraw their waiver up to the date of the 
scheduled hearing, if any. Even if all of the parties waive their right 
to appear at a hearing, the ALJ may require them to attend an oral 
hearing if he or she believes that a personal appearance and testimony 
by the appellant or any other party is necessary to decide the case.
    (c) Presenting written statements and oral arguments. A party or a 
person designated to act as a party's representative may appear before 
the ALJ to state the party's case, to present a written summary of the 
case, or to enter written statements about the facts and law material to 
the case in the record. A copy of any written statements must be 
provided to the other parties to a hearing, if any, at the same time 
they are submitted to the ALJ.
    (d) Waiver of adjudication period. At any time during the hearing 
process, the appellant may waive the adjudication deadline specified in 
Sec. 405.1016 for issuing a hearing decision. The waiver may be for a 
specific period of time agreed upon by the ALJ and the appellant.
    (e) What evidence is admissible at a hearing. The ALJ may receive 
evidence at the hearing even though the evidence is not admissible in 
court under the rules of evidence used by the court.
    (f) Subpoenas. (1) When it is reasonably necessary for the full 
presentation of a case, an ALJ may, on his or her own initiative or at 
the request of a party, issue subpoenas for the appearance and testimony 
of witnesses and for a party to make books, records, correspondence, 
papers, or other documents that are material to an issue at the hearing 
available for inspection and copying.
    (2) A party's written request for a subpoena must--
    (i) Give the names of the witnesses or documents to be produced;
    (ii) Describe the address or location of the witnesses or documents 
with sufficient detail to find them;
    (iii) State the important facts that the witness or document is 
expected to prove; and
    (iv) Indicate why these facts cannot be proven without issuing a 
subpoena.
    (3) Parties to a hearing who wish to subpoena documents or witnesses 
must file a written request for the issuance of a subpoena with the 
requirements set out in paragraph (f)(2) of this section with the ALJ 
within 10 calendar days of receipt of the notice of hearing.
    (4) Where a party has requested a subpoena, a subpoena will be 
issued only where a party--

[[Page 183]]

    (i) Has sought discovery;
    (ii) Has filed a motion to compel;
    (iii) Has had that motion granted by the ALJ; and
    (iv) Nevertheless, has not received the requested discovery.
    (5) Reviewability of subpoena rulings--
    (i) General rule. An ALJ ruling on a subpoena request is not subject 
to immediate review by the MAC. The ruling may be reviewed solely during 
the course of the MAC's review specified in Sec. 405.1102, Sec. 
405.1104, or Sec. 405.1110, as applicable. Exception. To the extent a 
subpoena compels disclosure of a matter for which an objection based on 
privilege, or other protection from disclosure such as case preparation, 
confidentiality, or undue burden, was made before an ALJ, the MAC may 
review immediately the subpoena or that portion of the subpoena as 
applicable.
    (ii) Where CMS objects to a discovery ruling, the MAC must take 
review and the discovery ruling at issue is automatically stayed pending 
the MAC's order.
    (iii) Upon notice to the ALJ that a party or non-party, as 
applicable, intends to seek MAC review of the subpoena, the ALJ must 
stay all proceedings affected by the subpoena.
    (iv) The ALJ determines the length of the stay under the 
circumstances of a given case, but in no event is the stay less than 15 
days beginning after the day on which the ALJ received notice of the 
party or non-party's intent to seek MAC review.
    (v) If the MAC grants a request for review of the subpoena, the 
subpoena or portion of the subpoena, as applicable, is stayed until the 
MAC issues a written decision that affirms, reverses, or modifies the 
ALJ's action on the subpoena.
    (vi) If the MAC does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifted and the ALJ's 
action stands.
    (6) Enforcement. (i) If the ALJ determines, whether on his or her 
own motion or at the request of a party, that a party or non-party 
subject to a subpoena issued under this section has refused to comply 
with the subpoena, the ALJ may request the Secretary to seek enforcement 
of the subpoena in accordance with section 205(e) of the Act, 42 U.S.C. 
405(e).
    (ii) Any enforcement request by an ALJ must consist of a written 
notice to the Secretary describing in detail the ALJ's findings of 
noncompliance and his or her specific request for enforcement, and 
providing a copy of the subpoena and evidence of its receipt by 
certified mail by the party or nonparty subject to the subpoena.
    (iii) The ALJ must promptly mail a copy of the notice and related 
documents to the party subject to the subpoena, and to any other party 
and affected non-party to the appeal.
    (g) Witnesses at a hearing. Witnesses may appear at a hearing. They 
testify under oath or affirmation, unless the ALJ finds an important 
reason to excuse them from taking an oath or affirmation. The ALJ may 
ask the witnesses any questions relevant to the issues and allows the 
parties or their designated representatives to do so.



Sec. 405.1037  Discovery.

    (a) General rules. (1) Discovery is permissible only when CMS or its 
contractor elects to participate in an ALJ hearing as a party.
    (2) The ALJ may permit discovery of a matter that is relevant to the 
specific subject matter of the ALJ hearing, provided the matter is not 
privileged or otherwise protected from disclosure and the ALJ determines 
that the discovery request is not unreasonable, unduly burdensome or 
expensive, or otherwise inappropriate.
    (3) Any discovery initiated by a party must comply with all 
requirements and limitations of this section, along with any further 
requirements or limitations ordered by the ALJ.
    (b) Limitations on discovery. Any discovery before the ALJ is 
limited.
    (1) A party may request of another party the reasonable production 
of documents for inspection and copying.
    (2) A party may not take the deposition, upon oral or written 
examination, of another party unless the proposed deponent agrees to the 
deposition or the ALJ finds that the proposed deposition is necessary 
and appropriate in order to secure the deponent's testimony for an ALJ 
hearing.

[[Page 184]]

    (3) A party may not request admissions or send interrogatories or 
take any other form of discovery not permitted under this section.
    (c) Time limits. (1) A party's discovery request is timely if the 
date of receipt of a request by another party is no later than the date 
specified by the ALJ.
    (2) A party may not conduct discovery any later than the date 
specified by the ALJ.
    (3) Before ruling on a request to extend the time for requesting 
discovery or for conducting discovery, the ALJ must give the other 
parties to the appeal a reasonable period to respond to the extension 
request.
    (4) The ALJ may extend the time in which to request discovery or 
conduct discovery only if the requesting party establishes that it was 
not dilatory or otherwise at fault in not meeting the original discovery 
deadline.
    (5) If the ALJ grants the extension request, it must impose a new 
discovery deadline and, if necessary, reschedule the hearing date so 
that all discoveries end no later than 45 days before the hearing.
    (d) Motions to compel or for protective order. (1) Each party is 
required to make a good faith effort to resolve or narrow any discovery 
dispute.
    (2) A party may submit to the ALJ a motion to compel discovery that 
is permitted under this section or any ALJ order, and a party may submit 
a motion for a protective order regarding any discovery request to the 
ALJ.
    (3) Any motion to compel or for protective order must include a 
self-sworn declaration describing the movant's efforts to resolve or 
narrow the discovery dispute. The declaration must also be included with 
any response to a motion to compel or for protective order.
    (4) The ALJ must decide any motion in accordance with this section 
and any prior discovery ruling in the appeal.
    (5) The ALJ must issue and mail to each party a discovery ruling 
that grants or denies the motion to compel or for protective order in 
whole or in part; if applicable, the discovery ruling must specifically 
identify any part of the disputed discovery request upheld and any part 
rejected, and impose any limits on discovery the ALJ finds necessary and 
appropriate.
    (e) Reviewability of discovery and disclosure rulings--(1) General 
rule. An ALJ discovery ruling, or an ALJ disclosure ruling such as one 
issued at a hearing is not subject to immediate review by the MAC. The 
ruling may be reviewed solely during the course of the MAC's review 
specified in Sec. 405.1100, Sec. 405.1102, Sec. 405.1104, or Sec. 
405.1110, as applicable.
    (2) Exception. To the extent a ruling authorizes discovery or 
disclosure of a matter for which an objection based on privilege, or 
other protection from disclosure such as case preparation, 
confidentiality, or undue burden, was made before the ALJ, the MAC may 
review that portion of the discovery or disclosure ruling immediately.
    (i) Where CMS objects to a discovery ruling, the MAC must take 
review and the discovery ruling at issue is automatically stayed pending 
the MAC's order.
    (ii) Upon notice to the ALJ that a party intends to seek MAC review 
of the ruling, the ALJ must stay all proceedings affected by the ruling.
    (iii) The ALJ determines the length of the stay under the 
circumstances of a given case, but in no event must the length of the 
stay be less than 15 days beginning after the day on which the ALJ 
received notice of the party or non-party's intent to seek MAC review.
    (iv) Where CMS requests the MAC to take review of a discovery ruling 
or where the MAC grants a request, made by a party other than CMS, to 
review a discovery ruling, the ruling is stayed until the time the MAC 
issues a written decision that affirms, reverses, modifies, or remands 
the ALJ's ruling.
    (v) With respect to a request from a party, other than CMS, for 
review of a discovery ruling, if the MAC does not grant review or take 
own motion review within the time allotted for the stay, the stay is 
lifted and the ruling stands.
    (f) Adjudication time frames. If a party requests discovery from 
another party to the ALJ hearing, the ALJ adjudication time frame 
specified in Sec. 405.1016 is tolled until the discovery dispute is 
resolved.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]

[[Page 185]]



Sec. 405.1038  Deciding a case without a hearing before an ALJ.

    (a) Decision wholly favorable. If the evidence in the hearing record 
supports a finding in favor of appellant(s) on every issue, the ALJ may 
issue a hearing decision without giving the parties prior notice and 
without holding a hearing. The notice of the decision informs the 
parties that they have the right to a hearing and a right to examine the 
evidence on which the decision is based.
    (b) Parties do not wish to appear. (1) The ALJ may decide a case on 
the record and not conduct a hearing if--
    (i) All the parties indicate in writing that they do not wish to 
appear before the ALJ at a hearing, including a hearing conducted by 
telephone or videoconferencing, if available; or
    (ii) The appellant lives outside the United States and does not 
inform the ALJ that he or she wants to appear, and there are no other 
parties who wish to appear.
    (2) When a hearing is not held, the decision of the ALJ must refer 
to the evidence in the record on which the decision was based.



Sec. 405.1040  Prehearing and posthearing conferences.

    (a) The ALJ may decide on his or her own, or at the request of any 
party to the hearing, to hold a prehearing or posthearing conference to 
facilitate the hearing or the hearing decision.
    (b) The ALJ informs the parties of the time, place, and purpose of 
the conference at least 7 calendar days before the conference date, 
unless a party indicates in writing that it does not wish to receive a 
written notice of the conference.
    (c) At the conference, the ALJ may consider matters in addition to 
those stated in the notice of hearing, if the parties consent in 
writing. A record of the conference is made.
    (d) The ALJ issues an order stating all agreements and actions 
resulting from the conference. If the parties do not object, the 
agreements and actions become part of the hearing record and are binding 
on all parties.



Sec. 405.1042  The administrative record.

    (a) Creating the record. (1) The ALJ makes a complete record of the 
evidence, including the hearing proceedings, if any.
    (2) The record will include marked as exhibits, the documents used 
in making the decision under review, including, but not limited to, 
claims, medical records, written statements, certificates, reports, 
affidavits, and any other evidence the ALJ admits. In the record, the 
ALJ must also discuss any evidence excluded under Sec. 405.1028 and 
include a justification for excluding the evidence.
    (3) A party may review the record at the hearing, or, if a hearing 
is not held, at any time before the ALJ's notice of decision is issued.
    (4) If a request for review is filed or the case is escalated to the 
MAC, the complete record, including any recording of the hearing, is 
forwarded to the MAC.
    (5) A typed transcription of the hearing is prepared if a party 
seeks judicial review of the case in a Federal district court within the 
stated time period and all other jurisdictional criteria are met, 
unless, upon the Secretary's motion prior to the filing of an answer, 
the court remands the case.
    (b) Requesting and receiving copies of the record. (1) A party may 
request and receive a copy of all or part of the record, including the 
exhibits list, documentary evidence, and a copy of the tape of the oral 
proceedings. The party may be asked to pay the costs of providing these 
items.
    (2) If a party requests all or part of the record from the ALJ and 
an opportunity to comment on the record, the time beginning with the 
ALJ's receipt of the request through the expiration of the time granted 
for the party's response does not count toward the 90-day adjudication 
deadline.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1044  Consolidated hearing before an ALJ.

    (a) A consolidated hearing may be held if one or more of the issues 
to be considered at the hearing are the same

[[Page 186]]

issues that are involved in another request for hearing or hearings 
pending before the same ALJ.
    (b) It is within the discretion of the ALJ to grant or deny an 
appellant's request for consolidation. In considering an appellant's 
request, the ALJ may consider factors such as whether the claims at 
issue may be more efficiently decided if the requests for hearing are 
combined. In considering the appellant's request for consolidation, the 
ALJ must take into account the adjudication deadlines for each case and 
may require an appellant to waive the adjudication deadline associated 
with one or more cases if consolidation otherwise prevents the ALJ from 
deciding all of the appeals at issue within their respective deadlines.
    (c) The ALJ may also propose on his or her own motion to consolidate 
two or more cases in one hearing for administrative efficiency, but may 
not require an appellant to waive the adjudication deadline for any of 
the consolidated cases.
    (d) Before consolidating a hearing, the ALJ must notify CMS of his 
or her intention to do so, and CMS may then elect to participate in the 
consolidated hearing, as a party, by sending written notice to the ALJ 
within 10 days after receipt of the ALJ's notice of the consolidation.
    (e) If the ALJ decides to hold a consolidated hearing, he or she may 
make either a consolidated decision and record or a separate decision 
and record on each claim. The ALJ ensures that any evidence that is 
common to all claims and material to the common issue to be decided is 
included in the consolidated record or each individual record, as 
applicable.



Sec. 405.1046  Notice of an ALJ decision.

    (a) General rule. Unless the ALJ dismisses the hearing, the ALJ will 
issue a written decision that gives the findings of fact, conclusions of 
law, and the reasons for the decision. The decision must be based on 
evidence offered at the hearing or otherwise admitted into the record. 
The ALJ mails a copy of the decision to all the parties at their last 
known address, to the QIC that issued the reconsideration determination, 
and to the contractor that issued the initial determination. For 
overpayment cases involving multiple beneficiaries, where there is no 
beneficiary liability, the ALJ may choose to send written notice only to 
the appellant. In the event a payment will be made to a provider or 
supplier in conjunction with this ALJ decision, the contractor must also 
issue a revised electronic or paper remittance advice to that provider 
or supplier.
    (b) Content of the notice. The decision must be written in a manner 
calculated to be understood by a beneficiary and must include--
    (1) The specific reasons for the determination, including, to the 
extent appropriate, a summary of any clinical or scientific evidence 
used in making the determination;
    (2) The procedures for obtaining additional information concerning 
the decision; and
    (3) Notification of the right to appeal the decision to the MAC, 
including instructions on how to initiate an appeal under this section.
    (c) Limitation on decision. When the amount of payment for an item 
or service is an issue before the ALJ, the ALJ may make a finding as to 
the amount of payment due. If the ALJ makes a finding concerning payment 
when the amount of payment was not an issue before the ALJ, the 
contractor may independently determine the payment amount. In either of 
the aforementioned situations, an ALJ's decision is not final for 
purposes of determining the amount of payment due. The amount of payment 
determined by the contractor in effectuating the ALJ's decision is a new 
initial determination under Sec. 405.924.
    (d) Timing of decision. The ALJ issues a decision by the end of the 
90-day period beginning on the date when the request for hearing is 
received by the entity specified in the QIC's reconsideration, unless 
the 90-day period is extended as provided in Sec. 405.1016.
    (e) Recommended decision. An ALJ issues a recommended decision if he 
or she is directed to do so in the MAC's remand order. An ALJ may not 
issue a recommended decision on his or her own motion. The ALJ mails a 
copy of

[[Page 187]]

the recommended decision to all the parties at their last known address.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1048  The effect of an ALJ's decision.

    The decision of the ALJ is binding on all parties to the hearing 
unless--
    (a) A party to the hearing requests a review of the decision by the 
MAC within the stated time period or the MAC reviews the decision issued 
by an ALJ under the procedures set forth in Sec. 405.1110, and the MAC 
either issues a final action or the appeal is escalated to Federal 
district court under the provisions at Sec. 405.1132 and the Federal 
district court issues a decision.
    (b) The decision is reopened and revised by an ALJ or the MAC under 
the procedures explained in Sec. 405.980;
    (c) The expedited access to judicial review process at Sec. 405.990 
is used;
    (d) The ALJ's decision is a recommended decision directed to the MAC 
and the MAC issues a decision; or
    (e) In a case remanded by a Federal district court, the MAC assumes 
jurisdiction under the procedures in Sec. 405.1138 and the MAC issues a 
decision.



Sec. 405.1050  Removal of a hearing request from an ALJ to the MAC.

    If a request for hearing is pending before an ALJ, the MAC may 
assume responsibility for holding a hearing by requesting that the ALJ 
send the hearing request to it. If the MAC holds a hearing, it conducts 
the hearing according to the rules for hearings before an ALJ. Notice is 
mailed to all parties at their last known address informing them that 
the MAC has assumed responsibility for the case.



Sec. 405.1052  Dismissal of a request for a hearing before an ALJ.

    Dismissal of a request for a hearing is in accordance with the 
following:
    (a) An ALJ dismisses a request for a hearing under any of the 
following conditions:
    (1) At any time before notice of the hearing decision is mailed, if 
only one party requested the hearing and that party asks to withdraw the 
request. This request may be submitted in writing to the ALJ or made 
orally at the hearing. The request for withdrawal must include a clear 
statement that the appellant is withdrawing the request for hearing and 
does not intend to further proceed with the appeal. If an attorney, or 
other legal professional on behalf of a beneficiary or other appellant 
files the request for withdrawal, the ALJ may presume that the 
representative has advised the appellant of the consequences of the 
withdrawal and dismissal.
    (2) Neither the party that requested the hearing nor the party's 
representative appears at the time and place set for the hearing, if--
    (i) The party was notified before the time set for the hearing that 
the request for hearing might be dismissed without further notice for 
failure to appear;
    (ii) The party did not appear at the time and place of hearing and 
does not contact the ALJ hearing office within 10 days and provide good 
cause for not appearing; or
    (iii) The ALJ sends a notice to the party asking why the party did 
not appear; and the party does not respond to the ALJ's notice within 10 
days or does not provide good cause for the failure to appear.
    (iv) In determining whether good cause exists under this paragraph 
(a)(2), the ALJ considers any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language), that the party may have.
    (3) The person or entity requesting a hearing has no right to it 
under Sec. 405.1002.
    (4) The party did not request a hearing within the stated time 
period and the ALJ has not found good cause for extending the deadline, 
as provided in Sec. 405.1014(c).
    (5) The beneficiary whose claim is being appealed died while the 
request for hearing is pending and all of the following criteria apply:
    (i) The request for hearing was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding this 
issue, the ALJ considers if the surviving spouse or estate

[[Page 188]]

remains liable for the services that were denied or a Medicare 
contractor held the beneficiary liable for subsequent similar services 
under the limitation of liability provisions based on the denial of the 
services at issue.
    (ii) No other individuals or entities that have a financial interest 
in the case wish to pursue an appeal under Sec. 405.1002.
    (iii) No other individual or entity filed a valid and timely request 
for an ALJ hearing in accordance to Sec. 405.1014.
    (6) The ALJ dismisses a hearing request entirely or refuses to 
consider any one or more of the issues because a QIC, an ALJ or the MAC 
has made a previous determination or decision under this subpart about 
the appellant's rights on the same facts and on the same issue(s) or 
claim(s), and this previous determination or decision has become final 
by either administrative or judicial action.
    (7) The appellant abandons the request for hearing. An ALJ may 
conclude that an appellant has abandoned a request for hearing when the 
ALJ hearing office attempts to schedule a hearing and is unable to 
contact the appellant after making reasonable efforts to do so.
    (b) Notice of dismissal. The ALJ mails a written notice of the 
dismissal of the hearing request to all parties at their last known 
address. The notice states that there is a right to request that the MAC 
vacate the dismissal action.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1054  Effect of dismissal of a request for a hearing before an ALJ.

    The dismissal of a request for a hearing is binding, unless it is 
vacated by the MAC under Sec. 405.1108(b).

               Applicability of Medicare Coverage Policies



Sec. 405.1060  Applicability of national coverage determinations (NCDs).

    (a) General rule. (1) An NCD is a determination by the Secretary of 
whether a particular item or service is covered nationally under 
Medicare.
    (2) An NCD does not include a determination of what code, if any, is 
assigned to a particular item or service covered under Medicare or a 
determination of the amount of payment made for a particular item or 
service.
    (3) NCDs are made under section 1862(a)(1) of the Act as well as 
under other applicable provisions of the Act.
    (4) An NCD is binding on fiscal intermediaries, carriers, QIOs, 
QICs, ALJs, and the MAC.
    (b) Review by an ALJ. (1) An ALJ may not disregard, set aside, or 
otherwise review an NCD.
    (2) An ALJ may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD was applied correctly to the claim.
    (c) Review by the MAC. (1) The MAC may not disregard, set aside, or 
otherwise review an NCD for purposes of a section 1869 claim appeal, 
except that the DAB may review NCDs as provided under part 426 of this 
title.
    (2) The MAC may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD was applied correctly to the claim.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1062  Applicability of local coverage determinations and other 

policies not binding on the ALJ and MAC.

    (a) ALJs and the MAC are not bound by LCDs, LMRPs, or CMS program 
guidance, such as program memoranda and manual instructions, but will 
give substantial deference to these policies if they are applicable to a 
particular case.
    (b) If an ALJ or MAC declines to follow a policy in a particular 
case, the ALJ or MAC decision must explain the reasons why the policy 
was not followed. An ALJ or MAC decision to disregard such policy 
applies only to the specific claim being considered and does not have 
precedential effect.
    (c) An ALJ or MAC may not set aside or review the validity of an 
LMRP or LCD for purposes of a claim appeal. An ALJ or the DAB may review 
or set aside an LCD (or any part of an LMRP that constitutes an LCD) in 
accordance with part 426 of this title.

[[Page 189]]



Sec. 405.1063  Applicability of CMS Rulings.

    CMS Rulings are published under the authority of the Administrator, 
CMS. Consistent with Sec. 401.108 of this chapter, rulings are binding 
on all CMS components, on all HHS components that adjudicate matters 
under the jurisdiction of CMS, and on the Social Security Administration 
to the extent that components of the Social Security Administration 
adjudicate matters under the jurisdiction of CMS.



Sec. 405.1064  ALJ decisions involving statistical samples.

    When an appeal from the QIC involves an overpayment issue and the 
QIC used a statistical sample in reaching its reconsideration, the ALJ 
must base his or her decision on a review of the entire statistical 
sample used by the QIC.

                     Medicare Appeals Council Review



Sec. 405.1100  Medicare Appeals Council review: General.

    (a) The appellant or any other party to the hearing may request that 
the MAC review an ALJ's decision or dismissal.
    (b) Under circumstances set forth in Sec. 405.1104 and 405.1108, 
the appellant may request that a case be escalated to the MAC for a 
decision even if the ALJ has not issued a decision or dismissal in his 
or her case.
    (c) When the MAC reviews an ALJ's decision, it undertakes a de novo 
review. The MAC issues a final action or remands a case to the ALJ 
within 90 days of receipt of the appellant's request for review, unless 
the 90-day period is extended as provided in this subpart.
    (d) When deciding an appeal that was escalated from the ALJ level to 
the MAC, the MAC will issue a final action or remand the case to the ALJ 
within 180 days of receipt of the appellant's request for escalation, 
unless the 180-day period is extended as provided in this subpart.



Sec. 405.1102  Request for MAC review when ALJ issues decision or dismissal.

    (a)(1) A party to the ALJ hearing may request a MAC review if the 
party files a written request for a MAC review within 60 days after 
receipt of the ALJ's decision or dismissal.
    (2) For purposes of this section, the date of receipt of the ALJ's 
decision or dismissal is presumed to be 5 days after the date of the 
notice of the decision or dismissal, unless there is evidence to the 
contrary.
    (3) The request is considered as filed on the date it is received by 
the entity specified in the notice of the ALJ's action.
    (b) A party requesting a review may ask that the time for filing a 
request for MAC review be extended if--
    (1) The request for an extension of time is in writing;
    (2) It is filed with the MAC; and
    (3) It explains why the request for review was not filed within the 
stated time period. If the MAC finds that there is good cause for 
missing the deadline, the time period will be extended. To determine 
whether good cause exists, the MAC uses the standards outlined at 
Sec. Sec. 405.942(b)(2) and 405.942(b)(3).
    (c) A party does not have the right to seek MAC review of an ALJ's 
remand to a QIC or an ALJ's affirmation of a QIC's dismissal of a 
request for reconsideration.
    (d) For purposes of requesting MAC review (Sec. 405.1100 through 
Sec. 405.1140), unless specifically excepted the term, ``party,'' 
includes CMS where CMS has entered into a case as a party according to 
Sec. 405.1012. The term, ``appellant,'' does not include CMS, where CMS 
has entered into a case as a party according to Sec. 405.1012.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1104  Request for MAC review when an ALJ does not issue a decision 

timely.

    (a) Requesting escalation. An appellant who files a timely request 
for hearing before an ALJ and whose appeal continues to be pending 
before the ALJ at

[[Page 190]]

the end of the applicable ALJ adjudication period under Sec. 405.1016 
may request MAC review if--
    (1) The appellant files a written request with the ALJ to escalate 
the appeal to the MAC after the adjudication period has expired; and
    (2) The ALJ does not issue a final action or remand the case to the 
QIC within the later of 5 days of receiving the request for escalation 
or 5 days from the end of the applicable adjudication period set forth 
in Sec. 405.1016.
    (b) Escalation. (1) If the ALJ is not able to issue a final action 
or remand within the time period set forth in paragraph (a)(2) of this 
section, he or she sends notice to the appellant.
    (2) The notice acknowledges receipt of the request for escalation, 
and confirms that the ALJ is not able to issue a final action or remand 
order within the statutory time frame.
    (3) If the ALJ does not act on a request for escalation within the 
time period set forth in paragraph (a)(2) of this section or does not 
send the required notice to the appellant, the QIC decision becomes a 
final administrative decision for purposes of MAC review.
    (c) No escalation. If the ALJ's adjudication period set forth in 
Sec. 405.1016 expires, the case remains with the ALJ until a final 
action is issued or the appellant requests escalation to the MAC.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1106  Where a request for review or escalation may be filed.

    (a) When a request for a MAC review is filed after an ALJ has issued 
a decision or dismissal, the request for review must be filed with the 
entity specified in the notice of the ALJ's action. The appellant must 
also send a copy of the request for review to the other parties to the 
ALJ decision or dismissal. Failure to copy the other parties tolls the 
MAC's adjudication deadline set forth in Sec. 405.1100 until all 
parties to the hearing receive notice of the request for MAC review. If 
the request for review is timely filed with an entity other than the 
entity specified in the notice of the ALJ's action, the MAC's 
adjudication period to conduct a review begins on the date the request 
for review is received by the entity specified in the notice of the 
ALJ's action. Upon receipt of a request for review from an entity other 
than the entity specified in the notice of the ALJ's action, the MAC 
sends written notice to the appellant of the date of receipt of the 
request and commencement of the adjudication time frame.
    (b) If an appellant files a request to escalate an appeal to the MAC 
level because the ALJ has not completed his or her action on the request 
for hearing within the adjudication deadline under Sec. 405.1016, the 
request for escalation must be filed with both the ALJ and the MAC. The 
appellant must also send a copy of the request for escalation to the 
other parties. Failure to copy the other parties tolls the MAC's 
adjudication deadline set forth in Sec. 405.1100 until all parties to 
the hearing receive notice of the request for MAC review. In a case that 
has been escalated from the ALJ, the MAC's 180-day period to issue a 
final action or remand the case to the ALJ begins on the date the 
request for escalation is received by the MAC.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1108  MAC actions when request for review or escalation is filed.

    (a) Except as specified in paragraphs (c) and (d) of this section, 
when a party requests that the MAC review an ALJ's decision, the MAC 
will review the ALJ's decision de novo. The party requesting review does 
not have a right to a hearing before the MAC. The MAC will consider all 
of the evidence in the administrative record. Upon completion of its 
review, the MAC may adopt, modify, or reverse the ALJ's decision or 
remand the case to an ALJ for further proceedings.
    (b) When a party requests that the MAC review an ALJ's dismissal, 
the MAC may deny review or vacate the dismissal and remand the case to 
the ALJ for further proceedings.
    (c) The MAC will dismiss a request for review when the party 
requesting review does not have a right to a review by the MAC, or will 
dismiss the request for a hearing for any reason that the ALJ could have 
dismissed the request for hearing.
    (d) When an appellant requests escalation of a case from the ALJ 
level to

[[Page 191]]

the MAC, the MAC may take any of the following actions:
    (1) Issue a decision based on the record constructed at the QIC and 
any additional evidence, including oral testimony, entered in the record 
by the ALJ before the case was escalated.
    (2) Conduct any additional proceedings, including a hearing, that 
the MAC determines are necessary to issue a decision.
    (3) Remand the case to an ALJ for further proceedings, including a 
hearing.
    (4) Dismiss the request for MAC review because the appellant does 
not have the right to escalate the appeal.
    (5) Dismiss the request for a hearing for any reason that the ALJ 
could have dismissed the request.



Sec. 405.1110  MAC reviews on its own motion.

    (a) General rule. The MAC may decide on its own motion to review a 
decision or dismissal issued by an ALJ. CMS or any of its contractors 
may refer a case to the MAC for it to consider reviewing under this 
authority anytime within 60 days after the date of an ALJ's decision or 
dismissal.
    (b) Referral of cases. (1) CMS or any of its contractors may refer a 
case to the MAC if, in their view, the decision or dismissal contains an 
error of law material to the outcome of the claim or presents a broad 
policy or procedural issue that may affect the public interest. CMS may 
also request that the MAC take own motion review of a case if--
    (i) CMS or its contractor participated in the appeal at the ALJ 
level; and
    (ii) In CMS' view, the ALJ's decision or dismissal is not supported 
by the preponderance of evidence in the record or the ALJ abused his or 
her discretion.
    (2) CMS's referral to the MAC is made in writing and must be filed 
with the MAC no later than 60 days after the ALJ's decision or dismissal 
is issued. The written referral will state the reasons why CMS believes 
that the MAC must review the case on its own motion. CMS will send a 
copy of its referral to all parties to the ALJ's action and to the ALJ. 
Parties to the ALJ's action may file exceptions to the referral by 
submitting written comments to the MAC within 20 days of the referral 
notice. A party submitting comments to the MAC must send such comments 
to CMS and all other parties to the ALJ's decision.
    (c) Standard of review. (1) Referral by CMS after participation at 
the ALJ level. If CMS or its contractor participated in an appeal at the 
ALJ level, the MAC exercises its own motion authority if there is an 
error of law material to the outcome of the case, an abuse of discretion 
by the ALJ, the decision is not consistent with the preponderance of the 
evidence of record, or there is a broad policy or procedural issue that 
may affect the general public interest. In deciding whether to accept 
review under this standard, the MAC will limit its consideration of the 
ALJ's action to those exceptions raised by CMS.
    (2) Referral by CMS when CMS did not participate in the ALJ 
proceedings or appear as a party. The MAC will accept review if the 
decision or dismissal contains an error of law material to the outcome 
of the case or presents a broad policy or procedural issue that may 
affect the general public interest. In deciding whether to accept 
review, the MAC will limit its consideration of the ALJ's action to 
those exceptions raised by CMS.
    (d) MAC's action. If the MAC decides to review a decision or 
dismissal on its own motion, it will mail the results of its action to 
all the parties to the hearing and to CMS if it is not already a party 
to the hearing. The MAC may adopt, modify, or reverse the decision or 
dismissal, may remand the case to an ALJ for further proceedings or may 
dismiss a hearing request. The MAC must issue its action no later than 
90 days after receipt of the CMS referral, unless the 90-day period has 
been extended as provided in this subpart. The MAC may not, however, 
issue its action before the 20-day comment period has expired, unless it 
determines that the agency's referral does not provide a basis for 
reviewing the case. If the MAC does not act within the applicable 
adjudication deadline, the ALJ's decision or dismissal remains the final 
action in the case.

[[Page 192]]



Sec. 405.1112  Content of request for review.

    (a) The request for MAC review must be filed with the MAC or 
appropriate ALJ hearing office. The request for review must be in 
writing and may be made on a standard form. A written request that is 
not made on a standard form is accepted if it contains the beneficiary's 
name; Medicare health insurance claim number; the specific service(s) or 
item(s) for which the review is requested; the specific date(s) of 
service; the date of the ALJ's final action, if any, if the party is 
requesting escalation from the ALJ to the MAC, the hearing office in 
which the appellant's request for hearing is pending; and the name and 
signature of the party or the representative of the party; and any other 
information CMS may decide.
    (b) The request for review must identify the parts of the ALJ action 
with which the party requesting review disagrees and explain why he or 
she disagrees with the ALJ's decision, dismissal, or other determination 
being appealed. For example, if the party requesting review believes 
that the ALJ's action is inconsistent with a statute, regulation, CMS 
Ruling, or other authority, the request for review should explain why 
the appellant believes the action is inconsistent with that authority.
    (c) The MAC will limit its review of an ALJ's actions to those 
exceptions raised by the party in the request for review, unless the 
appellant is an unrepresented beneficiary. For purposes of this section 
only, we define a representative as anyone who has accepted an 
appointment as the beneficiary's representative, except a member of the 
beneficiary's family, a legal guardian, or an individual who routinely 
acts on behalf of the beneficiary, such as a family member or friend who 
has a power of attorney.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005]



Sec. 405.1114  Dismissal of request for review.

    The MAC dismisses a request for review if the party requesting 
review did not file the request within the stated period of time and the 
time for filing has not been extended. The MAC also dismisses the 
request for review if--
    (a) The party asks to withdraw the request for review;
    (b) The party does not have a right to request MAC review; or
    (c) The beneficiary whose claim is being appealed died while the 
request for review is pending and all of the following criteria apply:
    (1) The request for review was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding this 
issue, the MAC considers whether the surviving spouse or estate remains 
liable for the services that were denied or a Medicare contractor held 
the beneficiary liable for subsequent similar services under the 
limitation of liability provisions based on the denial of the services 
at issue;
    (2) No other individual or entity with a financial interest in the 
case wishes to pursue an appeal under Sec. 405.1102;
    (3) No other party to the ALJ hearing filed a valid and timely 
review request under Sec. 405.1102 and Sec. 405.1112.



Sec. 405.1116  Effect of dismissal of request for MAC review or request for 

hearing.

    The dismissal of a request for MAC review or denial of a request for 
review of a dismissal issued by an ALJ is binding and not subject to 
further review unless reopened and vacated by the MAC. The MAC's 
dismissal of a request for hearing is also binding and not subject to 
judicial review.



Sec. 405.1118  Obtaining evidence from the MAC.

    A party may request and receive a copy of all or part of the record 
of the ALJ hearing, including the exhibits list, documentary evidence, 
and a copy of the tape of the oral proceedings. However, the party may 
be asked to pay the costs of providing these items. If a party requests 
evidence from the MAC and an opportunity to comment on that evidence, 
the time beginning with the MAC's receipt of the request for evidence 
through the expiration of the time granted for the party's response will 
not be counted toward the 90-day adjudication deadline.

[[Page 193]]



Sec. 405.1120  Filing briefs with the MAC.

    Upon request, the MAC will give the party requesting review, as well 
as all other parties, a reasonable opportunity to file briefs or other 
written statements about the facts and law relevant to the case. Any 
party who submits a brief or statement must send a copy to all of the 
other parties. Unless the party requesting review files the brief or 
other statement with the request for review, the time beginning with the 
date of receipt of the request to submit the brief and ending with the 
date the brief is received by the MAC will not be counted toward the 
adjudication timeframe set forth in Sec. 405.1100. The MAC may also 
request, but not require, CMS or its contractor to file a brief or 
position paper if the MAC determines that it is necessary to resolve the 
issues in the case. The MAC will not draw any adverse inference if CMS 
or a contractor either participates, or decides not to participate in 
MAC review.



Sec. 405.1122  What evidence may be submitted to the MAC.

    (a) Appeal before the MAC on request for review of ALJ's decision. 
(1) If the MAC is reviewing an ALJ's decision, the MAC limits its review 
of the evidence to the evidence contained in the record of the 
proceedings before the ALJ. However, if the hearing decision decides a 
new issue that the parties were not afforded an opportunity to address 
at the ALJ level, the MAC considers any evidence related to that issue 
that is submitted with the request for review.
    (2) If the MAC determines that additional evidence is needed to 
resolve the issues in the case and the hearing record indicates that the 
previous decision-makers have not attempted to obtain the evidence, the 
MAC may remand the case to an ALJ to obtain the evidence and issue a new 
decision.
    (b) Appeal before MAC as a result of appellant's request for 
escalation. (1) If the MAC is reviewing a case that is escalated from 
the ALJ level to the MAC, the MAC will decide the case based on the 
record constructed at the QIC and any additional evidence, including 
oral testimony, entered in the record by the ALJ before the case was 
escalated.
    (2) If the MAC receives additional evidence with the request for 
escalation that is material to the question to be decided, or determines 
that additional evidence is needed to resolve the issues in the case, 
and the record provided to the MAC indicates that the previous decision-
makers did not attempt to obtain the evidence before escalation, the MAC 
may remand the case to an ALJ to consider or obtain the evidence and 
issue a new decision.
    (c) Evidence related to issues previously considered by the QIC. (1) 
If new evidence related to issues previously considered by the QIC is 
submitted to the MAC by a provider, supplier, or a beneficiary 
represented by a provider or supplier, the MAC must determine if the 
provider, supplier, or the beneficiary represented by a provider or 
supplier had good cause for submitting it for the first time at the MAC 
level.
    (2) If the MAC determines that good cause does not exist, the MAC 
must exclude the evidence from the proceeding, may not consider it in 
reaching a decision, and may not remand the issue to an ALJ.
    (3) The MAC must notify all parties if it excludes the evidence. The 
MAC may remand to an ALJ if--
    (i) The ALJ did not consider the new evidence submitted by the 
provider, supplier, or beneficiary represented by a provider or supplier 
because good cause did not exist; and
    (ii) The MAC finds that good cause existed under Sec. 405.1028 and 
the ALJ should have reviewed the evidence.
    (iii) The new evidence is submitted by a party that is not a 
provider, supplier, or a beneficiary represented by a provider or 
supplier.
    (d) Subpoenas. (1) When it is reasonably necessary for the full 
presentation of a case, the MAC may, on its own initiative or at the 
request of a party, issue subpoenas requiring a party to make books, 
records, correspondence, papers, or other documents that are material to 
an issue at the hearing available for inspection and copying.
    (2) A party's request for a subpoena must--
    (i) Give a sufficient description of the documents to be produced;

[[Page 194]]

    (ii) State the important facts that the documents are expected to 
prove; and
    (iii) Indicate why these facts could not be proven without issuing a 
subpoena.
    (3) A party to the MAC review on escalation that wishes to subpoena 
documents must file a written request that complies with the 
requirements set out in paragraph (d)(2) of this section within 10 
calendar days of the request for escalation.
    (4) A subpoena will issue only where a party--
    (i) Has sought discovery;
    (ii) Has filed a motion to compel;
    (iii) Has had that motion granted; and
    (iv) Nevertheless, has still not received the requested discovery.
    (e) Reviewability of subpoena rulings--
    (1) General rule. A MAC ruling on a subpoena request is not subject 
to immediate review by the Secretary.
    (2) Exception. (i) To the extent a subpoena compels disclosure of a 
matter for which an objection based on privilege, or other protection 
from disclosure such as case preparation, confidentiality, or undue 
burden, was made before the MAC, the Secretary may review immediately 
that subpoena or portion of the subpoena.
    (ii) Upon notice to the MAC that a party or non-party, as 
applicable, intends to seek Secretary review of the subpoena, the MAC 
must stay all proceedings affected by the subpoena.
    (iii) The MAC determines the length of the stay under the 
circumstances of a given case, but in no event is less than 15 days 
after the day on which the MAC received notice of the party or non-
party's intent to seek Secretary review.
    (iv) If the Secretary grants a request for review, the subpoena or 
portion of the subpoena, as applicable, is stayed until the Secretary 
issues a written decision that affirms, reverses, modifies, or remands 
the MAC's action for the subpoena.
    (v) If the Secretary does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifed and the MAC's 
action stands.
    (f) Enforcement. (1) If the MAC determines, whether on its own 
motion or at the request of a party, that a party or non-party subject 
to a subpoena issued under this section has refused to comply with the 
subpoena, the MAC may request the Secretary to seek enforcement of the 
subpoena in accordance with section 205(c) of the Act, 42 U.S.C. 405(c).
    (2) Any enforcement request by the MAC must consist of a written 
notice to the Secretary describing in detail the MAC's findings of 
noncompliance and its specific request for enforcement, and providing a 
copy of the subpoena and evidence of its receipt by certified mail by 
the party or nonparty subject to the subpoena.
    (3) The MAC must promptly mail a copy of the notice and related 
documents to the party or non-party subject to the subpoena, and to any 
other party and affected non-party to the appeal.
    (4) If the Secretary does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifted and the 
subpoena stands.



Sec. 405.1124  Oral argument.

    A party may request to appear before the MAC to present oral 
argument.
    (a) The MAC grants a request for oral argument if it decides that 
the case raises an important question of law, policy, or fact that 
cannot be readily decided based on written submissions alone.
    (b) The MAC may decide on its own that oral argument is necessary to 
decide the issues in the case. If the MAC decides to hear oral argument, 
it tells the parties of the time and place of the oral argument at least 
10 days before the scheduled date.
    (c) In case of a previously unrepresented beneficiary, a newly hired 
representative may request an extension of time for preparation of the 
oral argument and the MAC must consider whether the extension is 
reasonable.
    (d) The MAC may also request, but not require, CMS or its contractor 
to appear before it if the MAC determines that it may be helpful in 
resolving the issues in the case.

[[Page 195]]

    (e) The MAC will not draw any inference if CMS or a contractor 
decides not to participate in the oral argument.



Sec. 405.1126  Case remanded by the MAC.

    (a) When the MAC may remand a case. Except as specified in Sec. 
405.1122(c), the MAC may remand a case in which additional evidence is 
needed or additional action by the ALJ is required. The MAC will 
designate in its remand order whether the ALJ will issue a final 
decision or a recommended decision on remand.
    (b) Action by ALJ on remand. The ALJ will take any action that is 
ordered by the MAC and may take any additional action that is not 
inconsistent with the MAC's remand order.
    (c) Notice when case is returned with a recommended decision. When 
the ALJ sends a case to the MAC with a recommended decision, a notice is 
mailed to the parties at their last known address. The notice tells them 
that the case was sent to the MAC, explains the rules for filing briefs 
or other written statements with the MAC, and includes a copy of the 
recommended decision.
    (d) Filing briefs with the MAC when ALJ issues recommended decision. 
(1) Any party to the recommended decision may file with the MAC briefs 
or other written statements about the facts and law relevant to the case 
within 20 days of the date on the recommended decision. Any party may 
ask the MAC for additional time to file briefs or statements. The MAC 
will extend this period, as appropriate, if the party shows that it has 
good cause for requesting the extension.
    (2) All other rules for filing briefs with and obtaining evidence 
from the MAC follow the procedures explained in this subpart.
    (e) Procedures before the MAC. (1) The MAC, after receiving a 
recommended decision, will conduct proceedings and issue its decision or 
dismissal according to the procedures explained in this subpart.
    (2) If the MAC determines that more evidence is required, it may 
again remand the case to an ALJ for further inquiry into the issues, 
rehearing, receipt of evidence, and another decision or recommended 
decision. However, if the MAC decides that it can get the additional 
evidence more quickly, it will take appropriate action.



Sec. 405.1128  Action of the MAC.

    (a) After it has reviewed all the evidence in the administrative 
record and any additional evidence received, subject to the limitations 
on MAC consideration of additional evidence in Sec. 405.1122, the MAC 
will make a decision or remand the case to an ALJ.
    (b) The MAC may adopt, modify, or reverse the ALJ hearing decision 
or recommended decision.
    (c) The MAC mails a copy of its decision to all the parties at their 
last known addresses. For overpayment cases involving multiple 
beneficiaries where there is no beneficiary liability the MAC may choose 
to send written notice only to the appellant. In the event the decision 
will result in a payment to a provider or supplier, the Medicare 
contractor must issue any electronic or paper remittance advice notice 
to that provider or supplier.



Sec. 405.1130  Effect of the MAC's decision.

    The MAC's decision is binding on all parties unless a Federal 
district court issues a decision modifying the MAC's decision or the 
decision is revised as the result of a reopening in accordance with 
Sec. 405.980. A party may file an action in a Federal district court 
within 60 days after the date it receives notice of the MAC's decision.



Sec. 405.1132  Request for escalation to Federal court.

    (a) If the MAC does not issue a decision or dismissal or remand the 
case to an ALJ within the adjudication period specified in Sec. 
405.1100, or as extended as provided in this subpart, the appellant may 
request that the appeal, other than an appeal of an ALJ dismissal, be 
escalated to Federal district court. Upon receipt of a request for 
escalation, the MAC may--
    (1) Issue a decision or dismissal or remand the case to an ALJ, if 
that action is issued within the latter of 5 calendar days of receipt of 
the request for escalation or 5 calendar days from the end of the 
applicable adjudication time period set forth in Sec. 405.1100; or
    (2) If the MAC is not able to issue a decision or dismissal or 
remand as set

[[Page 196]]

forth in paragraph (a)(1) of this section, it will send a notice to the 
appellant acknowledging receipt of the request for escalation and 
confirming that it is not able to issue a decision, dismissal or remand 
order within the statutory time frame.
    (b) A party may file an action in a Federal district court within 60 
days after the date it receives the MAC's notice that the MAC is not 
able to issue a final action or remand unless the party is appealing an 
ALJ dismissal.



Sec. 405.1134  Extension of time to file action in Federal district court.

    (a) Any party to the MAC's decision or to a request for EAJR that 
has been certified by the review entity other than CMS may request that 
the time for filing an action in a Federal district court be extended.
    (b) The request must--
    (1) Be in writing.
    (2) Give the reasons why the action was not filed within the stated 
time period.
    (3) Be filed with the MAC.
    (c) If the party shows that he or she had good cause for missing the 
deadline, the time period will be extended. To determine whether good 
cause exists, the MAC uses the standards specified in Sec. 
405.942(b)(2) or (b)(3).



Sec. 405.1136  Judicial review.

    (a) General rules. (1) To the extent authorized by sections 1869, 
1876(c)(5)(B), and 1879(d) of the Act, a party to a MAC decision, or an 
appellant who requests escalation to Federal district court if the MAC 
does not complete its review of the ALJ's decision within the applicable 
adjudication period, may obtain a court review if the amount remaining 
in controversy satisfies the requirements of Sec. 405.1006(c).
    (2) If the MAC's adjudication period set forth in Sec. 405.1100 
expires and the appellant does not request escalation to Federal 
district court, the case remains with the MAC until a final action is 
issued.
    (b) Court in which to file civil action. (1) Any civil action 
described in paragraph (a) of this section must be filed in the district 
court of the United States for the judicial district in which the party 
resides or where such individual, institution, or agency has its 
principal place of business.
    (2) If the party does not reside within any judicial district, or if 
the individual, institution, or agency does not have its principal place 
of business within any such judicial district, the civil action must be 
filed in the District Court of the United States for the District of 
Columbia.
    (c) Time for filing civil action. (1) Any civil action described in 
paragraph (a) of this section must be filed within the time periods 
specified in Sec. 405.1130, Sec. 405.1132, or Sec. 405.1134, as 
applicable.
    (2) For purposes of this section, the date of receipt of the notice 
of the MAC's decision or the MAC's notice that it is not able to issue a 
decision within the statutory timeframe shall be presumed to be 5 
calendar days after the date of the notice, unless there is a reasonable 
showing to the contrary.
    (3) Where a case is certified for judicial review in accordance with 
the expedited access to judicial review process in Sec. 405.990, the 
civil action must be filed within 60 days after receipt of the review 
entity's certification, except where the time is extended by the ALJ or 
MAC, as applicable, upon a showing of good cause.
    (d) Proper defendant. (1) In any civil action described in paragraph 
(a) of this section, the Secretary of HHS, in his or her official 
capacity, is the proper defendant. Any civil action properly filed shall 
survive notwithstanding any change of the person holding the Office of 
the Secretary of HHS or any vacancy in such office.
    (2) If the complaint is erroneously filed against the United States 
or against any agency, officer, or employee of the United States other 
than the Secretary, the plaintiff will be notified that he or she has 
named an incorrect defendant and is granted 60 days from the date of 
receipt of the notice in which to commence the action against the 
correct defendant, the Secretary.
    (e) Prohibition against judicial review of certain Part B 
regulations or instructions. Under section 1869(e)(1) of the Act, a 
court may not review a regulation or instruction that relates to a 
method of payment under Medicare Part B if the regulation was published,

[[Page 197]]

or the instructions issued, before January 1, 1991.
    (f) Standard of review. (1) Under section 205(g) of the Act, the 
findings of the Secretary of HHS as to any fact, if supported by 
substantial evidence, are conclusive.
    (2) When the Secretary's decision is adverse to a party due to a 
party's failure to submit proof in conformity with a regulation 
prescribed under section 205(a) of the Act pertaining to the type of 
proof a party must offer to establish entitlement to payment, the court 
will review only whether the proof conforms with the regulation and the 
validity of the regulation.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37705, June 30, 2005]



Sec. 405.1138  Case remanded by a Federal district court.

    When a Federal district court remands a case to the Secretary for 
further consideration, unless the court order specifies otherwise, the 
MAC, acting on behalf of the Secretary, may make a decision, or it may 
remand the case to an ALJ with instructions to take action and either 
issue a decision, take other action, or return the case to the MAC with 
a recommended decision. If the MAC remands a case, the procedures 
specified in Sec. 405.1140 will be followed.



Sec. 405.1140  MAC review of ALJ decision in a case remanded by a Federal 

district court.

    (a) General rules. (1) In accordance with Sec. 405.1138, when a 
case is remanded by a Federal district court for further consideration 
and the MAC remands the case to an ALJ, a decision subsequently issued 
by the ALJ becomes the final decision of the Secretary unless the MAC 
assumes jurisdiction.
    (2) The MAC may assume jurisdiction based on written exceptions to 
the decision of the ALJ that a party files with the MAC or based on its 
authority under paragraph (c) of this section.
    (3) The MAC either makes a new, independent decision based on the 
entire record that will be the final decision of the Secretary after 
remand, or remands the case to an ALJ for further proceedings.
    (b) A party files exceptions disagreeing with the decision of the 
ALJ. (1) If a party disagrees with an ALJ decision described in 
paragraph (a) of this section, in whole or in part, he or she may file 
exceptions to the decision with the MAC. Exceptions may be filed by 
submitting a written statement to the MAC setting forth the reasons for 
disagreeing with the decision of the ALJ. The party must file exceptions 
within 30 days of the date the party receives the decision of the ALJ or 
submit a written request for an extension within the 30-day period. The 
MAC will grant a timely request for a 30-day extension. A request for an 
extension of more than 30 days must include a statement of reasons as to 
why the party needs the additional time and may be granted if the MAC 
finds good cause under the standard established in Sec. 405.942(b)(2) 
or (b)(3).
    (2) If written exceptions are timely filed, the MAC considers the 
party's reasons for disagreeing with the decision of the ALJ. If the MAC 
concludes that there is no reason to change the decision of the ALJ, it 
will issue a notice addressing the exceptions and explaining why no 
change in the decision of the ALJ is warranted. In this instance, the 
decision of the ALJ is the final decision of the Secretary after remand.
    (3) When a party files written exceptions to the decision of the 
ALJ, the MAC may assume jurisdiction at any time. If the MAC assumes 
jurisdiction, it makes a new, independent decision based on its 
consideration of the entire record adopting, modifying, or reversing the 
decision of the ALJ or remanding the case to an ALJ for further 
proceedings, including a new decision. The new decision of the MAC is 
the final decision of the Secretary after remand.
    (c) MAC assumes jurisdiction without exceptions being filed. (1) Any 
time within 60 days after the date of the decision of the ALJ, the MAC 
may decide to assume jurisdiction of the case even though no written 
exceptions have been filed.
    (2) Notice of this action is mailed to all parties at their last 
known address.
    (3) The parties will be provided with the opportunity to file briefs 
or other written statements with the MAC

[[Page 198]]

about the facts and law relevant to the case.
    (4) After the briefs or other written statements are received or the 
time allowed (usually 30 days) for submitting them has expired, the MAC 
will either issue a final decision of the Secretary affirming, 
modifying, or reversing the decision of the ALJ, or remand the case to 
an ALJ for further proceedings, including a new decision.
    (d) Exceptions are not filed and the MAC does not otherwise assume 
jurisdiction. If no exceptions are filed and the MAC does not assume 
jurisdiction of the cases within 60 days after the date of the ALJ's 
decision, the decision of the ALJ becomes the final decision of the 
Secretary after remand.



  Subpart J_Expedited Determinations and Reconsiderations of Provider 

 Service Terminations, and Procedures for Inpatient Hospital Discharges

    Source: 69 FR 69624, Nov. 26, 2004, unless otherwise noted.



Sec. 405.1200  Notifying beneficiaries of provider service terminations.

    (a) Applicability and scope. (1) For purposes of Sec. Sec. 405.1200 
through 405.1204, the term, provider, is defined as a home health agency 
(HHA), skilled nursing facility (SNF), comprehensive outpatient 
rehabilitation facility (CORF), or hospice.
    (2) For purposes of Sec. Sec. 405.1200 through 405.1204, a 
termination of Medicare-covered service is a discharge of a beneficiary 
from a residential provider of services, or a complete cessation of 
coverage at the end of a course of treatment prescribed in a discrete 
increment, regardless of whether the beneficiary agrees that the 
services should end. A termination does not include a reduction in 
services. A termination also does not include the termination of one 
type of service by the provider if the beneficiary continues to receive 
other Medicare-covered services from the provider.
    (b) Advance written notice of service terminations. Before any 
termination of services, the provider of the service must deliver valid 
written notice to the beneficiary of the provider's decision to 
terminate services. The provider must use a standardized notice, as 
specified by CMS, in accordance with the following procedures:
    (1) Timing of notice. A provider must notify the beneficiary of the 
decision to terminate covered services no later than 2 days before the 
proposed end of the services. If the beneficiary's services are expected 
to be fewer than 2 days in duration, the provider must notify the 
beneficiary at the time of admission to the provider. If, in a non-
residential setting, the span of time between services exceeds 2 days, 
the notice must be given no later than the next to last time services 
are furnished.
    (2) Content of the notice. The standardized termination notice must 
include the following information:
    (i) The date that coverage of services ends;
    (ii) The date that the beneficiary's financial liability for 
continued services begins;
    (iii) A description of the beneficiary's right to an expedited 
determination under Sec. 405.1202, including information about how to 
request an expedited determination and about a beneficiary's right to 
submit evidence showing that services must continue;
    (iv) A beneficiary's right to receive the detailed information 
specified under Sec. 405.1202(f); and
    (v) Any other information required by CMS.
    (3) When delivery of the notice is valid. Delivery of the 
termination notice is valid if--
    (i) The beneficiary (or the beneficiary's authorized representative) 
has signed and dated the notice to indicate that he or she has received 
the notice and can comprehend its contents; and
    (ii) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph (b)(2) 
of this section.
    (4) If a beneficiary refuses to sign the notice. The provider may 
annotate its notice to indicate the refusal, and the date of refusal is 
considered the date of receipt of the notice.

[[Page 199]]

    (5) Financial liability for failure to deliver valid notice. A 
provider is financially liable for continued services until 2 days after 
the beneficiary receives valid notice as specified under paragraph 
(b)(3) of this section, or until the service termination date specified 
on the notice, whichever is later. A beneficiary may waive continuation 
of services if he or she agrees with being discharged sooner than the 
planned service termination date.



Sec. 405.1202  Expedited determination procedures.

    (a) Beneficiary's right to an expedited determination by the QIO. A 
beneficiary has a right to an expedited determination by a QIO under the 
following circumstances:
    (1) For services furnished by a non-residential provider, the 
beneficiary disagrees with the provider of those services that services 
should be terminated, and a physician certifies that failure to continue 
the provision of the service(s) may place the beneficiary's health at 
significant risk.
    (2) For services furnished by a residential provider or a hospice, 
the beneficiary disagrees with the provider's decision to discharge the 
beneficiary.
    (b) Requesting an expedited determination. (1) A beneficiary who 
wishes to exercise the right to an expedited determination must submit a 
request for a determination to the QIO in the State in which the 
beneficiary is receiving those provider services, in writing or by 
telephone, by no later than noon of the calendar day following receipt 
of the provider's notice of termination. If the QIO is unable to accept 
the beneficiary's request, the beneficiary must submit the request by 
noon of the next day the QIO is available to accept a request.
    (2) The beneficiary, or his or her representative, must be available 
to answer questions or to supply information that the QIO may request to 
conduct its review.
    (3) The beneficiary may, but is not required to, submit evidence to 
be considered by a QIO in making its decision.
    (4) If a beneficiary makes an untimely request for an expedited 
determination by a QIO, the QIO will accept the request and make a 
determination as soon as possible, but the 72-hour time frame under 
paragraph (e)(6) and the financial liability protection under paragraph 
(g) of this section do not apply.
    (c) Coverage of provider services. Coverage of provider services 
continues until the date and time designated on the termination notice, 
unless the QIO reverses the provider's service termination decision. If 
the QIO's decision is delayed because the provider did not timely supply 
necessary information or records, the provider may be liable for the 
costs of any additional coverage, as determined by the QIO in accordance 
with paragraph (e)(7) of this section. If the QIO finds that the 
beneficiary did not receive valid notice, coverage of provider services 
continues until at least 2 days after valid notice has been received. 
Continuation of coverage is not required if the QIO determines that 
coverage could pose a threat to the beneficiary's health or safety.
    (d) Burden of proof. When a beneficiary requests an expedited 
determination by a QIO, the burden of proof rests with the provider to 
demonstrate that termination of coverage is the correct decision, either 
on the basis of medical necessity, or based on other Medicare coverage 
policies.
    (1) In order for the QIO to determine whether the provider has met 
the burden of proof, the provider should supply any and all information 
that a QIO requires to sustain the provider's termination decision, 
consistent with paragraph (f) of this section.
    (2) The beneficiary may submit evidence to be considered by a QIO in 
making its decision.
    (e) Procedures the QIO must follow. (1) On the day the QIO receives 
the request for an expedited determination under paragraph (b) of this 
section, it must immediately notify the provider of those services that 
a request for an expedited determination has been made.
    (2) The QIO determines whether the provider delivered valid notice 
of the termination decision consistent with Sec. 405.1200(b) and 
paragraph (f) of this section.

[[Page 200]]

    (3) The QIO examines the medical and other records that pertain to 
the services in dispute. If applicable, the QIO determines whether a 
physician has certified that failure to continue the provision of 
services may place the beneficiary's health at significant risk.
    (4) The QIO must solicit the views of the beneficiary who requested 
the expedited determination.
    (5) The QIO must provide an opportunity for the provider/
practitioner to explain why the termination or discharge is appropriate.
    (6) No later than 72 hours after receipt of the request for an 
expedited determination, the QIO must notify the beneficiary, 
beneficiary's physician, and the provider of services of its 
determination whether termination of Medicare coverage is the correct 
decision, either on the basis of medical necessity or based on other 
Medicare coverage policies.
    (7) If the QIO does not receive the information needed to sustain a 
provider's decision to terminate services, it may make its determination 
based on the evidence at hand, or it may defer a decision until it 
receives the necessary information. If this delay results in extended 
Medicare coverage of an individual's provider services, the provider may 
be held financially liable for these services, as determined by the QIO.
    (8) The QIO's initial notification may be by telephone, followed by 
a written notice including the following information:
    (i) The rationale for the determination;
    (ii) An explanation of the Medicare payment consequences of the 
determination and the date a beneficiary becomes fully liable for the 
services; and
    (iii) Information about the beneficiary's right to a reconsideration 
of the QIO's determination, including how to request a reconsideration 
and the time period for doing so.
    (f) Responsibilities of providers. (1) When a QIO notifies a 
provider that a beneficiary has requested an expedited determination, 
the provider must send a detailed notice to the beneficiary by close of 
business of the day of the QIO's notification. The detailed termination 
notice must include the following information:
    (i) A specific and detailed explanation why services are either no 
longer reasonable and necessary or are no longer covered;
    (ii) A description of any applicable Medicare coverage rule, 
instruction, or other Medicare policy, including citations to the 
applicable Medicare policy rules or information about how the 
beneficiary may obtain a copy of the Medicare policy;
    (iii) Facts specific to the beneficiary and relevant to the coverage 
determination that are sufficient to advise the beneficiary of the 
applicability of the coverage rule or policy to the beneficiary's case; 
and
    (iv) Any other information required by CMS.
    (2) Upon notification by the QIO of the request for an expedited 
determination, the provider must supply all information that the QIO 
needs to make its expedited determination, including a copy of the 
notices required under Sec. 405.1200(b) and under paragraph (f)(1) of 
this section. The provider must furnish this information as soon as 
possible, but no later than by close of business of the day the QIO 
notifies the provider of the request for an expedited determination. At 
the discretion of the QIO, the provider may make the information 
available by phone or in writing (with a written record of any 
information not transmitted initially in writing).
    (3) At a beneficiary's request, the provider must furnish the 
beneficiary with a copy of, or access to, any documentation that it 
sends to the QIO including records of any information provided by 
telephone. The provider may charge the beneficiary a reasonable amount 
to cover the costs of duplicating the documentation and/or delivering it 
to the beneficiary. The provider must accommodate such a request by no 
later than close of business of the first day after the material is 
requested.
    (g) Coverage during QIO review. When a beneficiary requests an 
expedited determination in accordance with the procedures required by 
this section, the provider may not bill the beneficiary

[[Page 201]]

for any disputed services until the expedited determination process (and 
reconsideration process, if applicable) has been completed.



Sec. 405.1204  Expedited reconsiderations.

    (a) Beneficiary's right to an expedited reconsideration. A 
beneficiary who is dissatisfied with a QIO's expedited determination may 
request an expedited reconsideration by the appropriate QIC.
    (b) Requesting an expedited reconsideration. (1) A beneficiary who 
wishes to obtain an expedited reconsideration must submit a request for 
the reconsideration to the appropriate QIC, in writing or by telephone, 
by no later than noon of the calendar day following initial notification 
(whether by telephone or in writing) receipt of the QIO's determination. 
If the QIC is unable to accept the beneficiary's request, the 
beneficiary must submit the request by noon of the next day the QIC is 
available to accept a request.
    (2) The beneficiary, or his or her representative, must be available 
to answer questions or supply information that the QIC may request to 
conduct its reconsideration.
    (3) The beneficiary may, but is not required to, submit evidence to 
be considered by a QIC in making its decision.
    (4) A beneficiary who does not file a timely request for an 
expedited QIC reconsideration subsequently may request a reconsideration 
under the standard claims appeal process, but the coverage protections 
described in paragraph (f) of this section would not extend through this 
reconsideration, nor would the timeframes or the escalation process 
described in paragraphs (c)(3) and (c)(5) of this section, respectively.
    (c) Procedures the QIC must follow. (1) On the day the QIC receives 
the request for an expedited determination under paragraph (b) of this 
section, the QIC must immediately notify the QIO that made the expedited 
determination and the provider of services of the request for an 
expedited reconsideration.
    (2) The QIC must offer the beneficiary and the provider an 
opportunity to provide further information.
    (3) Unless the beneficiary requests an extension in accordance with 
paragraph (c)(6) of this section, no later than 72 hours after receipt 
of the request for an expedited reconsideration, and any medical or 
other records needed for such reconsideration, the QIC must notify the 
QIO, the beneficiary, the beneficiary's physician, and the provider of 
services, of its decision on the reconsideration request.
    (4) The QIC's initial notification may be done by telephone, 
followed by a written notice including:
    (i) The rationale for the reconsideration decision;
    (ii) An explanation of the Medicare payment consequences of the 
determination and the beneficiary's date of liability; and
    (iii) Information about the beneficiary's right to appeal the QIC's 
reconsideration decision to an ALJ, including how to request an appeal 
and the time period for doing so.
    (5) Unless the beneficiary requests an extension in accordance with 
paragraph (c)(6) of this section, if the QIC does not issue a decision 
within 72 hours of receipt of the request, the QIC must notify the 
beneficiary of his or her right to have the case escalated to the ALJ 
hearing level if the amount remaining in controversy after the QIO 
determination is $100 or more.
    (6) A beneficiary requesting an expedited reconsideration under this 
section may request (either in writing or orally) that the QIC grant 
such additional time as the beneficiary specifies (not to exceed 14 
days) for the reconsideration. If an extension is granted, the deadlines 
in paragraph (c)(3) of this section do not apply.
    (d) Responsibilities of the QIO. (1) When a QIC notifies a QIO that 
a beneficiary has requested an expedited reconsideration, the QIO must 
supply all information that the QIC needs to make its expedited 
reconsideration as soon as possible, but no later than by close of 
business of the day that the QIC notifies the QIO of the request for an 
expedited reconsideration.
    (2) At a beneficiary's request, the QIO must furnish the beneficiary 
with a copy of, or access to, any documentation that it sends to the 
QIC. The QIO

[[Page 202]]

may charge the beneficiary a reasonable amount to cover the costs of 
duplicating the documentation and/or delivering it to the beneficiary. 
The QIO must accommodate the request by no later than close of business 
of the first day after the material is requested.
    (e) Responsibilities of the provider. A provider may, but is not 
required to, submit evidence to be considered by a QIC in making its 
decision. If a provider fails to comply with a QIC's request for 
additional information beyond that furnished to the QIO for purposes of 
the expedited determination, the QIC makes its reconsideration decision 
based on the information available.
    (f) Coverage during QIC reconsideration process. When a beneficiary 
requests an expedited reconsideration in accordance with the deadline 
specified in (b)(1) of this section, the provider may not bill the 
beneficiary for any disputed services until the QIC makes its 
determination.



Sec. 405.1205  Notifying beneficiaries of hospital discharge appeal rights.

    (a) Applicability and scope. (1) For purposes of Sec. 405.1204, 
Sec. 405.1205, Sec. 405.1206, and Sec. 405.1208, the term 
``hospital'' is defined as any facility providing care at the inpatient 
hospital level, whether that care is short term or long term, acute or 
non acute, paid through a prospective payment system or other 
reimbursement basis, limited to specialty care or providing a broader 
spectrum of services. This definition includes critical access 
hospitals.
    (2) For purposes of Sec. 405.1204, Sec. 405.1205, Sec. 405.1206, 
and Sec. 405.1208, a discharge is a formal release of a beneficiary 
from an inpatient hospital.
    (b) Advance written notice of hospital discharge rights. For all 
Medicare beneficiaries, hospitals must deliver valid, written notice of 
a beneficiary's rights as a hospital inpatient, including discharge 
appeal rights. The hospital must use a standardized notice, as specified 
by CMS, in accordance with the following procedures:
    (1) Timing of notice. The hospital must provide the notice at or 
near admission, but no later than 2 calendar days following the 
beneficiary's admission to the hospital.
    (2) Content of the notice. The notice must include the following 
information:
    (i) The beneficiary's rights as a hospital inpatient including the 
right to benefits for inpatient services and for post-hospital services 
in accordance with 1866(a)(1)(M) of the Act.
    (ii) The beneficiary's right to request an expedited determination 
of the discharge decision including a description of the process under 
Sec. 405.1206, and the availability of other appeals processes if the 
beneficiary fails to meet the deadline for an expedited determination.
    (iii) The circumstances under which a beneficiary will or will not 
be liable for charges for continued stay in the hospital in accordance 
with 1866(a)(1)(M) of the Act.
    (iv) A beneficiary's right to receive additional detailed 
information in accordance with Sec. 405.1206(e).
    (v) Any other information required by CMS.
    (3) When delivery of the notice is valid. Delivery of the written 
notice of rights described in this section is valid if--
    (i) The beneficiary (or the beneficiary's representative) has signed 
and dated the notice to indicate that he or she has received the notice 
and can comprehend its contents, except as provided in paragraph (b)(4) 
of this section; and
    (ii) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph (b)(2) 
of this section.
    (4) If a beneficiary refuses to sign the notice. The hospital may 
annotate its notice to indicate the refusal, and the date of refusal is 
considered the date of receipt of the notice.
    (c) Follow up notification. (1) The hospital must present a copy of 
the signed notice described in paragraph (b)(2) of this section to the 
beneficiary (or beneficiary's representative) prior to discharge. The 
notice should be given as far in advance of discharge as possible, but 
not more than 2 calendar days before discharge.
    (2) Follow up notification is not required if the notice required 
under

[[Page 203]]

Sec. 405.1205(b) is delivered within 2 calendar days of discharge.

[71 FR 68720, Nov. 27, 2006]



Sec. 405.1206  Expedited determination procedures for inpatient hospital care.

    (a) Beneficiary's right to an expedited determination by the QIO. A 
beneficiary has a right to request an expedited determination by the QIO 
when a hospital (acting directly or through its utilization review 
committee), with physician concurrence, determines that inpatient care 
is no longer necessary.
    (b) Requesting an expedited determination. (1) A beneficiary who 
wishes to exercise the right to an expedited determination must submit a 
request to the QIO that has an agreement with the hospital as specified 
in Sec. 476.78 of this chapter. The request must be made no later than 
the day of discharge and may be in writing or by telephone.
    (2) The beneficiary, or his or her representative, upon request by 
the QIO, must be available to discuss the case.
    (3) The beneficiary may, but is not required to, submit written 
evidence to be considered by a QIO in making its decision.
    (4) A beneficiary who makes a timely request for an expedited QIO 
review in accordance with paragraph (b)(1) of this section is subject to 
the financial liability protections under paragraphs (f)(1) and (f)(2) 
of this section, as applicable.
    (5) A beneficiary who fails to make a timely request for an 
expedited determination by a QIO, as described in paragraph (b)(1) of 
this section, and remains in the hospital without coverage, still may 
request an expedited QIO determination at any time during the 
hospitalization. The QIO will issue a decision in accordance with 
paragraph (d)(6)(ii) of this section, however, the financial liability 
protection under paragraphs (f)(1) and (f)(2) of this section does not 
apply.
    (6) A beneficiary who fails to make a timely request for an 
expedited determination in accordance with paragraph (b)(1) of this 
section, and who is no longer an inpatient in the hospital, may request 
QIO review within 30 calendar days after the date of discharge, or at 
any time for good cause. The QIO will issue a decision in accordance 
with paragraph (d)(6)(iii) of this section; however, the financial 
liability protection under paragraphs (f)(1) and (f)(2) of this section 
does not apply.
    (c) Burden of proof. When a beneficiary (or his or her 
representative, if applicable) requests an expedited determination by a 
QIO, the burden of proof rests with the hospital to demonstrate that 
discharge is the correct decision, either on the basis of medical 
necessity, or based on other Medicare coverage policies. Consistent with 
paragraph (e)(2) of this section, the hospital should supply any and all 
information that a QIO requires to sustain the hospital's discharge 
determination.
    (d) Procedures the QIO must follow. (1) When the QIO receives the 
request for an expedited determination under paragraph (b)(1) of this 
section, it must immediately notify the hospital that a request for an 
expedited determination has been made.
    (2) The QIO determines whether the hospital delivered valid notice 
consistent with Sec. 405.1205(b)(3).
    (3) The QIO examines the medical and other records that pertain to 
the services in dispute.
    (4) The QIO must solicit the views of the beneficiary (or the 
beneficiary's representative) who requested the expedited determination.
    (5) The QIO must provide an opportunity for the hospital to explain 
why the discharge is appropriate.
    (6)(i) When the beneficiary requests an expedited determination in 
accordance with paragraph (b)(1) of this section, the QIO must make a 
determination and notify the beneficiary, the hospital, and physician of 
its determination within one calendar day after it receives all 
requested pertinent information.
    (ii) When the beneficiary makes an untimely request for an expedited 
determination, and remains in the hospital, consistent with paragraph 
(b)(5) of this section, the QIO will make a determination and notify the 
beneficiary, the hospital, and the physician of its determination within 
2 calendar days following receipt of the request and pertinent 
information.

[[Page 204]]

    (iii) When the beneficiary makes an untimely request for an 
expedited determination, and is no longer an inpatient in the hospital, 
consistent with paragraph (b)(6) of this section, the QIO will make a 
determination and notify the beneficiary, the hospital, and physician of 
its determination within 30 calendar days after receipt of the request 
and pertinent information.
    (7) If the QIO does not receive the information needed to sustain a 
hospital's decision to discharge, it may make its determination based on 
the evidence at hand, or it may defer a decision until it receives the 
necessary information. If this delay results in extended Medicare 
coverage of an individual's hospital services, the hospital may be held 
financially liable for these services, as determined by the QIO.
    (8) When the QIO issues an expedited determination, the QIO must 
notify the beneficiary, the physician, and hospital of its decision by 
telephone, followed by a written notice that must include the following 
information:
    (i) The basis for the determination.
    (ii) A detailed rationale for the determination.
    (iii) An explanation of the Medicare payment consequences of the 
determination and the date a beneficiary becomes fully liable for the 
services.
    (iv) Information about the beneficiary's right to a reconsideration 
of the QIO's determination as set forth in Sec. 405.1204, including how 
to request a reconsideration and the time period for doing so.
    (e) Responsibilities of hospitals. (1) When a QIO notifies a 
hospital that a beneficiary has requested an expedited determination, 
the hospital must deliver a detailed notice to the beneficiary as soon 
as possible but no later than noon of the day after the QIO's 
notification. The detailed notice must include the following 
information:
    (i) A detailed explanation why services are either no longer 
reasonable and necessary or are otherwise no longer covered.
    (ii) A description of any applicable Medicare coverage rule, 
instruction, or other Medicare policy, including information about how 
the beneficiary may obtain a copy of the Medicare policy.
    (iii) Facts specific to the beneficiary and relevant to the coverage 
determination that are sufficient to advise the beneficiary of the 
applicability of the coverage rule or policy to the beneficiary's case.
    (iv) Any other information required by CMS.
    (2) Upon notification by the QIO of the request for an expedited 
determination, the hospital must supply all information that the QIO 
needs to make its expedited determination, including a copy of the 
notices required as specified in Sec. 405.1205 (b) and (c) and 
paragraph (e)(1) of this section. The hospital must furnish this 
information as soon as possible, but no later than by noon of the day 
after the QIO notifies the hospital of the request for an expedited 
determination. At the discretion of the QIO, the hospital must make the 
information available by phone or in writing (with a written record of 
any information not transmitted initially in writing).
    (3) At a beneficiary's (or representative's) request, the hospital 
must furnish the beneficiary with a copy of, or access to, any 
documentation that it sends to the QIO, including written records of any 
information provided by telephone. The hospital may charge the 
beneficiary a reasonable amount to cover the costs of duplicating the 
documentation and/or delivering it to the beneficiary. The hospital must 
accommodate such a request by no later than close of business of the 
first day after the material is requested.
    (f) Coverage during QIO expedited review--(1) General rule and 
liability while QIO review is pending. If the beneficiary remains in the 
hospital past midnight of the discharge date ordered by the physician, 
and the hospital, the physician who concurred with the discharge 
determination, or the QIO subsequently finds that the beneficiary 
requires inpatient hospital care, the beneficiary is not financially 
responsible for continued care (other than applicable coinsurance and 
deductible) until the hospital once again determines that the 
beneficiary no longer requires inpatient care, secures concurrence from 
the physician responsible for the

[[Page 205]]

beneficiary's care or the QIO, and notifies the beneficiary with a 
notice consistent with 405.1205 (c).
    (2) Timely filing and limitation on liability. If a beneficiary 
files a request for an expedited determination by the QIO in accordance 
with paragraph (b)(1) of this section, the beneficiary is not 
financially responsible for inpatient hospital services (other than 
applicable coinsurance and deductible) furnished before noon of the 
calendar day after the date the beneficiary (or his or her 
representative) receives notification (either orally or in writing) of 
the expedited determination by the QIO.
    (3) Untimely request and liability. When a beneficiary does not file 
a request for an expedited determination by the QIO in accordance with 
paragraph (b) of this section, but remains in the hospital past the 
discharge date, that beneficiary may be held responsible for charges 
incurred after the date of discharge or as otherwise stated by the QIO.
    (4) Hospital requests an expedited review. When the hospital 
requests a review in accordance with Sec. 405.1208, and the QIO concurs 
with the hospital's discharge determination, a hospital may not charge 
the beneficiary until the date specified by the QIO.
    (g) Effect of an expedited QIO determination. The QIO determination 
is binding upon the beneficiary, physician, and hospital, except in the 
following circumstances:
    (1) Right to request a reconsideration. If the beneficiary is still 
an inpatient in the hospital and is dissatisfied with the determination, 
he or she may request a reconsideration according to the procedures 
described in Sec. 405.1204.
    (2) Right to pursue the general claims appeal process. If the 
beneficiary is no longer an inpatient in the hospital and is 
dissatisfied with this determination, the determination is subject to 
the general claims appeal process.

[71 FR 68721, Nov. 27, 2006]



Sec. 405.1208  Hospital requests expedited QIO review.

    (a) General rule. (1) If the hospital (acting directly or through 
its utilization review committee) believes that the beneficiary does not 
require further inpatient hospital care but is unable to obtain the 
agreement of the physician, it may request an expedited determination by 
the QIO.
    (2) When the hospital requests review, and the QIO concurs with the 
hospital's discharge determination, a hospital may not charge a 
beneficiary until the date specified by the QIO in accordance with 
405.1206(f)(4).
    (b) Procedures hospital must follow. (1) The hospital must (acting 
directly or through its utilization review committee) notify the 
beneficiary (or his or her representative) that it has requested that 
review.
    (2) The hospital must supply any pertinent information the QIO 
requires to conduct its review and must make it available by phone or in 
writing, by close of business of the first full working day immediately 
following the day the hospital submits the request for review.
    (c) Procedures the QIO must follow. (1) The QIO must notify the 
hospital that it has received the request for review and must notify the 
hospital if it has not received all pertinent records.
    (2) The QIO must examine the pertinent records pertaining to the 
services.
    (3) The QIO must solicit the views of the beneficiary in question.
    (4) The QIO must make a determination and notify the beneficiary, 
the hospital, and physician within 2 working days of the hospital's 
request and receipt of any pertinent information submitted by the 
hospital.
    (d) Notice of an expedited determination. (1) When a QIO issues an 
expedited determination as stated in paragraph (c)(4) of this section, 
it must notify the beneficiary, physician, and hospital of its decision, 
by telephone and subsequently in writing.
    (2) A written notice of the expedited initial determination must 
contain the following:
    (i) The basis for the determination;.
    (ii) A detailed rationale for the determination;
    (iii) A statement explaining the Medicare payment consequences of 
the expedited determination and date of liability, if any; and
    (iv) A statement informing the beneficiary of his or her appeal 
rights and

[[Page 206]]

the timeframe for requesting an appeal.
    (e) Effect of an expedited determination. The expedited 
determination under this section is binding upon the beneficiary, 
physician, and hospital, except in the following circumstances:
    (1) When a beneficiary remains in the hospital. If the beneficiary 
is still an inpatient in the hospital and is dissatisfied with this 
determination, he or she may request a reconsideration according to the 
procedures described in Sec. 405.1204. The procedures described in 
Sec. 405.1204 will apply to reconsiderations requested under this 
section. If the beneficiary does not make a request in accordance with 
Sec. 405.1204(b)(1), the timeframes described in Sec. 405.1204(c)(3), 
the escalation procedures described in Sec. 405.1204(c)(5), and the 
coverage rule described in Sec. 405.1204(f) will not apply.
    (2) When a beneficiary is no longer an inpatient in the hospital. If 
the beneficiary is no longer an inpatient in the hospital and is 
dissatisfied with this determination, this determination is subject to 
the general claims appeal process.

[69 FR 69624, Nov. 26, 2004, as amended at 71 FR 68722, Nov. 27, 2006]

Subparts K-Q [Reserved]



       Subpart R_Provider Reimbursement Determinations and Appeals

    Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 1871, 
1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 405, 1302, 
1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 1395oo, and 
1395ww).

    Source: 39 FR 34515, Sept. 26, 1974, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977.



Sec. 405.1801  Introduction.

    (a) Definitions. As used in this subpart:
    Administrator means the Administrator or Deputy Administrator of 
CMS.
    Administrator review means that review provided for in section 
1878(f) of the Act (42 U.S.C. 1395oo(f)) and Sec. 405.1875.
    Board means the Provider Reimbursement Review Board established in 
accordance with section 1878 of the Act (42 U.S.C. 1395oo) and Sec. 
405.1845.
    Board hearing means that hearing provided for in section 1878(a) of 
the Act (42 U.S.C. 1395oo(a)), and Sec. 405.1835.
    CMS reviewing official means the reviewing official provided for in 
Sec. 405.1834.
    CMS reviewing official procedure means the review provided for in 
Sec. 405.1834.
    Date of receipt means the date a document or other material is 
received by either of the following:
    (1) A party or an affected nonparty. A party or an affected 
nonparty, such as CMS, involved in proceedings before a reviewing 
entity.
    (i) As applied to a party or an affected nonparty, the phrase ``date 
of receipt'' in this definition is synonymous with the term ``notice,'' 
as that term is used in section 1878 of the Act and in this subpart.
    (ii) For purposes of an intermediary hearing, if no intermediary 
hearing officer is appointed (or none is currently presiding), the date 
of receipt of materials sent to the intermediary hearing officer is 
presumed to be the date that the intermediary stamps ``Received'' on the 
materials.
    (iii) The date of receipt by a party or affected nonparty of 
documents involved in proceedings before a reviewing entity is presumed 
to be 5 days after the date of issuance of an intermediary notice or a 
reviewing entity document. This presumption, which is otherwise 
conclusive, may be overcome if it is established by a preponderance of 
the evidence that such materials were actually received on a later date.
    (2) A reviewing entity. For purposes of this definition, a reviewing 
entity is deemed to include the Office of the Attorney Advisor. The 
determination as to the date of receipt by the reviewing entity to which 
the document or other material was submitted is final and binding as to 
all parties to the appeal. The date of receipt of documents by a 
reviewing entity is presumed to be the date--
    (i) Of delivery where the document or material is transmitted by a 
nationally-recognized next-day courier (such

[[Page 207]]

as the United States Postal Service's Express Mail, Federal Express, 
UPS, DHL, etc.); or
    (ii) Stamped ``Received'' by the reviewing entity on the document or 
other submitted material (where a nationally-recognized next-day courier 
is not employed). This presumption, which is otherwise conclusive, may 
be overcome if it is established by clear and convincing evidence that 
the document or other material was actually received on a different 
date.
    Intermediary determination means the following:
    (1) With respect to a provider of services that has filed a cost 
report under Sec. Sec. 413.20 and 413.24(f) of this chapter, the term 
means a determination of the amount of total reimbursement due the 
provider, pursuant to Sec. 405.1803 following the close of the 
provider's cost reporting period, for items and services furnished to 
beneficiaries for which reimbursement may be made on a reasonable cost 
basis under Medicare for the period covered by the cost report.
    (2) With respect to a hospital that receives payments for inpatient 
hospital services under the prospective payment system (part 412 of this 
chapter), the term means a determination of the total amount of payment 
due the hospital, pursuant to Sec. 405.1803 following the close of the 
hospital's cost reporting period, under that system for the period 
covered by the determination.
    (3) For purposes of appeal to the Provider Reimbursement Review 
Board, the term is synonymous with the phrases ``intermediary's final 
determination'' and ``final determination of the Secretary'', as those 
phrases are used in section 1878(a) of the Act.
    (4) For purposes of Sec. 405.376 concerning claims collection 
activities, the term does not include an action by CMS with respect to a 
compromise of a Medicare overpayment claim, or termination or suspension 
of collection action on an overpayment claim, against a provider or 
physician or other supplier.
    Intermediary hearing means that hearing provided for in Sec. 
405.1809.
    Intermediary hearing officer(s) means the hearing officer or panel 
of hearing officers provided for in Sec. 405.1817.
    Reviewing entity means the intermediary hearing officer(s), a CMS 
reviewing official, the Board, or the Administrator.
    (b) General rules--(1) Providers. In order to be paid for covered 
services furnished to Medicare beneficiaries, a provider must file a 
cost report with its intermediary as specified in Sec. 413.24(f) of 
this chapter. For purposes of this subpart, the term ``provider'' 
includes a hospital (as described in part 482 of this chapter), hospice 
program (as described in Sec. 418.3 of this chapter), critical access 
hospital (CAH), comprehensive outpatient rehabilitation facility (CORF), 
renal dialysis facility, Federally qualified health center (FQHC), home 
health agency (HHA), rural health clinic (RHC), skilled nursing facility 
(SNF), and any other entity included under the Act. (FQHCs and RHCs are 
providers, for purposes of this subpart, effective with cost reporting 
periods beginning on or after October 1, 1991).
    (2) Other nonprovider entities participating in Medicare Part A. (i) 
Providers of services, as well as, other entities (including, but not 
limited to health maintenance organizations (HMOs) and competitive 
medical plans (CMPs) (as described in Sec. 400.200 of this chapter)) 
may participate in the Medicare program, but do not qualify as providers 
under the Act or this subpart.
    (ii) Some of these nonprovider entities are required to file 
periodic cost reports and are paid on the basis of information furnished 
in these reports. Except as provided at Sec. 413.200(g), these 
nonprovider entities may not obtain an intermediary hearing or a Board 
hearing under section 1878 of the Act or this subpart.
    (iii) Some other hearing will be available to these nonprovider 
entities, if the amount in controversy is at least $1,000.
    (iv) For any nonprovider hearing, the procedural rules for a Board 
hearing set forth in this subpart are applicable to the maximum extent 
possible.
    (c) Effective dates. (1) Except as provided in paragraphs (c)(2) and 
(c)(3) of this section or in Sec. 405.1885(e), this subpart applies to 
all cost reporting periods ending on or after December 31,

[[Page 208]]

1971, for which reimbursement may be made on a reasonable cost basis.
    (2) Sections 405.1835 to 405.1877 apply only to cost reporting 
periods ending on or after June 30, 1973, for which reimbursement may be 
made on a reasonable cost basis.
    (3) With respect to hospitals under the prospective payment system 
(see part 412 of this chapter), the appeals procedures in Sec. Sec. 
405.1811 to 405.1877 that apply become applicable with the hospital's 
first cost reporting period beginning on or after October 1, 1983.
    (d) Calculating time periods and deadlines. In computing any period 
of time or deadline prescribed or allowed under this subpart or 
authorized by a reviewing entity the following principles are 
applicable:
    (1) The day of the act, event, or default from which the designated 
time period begins to run is not included.
    (2) Each succeeding calendar day, including the last day, is 
included in the designated time period, except that, in calculating a 
designated period of time for an act by a reviewing entity, a day is not 
included where the reviewing entity is unable to conduct business in the 
usual manner due to extraordinary circumstances beyond its control such 
as natural or other catastrophe, weather conditions, fire, or furlough. 
In that case, the designated time period resumes when the reviewing 
entity is again able to conduct business in the usual manner.
    (3) If the last day of the designated time period is a Saturday, a 
Sunday, a Federal legal holiday (as enumerated in Rule 6(a) of the 
Federal Rules of Civil Procedure), or a day on which the reviewing 
entity is unable to conduct business in the usual manner, the deadline 
becomes the next day that is not one of the aforementioned days.
    (4) For purposes of paragraph (d) of this section, the reviewing 
entity is deemed to also include--
    (i) The intermediary, if the intermediary hearing officer(s) is not 
yet appointed (or none is currently presiding); and
    (ii) The Office of the Attorney Advisor.

[39 FR 34515, Sept. 26, 1974. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 48 FR 39834, Sept. 1, 1983; 48 FR 45773, Oct. 7, 
1983; 49 FR 322, Jan. 3, 1984; 49 FR 23013, June 1, 1984; 51 FR 34793, 
Sept. 30, 1986; 61 FR 63749, Dec. 2, 1996; 73 FR 30243, May 23, 2008; 73 
FR 49356, Aug. 21, 2008]



Sec. 405.1803  Intermediary determination and notice of amount of program 

reimbursement.

    (a) General requirement. Upon receipt of a provider's cost report, 
or amended cost report where permitted or required, the intermediary 
must within a reasonable period of time (as described in Sec. 
405.1835(a)(3)(ii)), furnish the provider and other parties as 
appropriate (see Sec. 405.1805) a written notice reflecting the 
intermediary's determination of the total amount of reimbursement due 
the provider. The intermediary must include the following information in 
the notice, as appropriate:
    (1) Reasonable cost. The notice must--
    (i) Explain the intermediary's determination of total program 
reimbursement due the provider on the basis of reasonable cost for the 
reporting period covered by the cost report or amended cost report; and
    (ii) Relate this determination to the provider's claimed total 
program reimbursement due the provider for this period.
    (2) Prospective payment. With respect to a hospital that receives 
payments for inpatient hospital services under the prospective payment 
system (see part 412 of this chapter), the intermediary must include in 
the notice its determination of the total amount of the payments due the 
hospital under that system for the cost reporting period covered by the 
notice. The notice must explain (with appropriate use of the applicable 
money amounts) any difference in the amount determined to be due, and 
the amounts received by the hospital during the cost reporting period 
covered by the notice.
    (b) Requirements for intermediary notices. The intermediary must 
include in each notice appropriate references to law, regulations, CMS 
Rulings, or program instructions to explain why the intermediary's 
determination of the amount of program reimbursement for

[[Page 209]]

the period differs from the amount the provider claimed. The notice must 
also inform the provider of its right to an intermediary or Board 
hearing (see Sec. Sec. 405.1809, 405.1811, 405.1815, 405.1835, and 
405.1843) and that the provider must request the hearing within 180 days 
after the date of receipt of the notice.
    (c) Use of notice as basis for recoupment of overpayments. The 
intermediary's determination contained in its notice is the basis for 
making the retroactive adjustment (required by Sec. 413.64(f) of this 
chapter) to any program payments made to the provider during the period 
to which the determination applies, including recoupment under Sec. 
405.373 from ongoing payments to the provider of any overpayments to the 
provider identified in the determination. Recoupment is made 
notwithstanding any request for hearing on the determination the 
provider may make under Sec. 405.1811 or Sec. 405.1835.
    (d) Effect of certain final agency decisions and final court 
judgments; audits of self-disallowed and other items. (1) This paragraph 
applies to the following administrative decisions and court judgments:
    (i) A final hearing decision by the intermediary (as described in 
Sec. 405.1833 of this subpart) or the Board (as described in Sec. 
405.1871(b) of this subpart).
    (ii) A final decision by a CMS reviewing official (as described in 
Sec. 405.1834(f)(1) of this subpart) or the Administrator (as described 
in Sec. 405.1875(e)(4) of this subpart) following review of a hearing 
decision by the intermediary or the Board, respectively.
    (iii) A final, non-appealable judgment by a court on a Medicare 
reimbursement issue that the court rendered in accordance with 
jurisdiction under section 1878 of the Act (as described in Sec. 
405.1842 and Sec. 405.1877 of this subpart).
    (2) For any final agency decision or final court judgment specified 
in paragraph (d)(1) of this section, the intermediary must promptly, 
upon notification from CMS--
    (i) Determine the effect of the final decision or judgment on the 
intermediary determination for the cost reporting period at issue in the 
decision or judgment; and
    (ii) Issue any revised intermediary determination, and make any 
additional program payment, or recoup or offset any program payment (as 
described in Sec. 405.371 of this subpart), for the period that may be 
necessary to implement the final decision or judgment on the specific 
matters at issue in the decision or judgment.
    (3) CMS may require the intermediary to audit any item, including 
any self-disallowed item, at issue in an appeal or a civil action, 
before any revised intermediary determination or additional Medicare 
payment, recoupment, or offset may be determined for an item under 
paragraph (d)(2) of this section.
    (4) For any final settlement agreement, whether for an appeal to the 
intermediary hearing officer(s) or the Board or for a civil action 
before a court, the intermediary must implement the settlement agreement 
in accordance with paragraphs (d)(2) and (d)(3) of this section, unless 
a particular administrative or judicial settlement agreement provides 
otherwise.

[48 FR 39834, Sept. 1, 1983, as amended at 49 FR 322, Jan 3, 1984; 51 FR 
34793, Sept. 30, 1986; 61 FR 63748, Dec. 2, 1996; 73 FR 30244, May 23, 
2008]



Sec. 405.1804  Matters not subject to administrative and judicial review under 

prospective payment.

    Neither administrative nor judicial review is available for 
controversies about the following matters:
    (a) The determination of the requirement, or the proportional 
amount, of any budget neutrality adjustment in the prospective payment 
rates.
    (b) The establishment of--
    (1) Diagnosis related groups (DRGs);
    (2) The methodology for the classification of inpatient discharges 
within the DRGs; or
    (3) Appropriate weighting factors that reflect the relative hospital 
resources used with respect to discharge within each DRG.

[49 FR 322, Jan. 1, 1984]



Sec. 405.1805  Parties to intermediary determination.

    The parties to the intermediary's determination are the provider and 
any other entity found by the intermediary

[[Page 210]]

to be a related organization of the provider under Sec. 413.17 of this 
chapter.

[48 FR 39835, Sept. 1, 1983, as amended at 51 FR 34793, Sept. 30, 1986]



Sec. 405.1807  Effect of intermediary determination.

    The determination shall be final and binding on the party or parties 
to such determination unless:
    (a) An intermediary hearing is requested in accordance with Sec. 
405.1811 and an intermediary hearing decision rendered in accordance 
with Sec. 405.1831; or
    (b) The intermediary determination is revised in accordance with 
Sec. 405.1885; or
    (c) A Board hearing is requested in accordance with Sec. 405.1835 
and a hearing decision rendered pursuant thereto.



Sec. 405.1809  Intermediary hearing procedures.

    (a) Hearings. Each intermediary must establish and maintain written 
procedures for intermediary hearings, in accordance with the regulations 
in this subpart, for resolving issues that may arise between the 
intermediary and a provider concerning the amount of reasonable cost 
reimbursement, or prospective payment due the provider (except as 
provided in Sec. 405.1804) under the Medicare program. The procedures 
must provide for a hearing on the intermediary determination contained 
in the notice of program reimbursement (Sec. 405.1803), if the provider 
files a timely request for a hearing.
    (b) Amount in controversy. In order for an intermediary to grant a 
hearing, the following dates and amounts in controversy apply:
    (1) For cost reporting periods ending prior to June 30, 1973, the 
amount of program reimbursement in controversy must be at least $1000.
    (2) For cost reporting periods ending on or after June 30, 1973, the 
amount of program reimbursement in controversy must be at least $1000 
but less than $10,000.

[48 FR 39835, Sept. 1, 1983, as amended at 49 FR 323, Jan. 1, 1984]



Sec. 405.1811  Right to intermediary hearing; contents of, and adding issues 

to, hearing request.

    (a) Criteria. A provider (but no other individual, entity, or party) 
has a right to an intermediary hearing, as a single provider appeal, for 
specific items claimed for a cost reporting period covered by an 
intermediary or Secretary determination for the period, but only if--
    (1) The provider has preserved its right to claim dissatisfaction 
with the amount of Medicare payment for the specific item(s) at issue, 
by either--
    (i) Including a claim for a specific item(s) on its cost report for 
a period if the provider seeks payment that it believes to be in 
accordance with Medicare policy; or
    (ii) Effective with cost reporting periods that end on or after 
December 31, 2008, self-disallowing a specific item(s) by following the 
applicable procedures for filing a cost report under protest, if the 
provider seeks payment that it believes may not be allowable or may not 
be in accordance with Medicare policy (for example, if the intermediary 
lacks discretion to award the reimbursement the provider seeks for the 
item(s)),
    (2) The amount in controversy (as determined in accordance with 
Sec. 405.1839 of this subpart) is at least $1,000 but less than 
$10,000; and
    (3) Unless the provider qualifies for a good cause extension under 
Sec. 405.1813 of this subpart, the date of receipt by the intermediary 
of the provider's hearing request must be--
    (i) No later than 180 days after the date of receipt by the provider 
of the intermediary or Secretary determination; or
    (ii) When the intermediary determination is not issued (through no 
fault of the provider) within 12 months of the date of receipt by the 
intermediary of the provider's perfected cost report or amended cost 
report (as specified in Sec. 413.24(f) of this chapter), no later than 
180 days after the expiration of the 12-month period for issuance of the 
intermediary determination. The date of receipt by the intermediary of 
the provider's perfected cost report or amended cost report is presumed 
to be the date the

[[Page 211]]

intermediary stamped ``Received'' unless it is shown by a preponderance 
of the evidence that the intermediary received the cost report on an 
earlier date.
    (b) Contents of request for an intermediary hearing. The provider's 
request for an intermediary hearing must be submitted in writing to the 
intermediary, and the request must include the elements described in 
paragraphs (b)(1) through (b)(3) of this section. If the provider 
submits a hearing request that does not meet the requirements of (b)(1), 
(b)(2), or (b)(3) of this section, the intermediary hearing officer may 
dismiss with prejudice the appeal, or take any other remedial action he 
or she considers appropriate.
    (1) A demonstration that the provider satisfies the requirements for 
an intermediary hearing as specified in paragraph (a) of this section, 
including a specific identification of the intermediary or Secretary 
determination under appeal.
    (2) An explanation, for each specific item at issue (as described in 
paragraph (a)(1) of this section), of the provider's dissatisfaction 
with the intermediary or Secretary determination under appeal, including 
an account of--
    (i) Why the provider believes Medicare payment is incorrect for each 
disputed item (or, where applicable, why the provider is unable to 
determine whether Medicare payment is correct because it allegedly does 
not have access to underlying information concerning the calculation of 
its payment); and
    (ii) How and why the provider believes Medicare payment should be 
determined differently for each disputed item.
    (iii) If the provider self-disallows a specific item, a description 
of the nature and amount of each self-disallowed item and the 
reimbursement sought for any item.
    (3) A copy of the intermediary or Secretary determination under 
appeal, and any other documentary evidence the provider considers 
necessary to satisfy the hearing request requirements of paragraphs 
(b)(1) and (b)(2) of this section.
    (c) Adding issues to the hearing request. After filing a hearing 
request in accordance with paragraphs (a) and (b) of this section, a 
provider may add specific Medicare payment issues to the original 
hearing request by submitting a written request to the intermediary 
hearing officer, only if the following requirements are met:
    (1) The request to add issues complies with the requirements of 
paragraphs (a)(1) and (b) of this section as to each new issue.
    (2) The specific matters at issue raised in the initial hearing 
request and the matters identified in subsequent requests to add issues, 
when combined, satisfy the requirements of paragraph (a)(2) of this 
section.
    (3) The intermediary hearing officer receives the request to add 
issues no later than 60 days after the expiration of the applicable 180-
day period prescribed in paragraph (a)(3) of this section.

[73 FR 30244, May 23, 2008]



Sec. 405.1813  Good cause extension of time limit for requesting an 

intermediary hearing.

    (a) A request for an intermediary hearing that is received by the 
intermediary after the applicable 180-day time limit prescribed in Sec. 
405.1811(a)(3) of this subpart must be dismissed by the intermediary 
hearing officer(s), except that the hearing officer(s) may extend the 
time limit upon a good cause showing by the provider.
    (b) The intermediary hearing officer(s) may find good cause to 
extend the time limit only if the provider demonstrates in writing it 
could not reasonably have been expected to file timely due to 
extraordinary circumstances beyond its control (such as a natural or 
other catastrophe, fire, or strike), and the provider's written request 
for an extension is received by the intermediary hearing officer(s) 
within a reasonable time (as determined by the intermediary hearing 
officer(s) under the circumstances) after the expiration of the 
applicable 180-day limit prescribed in Sec. 405.1811(a)(3) of this 
subpart.
    (c) The intermediary hearing officer(s) may not grant a request for 
an extension under this section if--
    (1) The provider relies on a change in the law, regulations, CMS 
Rulings, or

[[Page 212]]

general CMS instructions (whether based on a court decision or 
otherwise) or a CMS administrative ruling or policy as the basis for the 
extension request; or
    (2) The date of receipt by the intermediary of the provider's 
extension request is later than 3 years after the date of the 
intermediary or other determination that the provider seeks to appeal.
    (d) If an extension request is granted or denied under this section, 
the intermediary hearing officer(s) must give prompt written notice to 
the provider, and mail a copy to each party to the appeal. The notice 
must include an explanation of the reasons for the decision by the 
hearing officer(s) and the facts underlying the decision.
    (e)(1) A decision denying an extension request under this section 
and dismissing the appeal is final and binding on the provider, unless 
the dismissal decision is reviewed by a CMS reviewing official in 
accordance with Sec. 405.1834(b)(2)(i) of this subpart or reopened and 
revised by the intermediary hearing officer(s) in accordance with Sec. 
405.1885 through Sec. 405.1889 of this subpart. The intermediary 
hearing officer(s) promptly mails the decision to the appropriate 
component of CMS (currently the Center for Medicare Management) (as 
specified in Sec. 405.1834(b)(4) of this subpart).
    (2) A decision granting an extension request under this section is 
not subject to immediate review by a CMS reviewing official (as 
described in Sec. 405.1834(b)(3) of this subpart). Any decision may be 
examined during the course of CMS review of a final jurisdictional 
dismissal decision or a final hearing decision by the intermediary 
hearing officer(s) (as described in Sec. 405.1834(b)(2)(i) and Sec. 
405.1834(b)(2)(ii) of this subpart).

[73 FR 30245, May 23, 2008]



Sec. 405.1814  Intermediary hearing officer jurisdiction.

    (a) General rules. (1) After a request for an intermediary hearing 
is filed under Sec. 405.1811 of this subpart, the intermediary hearing 
officer(s) must do the following:
    (i) Determine in accordance with paragraph (b) of this section 
whether or not it has jurisdiction to grant a hearing on each of the 
specific matters at issue in the hearing request.
    (ii) Make a preliminary determination of the scope of its 
jurisdiction (that is, whether the request for hearing was timely, and 
whether the amount in controversy requirement has been met), if any, 
over the matters at issue in the appeal before conducting any of the 
following proceedings:
    (A) Determining its authority to decide a legal question relevant to 
a matter at issue (as described in Sec. 405.1829 of this subpart);
    (B) Permitting discovery (as specified in Sec. 405.1821 of this 
subpart); or
    (C) Conducting a hearing (as specified in Sec. 405.1819 of this 
subpart);
    (2) The hearing officer(s) may revise a preliminary jurisdictional 
determination at any subsequent stage of the proceedings in an appeal, 
and it must promptly notify the parties of any revised determination.
    (3) Under paragraph (c)(1) of this section, each intermediary 
hearing decision (as described in Sec. 405.1831 of this subpart) must 
include a final jurisdictional finding for each specific matter at issue 
in the appeal.
    (4) If the hearing officer(s) finally determines it lacks 
jurisdiction over every specific matter at issue in the appeal, it 
issues a jurisdictional dismissal decision under paragraph (c)(2) of 
this section.
    (5) Final jurisdictional findings and jurisdictional dismissal 
decisions by the hearing officer(s) are subject to the CMS reviewing 
official procedure in accordance with paragraph (d) of this section and 
Sec. 405.1834(b)(2)(i) and (b)(2)(ii) of this subpart.
    (b) Criteria. Except for the amount in controversy requirement, the 
jurisdiction of the intermediary hearing officer(s) to grant a hearing 
is determined separately for each specific matter at issue in the 
intermediary or Secretary determination for the cost reporting period 
under appeal. The hearing officer(s) has jurisdiction to grant a hearing 
over a specific matter at issue in an appeal only if the provider has a 
right to an intermediary hearing under Sec. 405.1811. Certain matters 
at issue are removed from the jurisdiction of the

[[Page 213]]

intermediary hearing officer(s); these matters include, but are not 
limited to, the following:
    (1) A finding in an intermediary determination that expenses 
incurred for certain items or services furnished by a provider to an 
individual are not payable under title XVIII of the Act because those 
items and services are excluded from coverage under section 1862 of the 
Act and part 411 of the regulations. Review of these findings is limited 
to the applicable provisions of sections 1155, 1869, and 1879(d) of the 
Act, and of subpart I of part 405 and subpart B of part 478, as 
applicable.
    (2) Certain matters affecting payments to hospitals under the 
prospective payment system, as provided in section 1886(d)(7) of the Act 
and Sec. 405.1804 of this subpart.
    (3) Any self-disallowed item except as permitted in Sec. 
405.1811(a)(1)(ii) of this subpart.
    (c) Final jurisdictional findings, and jurisdictional dismissal 
decisions by intermediary hearing officer(s). (1) In issuing a hearing 
decision under Sec. 405.1831 of this subpart, the intermediary hearing 
officer(s) must make a final determination of its jurisdiction, or lack 
thereof, for each specific matter at issue in the hearing decision. Each 
intermediary hearing decision must include specific findings of fact and 
conclusions of law as to the jurisdiction of the hearing officer(s), or 
lack thereof, to grant a hearing on each matter at issue in the appeal.
    (2) If the hearing officer(s) finally determines it lacks 
jurisdiction to grant a hearing for every specific matter at issue in an 
appeal, it must issue a jurisdictional dismissal decision. Each 
jurisdictional dismissal decision by the hearing officer(s) must include 
specific findings of fact and conclusions of law explaining the 
determination that there is no jurisdiction to grant a hearing on each 
matter at issue in the appeal. A copy of the jurisdictional dismissal 
decision must be mailed promptly to each party to the appeal.
    (3) A jurisdictional dismissal decision by the intermediary hearing 
officer(s) under paragraph (c)(2) of this section is final and binding 
on the parties, unless the decision is reviewed by a CMS reviewing 
official in accordance with Sec. 405.1834 of this subpart or reopened 
and revised by the intermediary hearing officer(s) in accordance with 
Sec. 405.1885 through Sec. 405.1889 of this subpart.
    (d) CMS reviewing official review. Any finding by the intermediary 
hearing officer as to whether it has jurisdiction to grant a hearing on 
a specific matter at issue in an appeal is not subject to further 
administrative review, except as provided in this paragraph. The 
intermediary hearing officer's jurisdictional findings as to specific 
matters at issue in an appeal may be reviewed solely during the course 
of CMS reviewing official review of one of the intermediary hearing 
officer decisions specified in Sec. 405.1834(b)(2) of this subpart.

[73 FR 30245, May 23, 2008]



Sec. 405.1815  Parties to proceedings before the intermediary hearing 

officer(s).

    When a provider files a request for an intermediary hearing in 
accordance with Sec. 405.1811 of this subpart, the parties to all 
proceedings before the intermediary hearing officer(s) are the provider 
and, if applicable, any other entity found by the intermediary hearing 
officer(s) to be a related organization of the provider under the 
principles enunciated in Sec. 413.17 of this chapter. The parties must 
be given reasonable notice of the time, date, and place of any 
intermediary hearing. Neither the intermediary nor CMS may be made a 
party to proceedings before the intermediary hearing officer(s).

[73 FR 30246, May 23, 2008]



Sec. 405.1817  Hearing officer or panel of hearing officers authorized to 

conduct intermediary hearing; disqualification of officers.

    The intermediary hearing provided for in Sec. 405.1809 shall be 
conducted by a hearing officer or panel of hearing officers designated 
by the intermediary. Such hearing officer or officers shall be persons 
knowledgeable in the field of health care reimbursement. The hearing 
officer or officers shall not have had any direct responsibility for the 
program reimbursement determination with respect to which a request for 
hearing is filed; no hearing officer (or

[[Page 214]]

officers) shall conduct a hearing in a case in which he is prejudiced or 
partial with respect to any party, or where he has any interest in the 
matter pending for determination before him. Notice of any objection 
which a party may have with respect to a hearing officer shall be 
presented in writing to such officer by the objecting party at the 
party's earliest opportunity. The hearing officer shall consider the 
objection and shall, at his discretion, either proceed in the conduct of 
the hearing or withdraw. If the hearing officer does not withdraw, the 
objecting party may, after the hearing, present his objections to an 
executive official of the intermediary, who shall rule promptly on the 
objection.



Sec. 405.1819  Conduct of intermediary hearing.

    The hearing shall be open to all parties thereto (see Sec. 
405.1815) and to representatives of the intermediary and of the Centers 
for Medicare & Medicaid Services (see Sec. 405.1815). The hearing 
officer(s) shall inquire fully into all of the matters at issue and 
shall receive into evidence the testimony and any documents which are 
relevant and material to such matters. If the hearing officer(s) 
believes that there is relevant and material evidence available which 
has not been presented at the hearing, he (they) may, at any time prior 
to the mailing of notice of the decision, reopen the hearing record for 
the receipt of such evidence. The order in which the evidence and the 
allegations shall be presented and the conduct of the hearing shall be 
at the discretion of the hearing officer(s).



Sec. 405.1821  Prehearing discovery and other proceedings prior to the 

intermediary hearing.

    (a) Discovery rule: Time limits. (1) Limited prehearing discovery 
may be permitted by the intermediary hearing officer(s) upon request of 
a party, provided the request is timely and the hearing officer(s) makes 
a preliminary finding of its jurisdiction over the matters at issue in 
accordance with Sec. 405.1814(a) of this subpart.
    (2) A prehearing discovery request is timely if the request by a 
party is served no later than 120 days before the initially scheduled 
starting date of the intermediary hearing, unless the intermediary 
hearing officer(s) extends the time for requesting discovery.
    (3) In the absence of a specific schedule for responses set by the 
intermediary hearing officer(s), responses to interrogatories and 
requests for production of documents are due according to the schedule 
agreed upon by the party serving discovery and the party to which the 
discovery is directed. Responses by a party to interrogatories or 
requests for production of documents must be served no later than 45 
days before the initially scheduled start of the intermediary hearing, 
unless the intermediary hearing officer(s) orders otherwise. Responses 
by a nonparty to requests for production of documents must be served no 
later than 75 days after the date the requests were served on the 
nonparty, unless the party requesting the documents and the nonparty to 
which the requests are directed agree on a different time for 
responding, or unless the intermediary hearing officer(s) extends the 
time for responding.
    (4) Before ruling on a request to extend the time for requesting 
discovery or for responding to discovery, the hearing officer(s) must 
give the other parties to the appeal and any nonparty subject to a 
discovery request a reasonable period to respond to the extension 
request.
    (5) If the extension request is granted, the hearing officer(s) sets 
a new deadline and has the discretion to reschedule the hearing date.
    (b) Discovery criteria--(1) General rule. The intermediary hearing 
officer(s) may permit discovery of a matter that is relevant to the 
specific subject matter of the intermediary hearing, provided the matter 
is not privileged or otherwise protected from disclosure and the 
discovery request is not unreasonable, unduly burdensome or expensive, 
or otherwise inappropriate. In determining whether to permit discovery, 
and in fixing the scope and limits of any discovery, the hearing 
officer(s) uses the Federal Rules of Civil Procedure and Rules 401 and 
501 of the Federal Rules of Evidence for guidance.

[[Page 215]]

    (2) Limitations on discovery. Any discovery before the intermediary 
hearing officer(s) is limited as follows:
    (i) A party may request of another party, or of a nonparty other 
than CMS, HHS or any Federal agency, the reasonable production of 
documents for inspection and copying.
    (ii) A party may request another party to respond to a reasonable 
number of written interrogatories.
    (iii) A party may not request admissions, take oral or written 
depositions, or take any other form of discovery not permitted under 
this section.
    (c) Discovery procedures. Rights of nonparties: Motions to compel or 
for protective order. (1) A party may request discovery of another party 
to the proceedings before the intermediary hearing officer(s) or of a 
nonparty other than CMS, HHS or other Federal agency. Any discovery 
request filed with the intermediary hearing officer(s) must be mailed 
promptly to the party or nonparty from which the discovery is requested, 
and to any other party to the intermediary hearing (as described in 
Sec. 405.1815 of this subpart).
    (2) If a discovery request is made of a nonparty to the intermediary 
hearing, the nonparty has the rights any party has in responding to a 
discovery request. The rights of the nonparty include, but are not 
limited to, the right to select and use any attorney or other 
representative, and to submit discovery responses, objections, or 
motions to the hearing officer(s).
    (3) Each party and nonparty is required to make a good faith effort 
to resolve or narrow any discovery dispute, regardless of whether the 
dispute is with another party or a nonparty.
    (i) A party may submit to the intermediary hearing officer(s) a 
motion to compel discovery that is permitted under this section, and a 
motion for a protective order regarding any discovery request may be 
submitted to the hearing officer(s) by a party or nonparty.
    (ii) Any motion to compel or for protective order must include a 
self-sworn declaration describing the movant's efforts to resolve or 
narrow the discovery dispute. A self-sworn declaration describing 
efforts to resolve or narrow a discovery dispute also must be included 
with any response to a motion to compel or for a protective order.
    (iii) The hearing officer(s) must--
    (A) Decide the motion in accordance with this section and any prior 
discovery ruling; and
    (B) Issue and mail to each party and any affected nonparty a 
discovery ruling that grants or denies the motion to compel or for 
protective order in whole or in part; if applicable the discovery ruling 
must specifically identify any part of the disputed discovery request 
upheld and any part rejected, and impose any limits on discovery the 
hearing officer(s) finds necessary and appropriate. Nothing in this 
section authorizes the intermediary hearing officer to compel any action 
from the Secretary or CMS.
    (d) Reviewability of discovery or disclosure rulings--(1) General 
rule. A discovery ruling issued in accordance with paragraph (c)(3) of 
this section, or a disclosure ruling (such as one issued at a hearing), 
is not subject to immediate review by a CMS official (as described in 
Sec. 405.1834(b)(3) of this subpart). A discovery ruling may be 
examined solely during the course of CMS review under Sec. 405.1834 of 
this subpart of a jurisdictional dismissal decision (as described in 
Sec. 405.1814(c)(2) of this subpart) or a hearing decision (as 
described in Sec. 405.1831 of this subpart) by the intermediary hearing 
officer(s).
    (2) Exception. To the extent a ruling authorizes discovery or 
disclosure of a matter for which an objection based on privilege or 
other protection from disclosure such as case preparation, 
confidentiality, or undue burden, was made before the intermediary 
hearing officer(s), that portion of the discovery or disclosure ruling 
may immediately be reviewed by a CMS reviewing official in accordance 
with Sec. 405.1834(b)(3).
    (i) Upon notice to the intermediary hearing officer that the 
provider intends to seek immediate review of a ruling, or that the 
intermediary or other affected nonparty intends to suggest that the 
Administrator through the CMS reviewing official, take own motion review 
of the ruling, the intermediary hearing officer stays all proceedings 
affected by the ruling.

[[Page 216]]

    (ii) The intermediary hearing officer must determine, under the 
circumstances of a given case, the length of any stay, but in no event 
may the stay be less than 15 days.
    (iii) If the Administrator through the CMS reviewing official--
    (A) Grants a request for review, or takes own motion review, of a 
ruling, the ruling is stayed until such time as the CMS reviewing 
official issues a written decision that affirms, reverses, modifies, or 
remands the intermediary hearing officer's ruling.
    (B) Does not grant review or take own motion review within the time 
allotted for the stay, the stay is lifted and the ruling is not subject 
to immediate review.
    (e) Prehearing conference. The intermediary hearing officer(s) has 
discretion to schedule a prehearing conference. A prehearing conference 
may be conducted in person or telephonically, at the discretion of the 
intermediary hearing officer(s). When a panel of intermediary hearing 
officers is designated, the panel may appoint one or more hearing 
officers to act for the panel for any prehearing conference or any 
matter addressed at the conference.

[73 FR 30246, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1823  Evidence at intermediary hearing.

    Evidence may be received at the intermediary hearing even though 
inadmissible under the rules of evidence applicable to court procedure. 
The hearing officer(s) shall give the parties opportunity for submission 
and consideration of facts and arguments, and during the course of the 
hearing, should in ruling upon admissibility of evidence, exclude 
irrelevant, immaterial, or unduly repetitious evidence. The hearing 
officer(s) shall render a final ruling on the admissibility of evidence.



Sec. 405.1825  Witnesses at intermediary hearing.

    The hearing officer(s) may examine the witnesses and shall allow the 
parties and their representatives to do so. Parties to the proceedings 
may also cross-examine witnesses.



Sec. 405.1827  Record of proceedings before the intermediary hearing 

officer(s).

    (a) The intermediary hearing officer(s) must maintain a complete 
record of all proceedings in an appeal.
    (b) The record consists of all documents and any other tangible 
materials timely submitted to the hearing officer(s) by the parties to 
the appeal and by any nonparty (as described in Sec. 405.1821(c) of 
this subpart), along with all correspondence, rulings, orders, and 
decisions (including the final decision) issued by the hearing 
officer(s).
    (c) The record must include a complete transcription of the 
proceedings at any intermediary hearing.
    (d) A copy of the transcription must be made available to any party 
upon request.

[73 FR 30247, May 23, 2008]



Sec. 405.1829  Scope of authority of intermediary hearing officer(s).

    (a) The hearing officer(s) in exercising his authority must comply 
with all the provisions of title XVIII of the Act and regulations issued 
thereunder, as well as with CMS Rulings issued under the authority of 
the Administrator of the Centers for Medicare & Medicaid Services (as 
described in Sec. 401.108 of this chapter), and with the general 
instructions issued by the Centers for Medicare & Medicaid Services in 
accordance with the Secretary's agreement with the intermediary.
    (b)(1) If the intermediary hearing officer(s) has jurisdiction to 
conduct a hearing on the specific matters at issue under Sec. 405.1811, 
and the legal authority to fully resolve the matters in a hearing 
decision (as described in Sec. 405.1831 of this subpart), the hearing 
officer(s) must affirm, modify, or reverse the intermediary's findings 
on each specific matter at issue in the intermediary or Secretary 
determination for the cost year under appeal.
    (2) The intermediary hearing officer(s) also may make additional 
revisions on specific matters regardless of whether the intermediary 
considered the matters in issuing the intermediary determination for the 
cost year, provided the hearing officer(s) does not consider or decide 
any specific matter for which it lacks jurisdiction

[[Page 217]]

(as described in Sec. 405.1814(b) of this subpart) or which was not 
timely raised in the provider's hearing request.
    (3) The authority of the intermediary hearing officer(s) under this 
paragraph to make the additional revisions is limited to those revisions 
necessary to fully resolve a specific matter at issue if--
    (i) The hearing officer(s) has jurisdiction to grant a hearing on 
the specific matter under Sec. 405.1811 and Sec. 405.1814 of this 
subpart; and
    (ii) The specific matter was timely raised in an initial request for 
an intermediary hearing filed in accordance with Sec. 405.1811(b) of 
this subpart or in a timely request to add issues to an appeal submitted 
in accordance with Sec. 405.1811(c) of this subpart.

[39 FR 34515, Sept. 26, 1974. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 73 FR 30247, May 23, 2008]



Sec. 405.1831  Intermediary hearing decision.

    (a) If the intermediary hearing officer(s) finds jurisdiction (as 
described in Sec. 405.1814(a) of this subpart) and conducts a hearing, 
the intermediary hearing officer(s) must promptly issue a written 
hearing decision.
    (b) The intermediary hearing decision must be based on the evidence 
from the intermediary hearing (as described in Sec. 405.1823 of this 
subpart) and other evidence as may be included in the record (as 
described in Sec. 405.1827 of this subpart).
    (c) The decision must include findings of fact and conclusions of 
law on jurisdictional issues (as described in Sec. 405.1814(c)(1) of 
this subpart) and on the merits of the provider's reimbursement claims, 
and include appropriate citations to the record evidence and to the 
applicable law, regulations, CMS Rulings, and other interpretive rules, 
general statements of policy, and rules of agency organization, 
procedure, or practice established by CMS.
    (d) A copy of the decision must be mailed promptly to the 
intermediary, to each party and to the appropriate component of CMS 
(which currently is the Center for Medicare Management).
    (e) When the intermediary's denial of the relief that the provider 
seeks before the intermediary hearing officer(s) was based on procedural 
grounds (for example, the alleged failure of the provider to satisfy a 
time limit), or was based on the alleged failure to supply adequate 
documentation to support the provider's claim, and the intermediary 
hearing officer(s) rule(s) that the basis of the intermediary's denial 
is invalid, the intermediary hearing officer(s) remands to the 
intermediary for the intermediary to make a determination on the merits 
of the provider's claim.

[73 FR 30248, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1833  Effect of intermediary hearing decision.

    An intermediary hearing decision issued in accordance with Sec. 
405.1831 of this subpart is final and binding on all parties to the 
intermediary hearing and on the intermediary, unless the hearing 
decision is reviewed by a CMS reviewing official in accordance with 
Sec. 405.1834 of this subpart or reopened and revised by the 
intermediary hearing officer(s) in accordance with Sec. 405.1885 
through Sec. 405.1889 of this subpart. Final intermediary hearing 
decisions are subject to the provisions of Sec. 405.1803(d) of this 
subpart.

[73 FR 30248, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1834  CMS reviewing official procedure.

    (a) Scope. A provider that is a party to, and dissatisfied with, a 
final decision by the intermediary hearing officer(s), upon submitting a 
request that meets the requirements of paragraph (c) of this section, is 
entitled to further administrative review of the decision, or the 
decision may be reviewed at the discretion of the Administrator. No 
other individual, entity, or party has the right to the review. The 
review is conducted on behalf of the Administrator by a designated CMS 
reviewing official who considers whether the decision of the 
intermediary hearing officer(s) is consistent with the controlling legal 
authority (as described in Sec. 405.1834(e)(1) of this subpart) and the 
evidence in the record. Based on the review, the CMS reviewing official 
issues a decision on behalf of the Administrator.

[[Page 218]]

    (b) General rules. (1) A CMS reviewing official may immediately 
review any final decision of the intermediary hearing officer(s) as 
specified in paragraph (b)(2) of this section.
    (i) Nonfinal decisions and other nonfinal actions by the 
intermediary hearing officer(s) are not immediately reviewable, except 
as provided in paragraph (b)(3) of this section.
    (ii) The CMS reviewing official exercises this review authority in 
response to a request from a provider party to the appeal that meets the 
requirements of paragraph (c) of this section or may exercise his or her 
discretion to take own motion review.
    (2) A CMS reviewing official may immediately review the following:
    (i) Any final jurisdictional dismissal decision by the intermediary 
hearing officer(s), including any finding that the provider failed to 
demonstrate good cause for extending the time in which to request a 
hearing (as described in Sec. 405.1813(e)(1) and Sec. 405.1814(c)(3) 
of this subpart).
    (ii) Any final intermediary hearing decision (as described in Sec. 
405.1831 of this subpart).
    (3) Nonfinal decisions and other nonfinal actions by the 
intermediary hearing officer(s) are not subject to the CMS reviewing 
official procedure until the intermediary hearing officer(s) issues a 
final decision as specified in paragraph (b)(2) of this section (as 
described in Sec. Sec. 405.1813(e)(2), 405.1814(c) and (d), and 
405.1821(d)(1) of this subpart), except that the CMS reviewing official 
may immediately review a ruling, authorizing discovery or disclosure of 
a matter, where there is a claim of privilege or other protection from 
disclosure such as case preparation, confidentiality, or undue burden.
    (4) In order to facilitate the Administrator's exercise of this 
review authority, the intermediary hearing officer(s) must promptly send 
copies of any decision specified in paragraph (b)(2) of this section or 
in Sec. 405.1821(d)(2) of this subpart to the appropriate component of 
CMS (currently the Center for Medicare Management).
    (i) All requests for review by a CMS reviewing official and all 
written submissions to a CMS reviewing official under paragraphs (c) and 
(d) of this section also must be sent to the appropriate component of 
CMS.
    (ii) The appropriate CMS component examines each intermediary 
hearing officer decision that is reviewable under paragraph (b)(2) of 
this section or Sec. 405.1821(d)(2) of this subpart, along with any 
review requests and any other submissions made by a party in accordance 
with the provisions of this section, in order to assist the 
Administrator's exercise of this review authority.
    (c) Request for review. (1) A provider's request for review by a CMS 
reviewing official is granted if--
    (i) The date of receipt by the appropriate CMS component of the 
review request is no later than 60 days after the date of receipt by the 
provider of the intermediary hearing officer decision; or
    (ii) The request seeks review of a decision listed in paragraph 
(b)(2) of this section, and the provider complies with the requirements 
of paragraph (c)(2) of this section.
    (2) The provider must submit its request for review in writing, 
attach a copy of the intermediary decision for which it seeks review and 
include a brief description of all of the following:
    (i) Those aspects of the intermediary hearing officer decision with 
which the provider is dissatisfied.
    (ii) The reasons for the provider's dissatisfaction.
    (iii) Any argument or record evidence the provider believes supports 
its position.
    (iv) Any additional, extra-record evidence relied on by the 
provider, along with a demonstration that such evidence was improperly 
excluded from the intermediary hearing (as described in Sec. 405.1823 
of this subpart).
    (3) A provider request for immediate review of an intermediary 
hearing officer ruling authorizing discovery or disclosure in accordance 
with paragraph (b)(3) of this section must--
    (i) Be made as soon as practicable after the ruling is made, but in 
no event later than 5 business days after the date it received notice of 
the ruling; and
    (ii) State the reason(s) why the ruling is in error and the 
potential harm that may be caused if immediate review is not granted.

[[Page 219]]

    (d) Own motion review. (1) The Administrator has discretion to take 
own motion review of an intermediary hearing officer decision 
(regardless of whether the decision was favorable or unfavorable to the 
provider) or other reviewable action.
    (2) In order to exercise this authority, the CMS reviewing official 
must, no later than 60 days after the date of the intermediary hearing 
officer's decision, notify the parties and the intermediary that he or 
she intends to review the intermediary hearing officer decision or other 
reviewable action.
    (3) In the notice, the CMS reviewing official identifies with 
particularity the issues that are to be reviewed, and gives each party 
(as described in Sec. 405.1815 of this subpart) and affected nonparty a 
reasonable period to comment on the issues through a written submission 
complying with paragraph (c)(2) of this section.
    (e) Review procedure. (1) In reviewing an intermediary hearing 
officer decision specified in paragraph (b)(2) of this section, the CMS 
reviewing official must--
    (i) Comply with all applicable law, regulations, and CMS Rulings (as 
described in Sec. 401.108 of this chapter), and afford great weight to 
other interpretive rules, general statements of policy, and rules of 
agency organization, procedure, or practice established by CMS;
    (ii) Subject to paragraph (e)(1)(iii) of this section, limit the 
review to the record of the proceedings before the intermediary hearing 
officer(s) (as described in Sec. 405.1827 of this subpart) and any 
written submissions by the parties under paragraphs (c)(2) or (d) of 
this section; and
    (iii) Consider additional, extra-record evidence only if he or she 
determines that the evidence was improperly excluded from the 
intermediary hearing (as described in Sec. 405.1823 of this subpart).
    (2) Review of an intermediary decision specified in paragraph (b)(2) 
of this section is limited to a hearing on the written record in 
accordance with paragraph (e)(1)(ii) of this section, unless the CMS 
reviewing official determines that--
    (i) Additional, extra-record evidence may be considered in 
accordance with paragraph (e)(1)(iii) of this section;
    (ii) An oral hearing is necessary for consideration of the extra-
record evidence; and
    (iii) It is not necessary or appropriate to remand the matter to the 
intermediary hearing officer(s).
    (3) Upon completion of the review of an intermediary hearing 
decision specified in paragraph (b)(2) of this section, the CMS 
reviewing official issues a written decision that affirms, reverses, 
modifies, or remands the intermediary hearing decision. A copy of the 
decision must be mailed promptly to each party, to the intermediary, and 
to the appropriate component of CMS (currently the Center for Medicare 
Management).
    (f) Effect of a decision: Remand. (1) A decision of affirmation, 
reversal, or modification by the CMS reviewing official is final and 
binding on each party and the intermediary. No further review or appeal 
of a decision is available, but the decision may be reopened and revised 
by a CMS reviewing official in accordance with Sec. 405.1885 through 
Sec. 405.1889 of this subpart. Decisions of a CMS reviewing official 
are subject to the provisions of Sec. 405.1803(d) of this subpart. A 
decision by a CMS reviewing official remanding an appeal to the 
intermediary hearing officer(s) for further proceedings under paragraph 
(f)(2) of this section is not a final decision.
    (2) A remand to the intermediary hearing officer(s) by the CMS 
reviewing official must--
    (i) Vacate the intermediary hearing officer decision;
    (ii) Be governed by the same criteria that apply to remands by the 
Administrator to the Board under Sec. 405.1875(f)(2) of this subpart, 
and require the intermediary hearing officer(s) to take specific actions 
on remand; and
    (iii) Result in the intermediary hearing officer(s) taking the 
actions required on remand and issuing a new intermediary hearing 
decision in accordance with Sec. 405.1831 and Sec. 405.1833 of this 
subpart.

[73 FR 30248, May 23, 2008; 73 FR 49356 Aug. 21, 2008]

[[Page 220]]



Sec. 405.1835  Right to Board hearing; contents of, and adding issues to, 

hearing request.

    (a) Criteria. A provider (but no other individual, entity, or party) 
has a right to a Board hearing, as a single provider appeal, for 
specific items claimed for a cost reporting period covered by an 
intermediary or Secretary determination, only if--
    (1) The provider has preserved its right to claim dissatisfaction 
with the amount of Medicare payment for the specific item(s) at issue, 
by either--
    (i) Including a claim for specific item(s) on its cost report for 
the period where the provider seeks payment that it believes to be in 
accordance with Medicare policy; or
    (ii) Effective with cost reporting periods that end on or after 
December 31, 2008, self-disallowing the specific item(s) by following 
the applicable procedures for filing a cost report under protest, where 
the provider seeks payment that it believes may not be allowable or may 
not be in accordance with Medicare policy (for example, if the 
intermediary lacks discretion to award the reimbursement the provider 
seeks for the item(s)).
    (2) The amount in controversy (as determined in accordance with 
Sec. 405.1839 of this subpart) is $10,000 or more; and
    (3) Unless the provider qualifies for a good cause extension under 
Sec. 405.1836 of this subpart, the date of receipt by the Board of the 
provider's hearing request is--
    (i) No later than 180 days after the date of receipt by the provider 
of the intermediary or Secretary determination; or
    (ii) If the intermediary determination is not issued (through no 
fault of the provider) within 12 months of the date of receipt by the 
intermediary of the provider's perfected cost report or amended cost 
report (as specified in Sec. 413.24(f) of this chapter), no later than 
180 days after the expiration of the 12 month period for issuance of the 
intermediary determination. The date of receipt by the intermediary of 
the provider's perfected cost report or amended cost report is presumed 
to be the date the intermediary stamped ``Received'' unless it is shown 
by a preponderance of the evidence that the intermediary received the 
cost report on an earlier date.
    (b) Contents of request for a Board hearing. The provider's request 
for a Board hearing must be submitted in writing to the Board, and the 
request must include the elements described in paragraphs (b)(1) through 
(b)(4) of this section. If the provider submits a hearing request that 
does not meet the requirements of paragraphs (b)(1), (b)(2), or (b)(3) 
of this section, the Board may dismiss with prejudice the appeal, or 
take any other remedial action it considers appropriate.
    (1) A demonstration that the provider satisfies the requirements for 
a Board hearing as specified in paragraph (a) of this section, including 
a specific identification of the intermediary's or Secretary's 
determination under appeal.
    (2) An explanation (for each specific item at issue, see paragraph 
(a)(1) of this section) of the provider's dissatisfaction with the 
intermediary's or Secretary's determination under appeal, including an 
account of all of the following:
    (i) Why the provider believes Medicare payment is incorrect for each 
disputed item (or, where applicable, why the provider is unable to 
determine whether Medicare payment is correct because it does not have 
access to underlying information concerning the calculation of its 
payment).
    (ii) How and why the provider believes Medicare payment must be 
determined differently for each disputed item.
    (iii) If the provider self-disallows a specific item, a description 
of the nature and amount of each self-disallowed item and the 
reimbursement or payment sought for the item.
    (3) A copy of the intermediary or Secretary determination under 
appeal, and any other documentary evidence the provider considers 
necessary to satisfy the hearing request requirements of paragraphs 
(b)(1) and (b)(2) of this section.
    (4) With respect to a provider under common ownership or control, 
the name and address of its parent corporation, and a statement that--
    (i) To the best of the provider's knowledge, no other provider to 
which it is related by common ownership or

[[Page 221]]

control, has pending a request for a Board hearing pursuant to this 
section or pursuant to Sec. 405.1837(b)(1) on any of the same issues 
contained in the provider's hearing request for a cost reporting period 
that ends within the same calendar year as the calendar year covered by 
the provider's hearing request; or
    (ii) Such a pending appeal(s) exist(s), and the provider name(s), 
provider number(s), and the case number(s) (if assigned), for such 
appeal(s).
    (c) Adding issues to the hearing request. After filing a hearing 
request in accordance with paragraphs (a) and (b) of this section, a 
provider may add specific Medicare payment issues to the original 
hearing request by submitting a written request to the Board, only if 
the following requirements are met:
    (1) The request to add issues complies with the requirements of 
paragraphs (a)(1) and (b) of this section as to each new issue.
    (2) The specific matters at issue raised in the initial hearing 
request and the matters identified in subsequent requests to add issues, 
when combined, satisfy the requirements of paragraph (a)(2) of this 
section.
    (3) The Board receives the request to add issues no later than 60 
days after the expiration of the applicable 180-day period prescribed in 
paragraph (a)(3) of this section.

[73 FR 30249, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1836  Good cause extension of time limit for requesting a Board 

hearing.

    (a) A request for a Board hearing that the Board receives after the 
applicable 180-day time limit prescribed in Sec. 405.1835(a)(3) of this 
subpart must be dismissed by the Board, except that the Board may extend 
the time limit upon a good cause showing by the provider.
    (b) The Board may find good cause to extend the time limit only if 
the provider demonstrates in writing it could not reasonably be expected 
to file timely due to extraordinary circumstances beyond its control 
(such as a natural or other catastrophe, fire, or strike), and the 
provider's written request for an extension is received by the Board 
within a reasonable time (as determined by the Board under the 
circumstances) after the expiration of the applicable 180-day limit 
specified in Sec. 405.1835(a)(3).
    (c) The Board may not grant a request for an extension under this 
section if--
    (1) The provider relies on a change in the law, regulations, CMS 
Rulings, or general CMS instructions (whether based on a court decision 
or otherwise) or a CMS administrative ruling or policy as the basis for 
the extension request; or
    (2) The date of receipt by the Board of the provider's extension 
request is later than 3 years after the date of the intermediary or 
other determination that the provider seeks to appeal.
    (d) If an extension request is granted or denied under this section, 
the Board must give prompt written notice to the provider, and mail a 
copy of the notice to each party to the appeal. The notice must include 
a detailed explanation of the reasons for the decision by the Board and 
the facts underlying the decision.
    (e)(1) If the Board denies an extension request and determines it 
lacks jurisdiction to grant a hearing for every specific matter at issue 
in an appeal, it must issue a Board dismissal decision dismissing the 
appeal for lack of Board jurisdiction. This decision by the Board must 
be in writing and include the explanation of the extension request 
denial required under paragraph (d) of this section, in addition to 
specific findings of fact and conclusions of law explaining the Board's 
determination that it lacks jurisdiction to grant a hearing on each 
matter at issue in the appeal (as described in Sec. 405.1840(c) of this 
subpart). A copy of the Board's dismissal decision must be mailed 
promptly to each party to the appeal (as described in Sec. 405.1843 of 
this subpart).
    (2) A Board dismissal decision under paragraph (e)(1) of this 
section is final and binding on the parties, unless the decision is 
reversed, affirmed, modified, or remanded by the Administrator under 
Sec. 405.1875(a)(2)(ii) and Sec. 405.1875(e) or Sec. 405.1875(f) of 
this subpart, no later than 60 days after the date of receipt by the 
provider of the Board's decision.

[[Page 222]]

    (i) This Board decision is inoperative during the 60-day period for 
review of the decision by the Administrator, or in the event the 
Administrator reverses, affirms, modifies, or remands that decision, 
within the period.
    (ii) A Board decision under paragraph (e)(1) of this section that is 
otherwise final and binding may be reopened and revised by the Board in 
accordance with Sec. Sec. 405.1885 through 405.1889 of this subpart.
    (3) The Administrator may review a Board decision granting an 
extension request solely during the course of an Administrator review of 
one of the Board decisions specified as final, or deemed final by the 
Administrator, under Sec. 405.1875(a)(2) of this subpart.
    (4) A finding by the Board or the Administrator that the provider 
did or did not demonstrate good cause for extending the time for 
requesting a Board hearing is not subject to judicial review.

[73 FR 30250, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1837  Group appeals.

    (a) Right to Board hearing as part of a group appeal; criteria. A 
provider (but no other individual, entity, or party) has a right to a 
Board hearing, as part of a group appeal with other providers, for 
specific items claimed for a cost reporting period covered by an 
intermediary or Secretary determination for the period, only if--
    (1) The provider satisfies individually the requirements for a Board 
hearing under Sec. 405.1835(a), except for the $10,000 amount in 
controversy requirement under Sec. 405.1835(a)(2) of this subpart;
    (2) The matter at issue in the group appeal involves a single 
question of fact or interpretation of law, regulations, or CMS Rulings 
that is common to each provider in the group; and
    (3) The amount in controversy is, in the aggregate, $50,000 or more, 
as determined in accordance with Sec. 405.1839 of this subpart.
    (b) Usage and filing of group appeals--(1) Mandatory use of group 
appeals. (i) Two or more providers under common ownership or control 
that wish to appeal to the Board a specific matter at issue that 
involves a question of fact or interpretation of law, regulations, or 
CMS Rulings that is common to the providers, and that arises in cost 
reporting periods that end in the same calendar year, and for which the 
amount in controversy is $50,000 or more in the aggregate, must bring 
the appeal as a group appeal.
    (ii) One or more of the providers under common ownership or control 
may appeal more than one cost reporting period with respect to the issue 
that is the subject of the group appeal for purposes of meeting the 
$50,000 amount in controversy requirement, and, subject to the Board's 
discretion, may appeal more than one cost reporting period with respect 
to the issue that is the subject of the group appeal for other purposes, 
such as convenience.
    (iii) A group appeal involving two or more providers under common 
ownership or control must consist entirely of providers under common (to 
all) ownership or control.

    (iv)(A) Example 1: A, B, C and D are commonly owned providers that 
wish to appeal issue X. This issue was adjusted on A, B and C's CY 2004 
cost reports, and on D's CY 2005 cost report. The amount in controversy 
is more than $50,000 in the aggregate for providers A, B and C, and more 
than $10,000 for provider D. Providers A, B and C must appeal issue X as 
a group appeal. Provider D may pursue an individual appeal to the Board 
under the procedures set forth in Sec. 405.1835 of this subpart, or if 
the Board agrees, Provider D may join the group appeal. (If Provider D 
joins the group appeal, the calendar years in the group appeal would 
then be 2004 and 2005, and any provider related to Providers A through D 
by common ownership or control would be required to appeal issue X for 
its cost reporting period ending in 2004 or 2005 through the group 
appeal.)
    (B) Example 2: A, B and C are commonly owned providers that wish to 
appeal issue X. This issue was adjusted on A, B and C's CY 2004 cost 
reports. The amount in controversy is less than $50,000 in the aggregate 
for providers A, B and C ($10,000 for A, $10,000 for B and $7,000 for 
C). Providers A, B and C cannot appeal issue X as a group appeal. 
Provider A, if it wishes, and provider B, if it wishes, may pursue an 
individual appeal to the Board under the procedures set forth in Sec. 
405.1835 of this subpart. Provider C may not pursue an individual appeal 
to the Board, because the amount in controversy is less than $10,000; 
however, it may pursue an appeal to the intermediary under the 
procedures set forth in Sec. 405.1811 of this subpart.

[[Page 223]]

    (2) Optional group appeals. (i) Two or more providers not under 
common ownership or control may bring a group appeal before the Board 
under this section, if the providers wish to appeal to the Board a 
specific matter at issue that involves a question of fact or 
interpretation of law, regulations, or CMS Rulings that is common to the 
providers. Alternatively, any provider may appeal to the Board any 
issues in a single provider appeal brought under Sec. 405.1835 of this 
subpart.
    (ii) One or more of the providers bringing a group appeal under this 
paragraph may appeal more than one cost reporting period with respect to 
the issue that is the subject of the group appeal for purposes of 
meeting the $50,000 amount in controversy requirement, and, subject to 
the Board's discretion, may appeal more than one cost reporting period 
with respect to the issue that is the subject of the group appeal for 
other purposes, such as convenience.
    (3) Initiating a group appeal. With respect to group appeals brought 
under paragraph (b)(1) of this section, one or more commonly owned or 
operated providers must make a written request for a Board hearing as a 
group appeal in accordance with paragraph (c) of this section. Any group 
appeal filed by a single provider must be joined by related providers on 
common issues in accordance with paragraphs (b)(1) and (e) of this 
section. With respect to group appeals brought under paragraph (b)(2) of 
this section, two or more providers may submit--
    (i) A written request for a Board hearing as a group appeal in 
accordance with paragraph (c) of this section; or
    (ii) A request to the Board in accordance with paragraph (e)(4) of 
this section that a specific matter at issue in a single provider 
appeal, filed previously under Sec. 405.1835 of this subpart, be 
transferred from the single appeal to a group appeal.
    (c) Contents of request for a group appeal. The request for a Board 
hearing as a group appeal must be submitted in writing to the Board, and 
the request must include all of the following:
    (1) A demonstration that the request satisfies the requirements for 
a Board hearing as a group appeal, as specified in paragraph (a) of this 
section.
    (2) An explanation (for each specific item at issue; see Sec. 
405.1835(a)(1)) of each provider's dissatisfaction with its intermediary 
or Secretary determination under appeal, including an account of--
    (i) Why the provider believes Medicare payment is incorrect for each 
disputed item;
    (ii) How and why the provider believes Medicare payment must be 
determined differently for each disputed item; and
    (iii) If the provider self-disallows a specific item, a description 
of the nature and amount of each self-disallowed item and the 
reimbursement sought for each item.
    (3) A copy of each intermediary or Secretary determination under 
appeal, and any other documentary evidence the providers consider 
necessary to satisfy the hearing request requirements of paragraphs 
(c)(1) and (c)(2) of this section, and a precise description of the one 
question of fact or interpretation of law, regulations, or CMS Rulings 
that is common to the particular matters at issue in the group appeal; 
and
    (4) A statement that--
    (i) The providers believe they have satisfied all of the 
requirements for a group appeal hearing request under paragraph (a) of 
this section and requesting the Board to proceed to make jurisdictional 
findings in accordance with Sec. 405.1840; or
    (ii) The Board is requested to defer making jurisdictional findings 
until the providers request the findings in accordance with paragraph 
(e)(2) of this section.
    (d) Board's preliminary response to group appeal hearing requests. 
(1) Upon receipt of a group appeal hearing request, the Board must take 
any necessary ministerial steps.
    (2) The steps, include, for example--
    (i) Acknowledging the request;
    (ii) Assigning a case number to the appeal; or
    (iii) If applicable, transferring a specific matter at issue from a 
single provider appeal filed under Sec. 405.1835 of this subpart to a 
group appeal filed under this section.

[[Page 224]]

    (e) Group appeal procedures pending full formation of the group and 
issuance of a Board decision. (1) A provider (or providers) may file a 
group appeal hearing request with the Board under this section before 
each provider member of the group identifies or complies with paragraphs 
(a)(1) and (a)(2) of this section, or before the group satisfies the 
$50,000 amount in controversy requirement under paragraph (a)(3) of this 
section. Proceedings before the Board in any partially formed group 
appeal are subject to the provisions of paragraphs (e)(2), (e)(3), and 
(e)(4) of this section. The Board will determine that a group appeal 
brought under paragraph (b)(1) of this section is fully formed upon a 
notice in writing from the group that it is fully formed. Absent such a 
notice from the group, the Board may issue an order, requiring the group 
to demonstrate (within a period of not less than 15 days) that at least 
one commonly owned or controlled provider has preserved the issue for 
appeal by claiming the relevant item on its cost report or by self-
disallowing the item, but has not yet received its final determination 
with respect to the item for a cost year that is within the same 
calendar year as that covered by the group appeal (or that it has 
received its final determination with respect to the item for that 
period, and is still within the time to request a hearing on the issue). 
The Board determines that a group appeal brought under paragraph (b)(2) 
of this section is fully formed upon a notice in writing from the group 
that it is fully formed, or following an order from the Board that in 
its judgment, that the group is fully formed, or through general 
instructions that set forth a schedule for the closing of group appeals 
brought under paragraph (b)(2) of this section. When the Board has 
determined that a group appeal brought under paragraph (b)(1) of this 
section is fully formed, absent an order from the Board modifying its 
determination, no other provider under common ownership or control may 
appeal to the Board the issue that is the subject of the group appeal 
with respect to a cost reporting period that falls within the calendar 
year(s) covered by the group appeal.
    (2) The Board may make jurisdictional findings under Sec. 405.1840 
at any time, including, but not limited to, following a request by the 
providers for the jurisdictional findings. The providers may request 
jurisdictional findings by notifying the Board in writing that the group 
appeal is fully formed, or that the providers believe they have 
satisfied all of the requirements for a group appeal hearing request, 
and the Board may proceed to make jurisdictional findings. The providers 
must include with the notice any additional information or documentary 
evidence that is required for group appeal hearing requests. The Board 
does not dismiss a group appeal hearing request for failure to meet the 
$50,000 amount in controversy requirement until the Board has 
determined, in accordance with paragraph (e)(1) of this section, that 
the group is fully formed.
    (3) If the Board makes a preliminary determination of jurisdiction 
to conduct a hearing as a group appeal under this section, the Board 
then takes any further actions in the appeal it finds to be appropriate 
under this subpart (as described in Sec. 405.1840(a) of this subpart). 
The Board may take further actions, even though the providers in the 
appeal may wish to add other providers to the group in accordance with 
paragraph (e)(4) of this section. The Board must make separate 
jurisdictional findings for each cost reporting period added 
subsequently to the group appeal (as described in Sec. 405.1837(a) and 
Sec. 405.1839(b) of this subpart).
    (4) A provider may submit a request to the Board to join a group 
appeal anytime before the Board issues one of the decisions specified in 
Sec. 405.1875(a)(2). By submitting a request, the provider agrees that, 
if the request is granted, the provider is bound by the Board's actions 
and decision in the appeal. If the Board denies a request, the Board's 
action is without prejudice to any separate appeal the provider may 
bring in accordance with Sec. 405.1811 of this subpart, Sec. 405.1835 
of this subpart, or this section. For purposes of determining timeliness 
for the filing of any separate appeal and for the adding of issues to 
such appeal, the date of receipt of the provider's request to form or 
join the group appeal is considered

[[Page 225]]

the date of receipt for purposes of meeting the applicable 180-day 
period prescribed in Sec. 405.1835(a)(3) of this subpart.
    (5)(i) Except as specified in paragraph (ii) of this paragraph, when 
a provider has appealed an issue through electing to form, or joining, a 
group appeal under the procedures set forth in this section, it may not 
subsequently request that the Board transfer that issue to a single 
provider appeal brought in accordance with Sec. 405.1811 or Sec. 
405.1835 of this subpart.
    (ii) Exception. When the Board determines that the requirements for 
a group appeal are not met (that is, when there has been a failure to 
meet the amount in controversy or the common issue requirement), it 
transfers the issue that was the subject of the group appeal to a single 
provider appeal (or appeals) for the provider (or providers) that meets 
(or meet) the requirements for a single provider appeal.
    (f) Limitations on group appeals. (1) After the date of receipt by 
the Board of a group appeal hearing request under paragraph (c) of this 
section, a provider may not add other questions of fact or law to the 
appeal, regardless of whether the question is common to other members of 
the appeal (as described in Sec. 405.1837(a)(2) and (g) of this 
subpart).
    (2) The Board may not consider, in one group appeal, more than one 
question of fact, interpretation of law, regulations, or CMS Rulings 
that is common to each provider in the appeal. If the Board finds 
jurisdiction over a group appeal hearing request under Sec. 405.1840 of 
this subpart--
    (i) The Board must determine whether the appeal involves specific 
matters at issue that raise more than one factual or legal question 
common to each provider; and
    (ii) When the appeal is found to involve more than one factual or 
legal question common to each provider, the Board must assign a separate 
case number to the appeal of each common factual or legal question and 
conduct further proceedings in the various appeals separately for each 
case.
    (g) Issues not common to the group appeal. A provider involved in a 
group appeal that also wishes to appeal a specific matter that does not 
raise a factual or legal question common to each of the other providers 
in the group must file a separate request for a single provider hearing 
in accordance with Sec. 405.1811 or Sec. 405.1835 of this subpart, or 
file a separate request for a hearing as part of a different group 
appeal under this section, as applicable.

[73 FR 30250, May 23, 2008]



Sec. 405.1839  Amount in controversy.

    (a) Single provider appeals. (1) In order to satisfy the amount in 
controversy requirement under Sec. 405.1811(a)(2) of this subpart for 
an intermediary hearing or the amount in controversy requirement under 
Sec. 405.1835(a)(2) of this subpart for a Board hearing for a single 
provider, the provider must demonstrate that if its appeal were 
successful, the provider's total program reimbursement for each cost 
reporting period under appeal would increase by at least $1,000 but by 
less than $10,000 for an intermediary hearing, or by at least $10,000 
for a Board hearing, as applicable.
    (2) Aggregation of claims. For purposes of satisfying the applicable 
amount in controversy requirement for a single provider appeal to the 
intermediary or the Board, the provider may aggregate claims for 
additional program payment for more than one specific matter at issue, 
provided each specific claim and issue is for the same cost reporting 
period. Aggregation of claims from more than one cost reporting period 
to meet the applicable amount in controversy requirement is prohibited, 
even if a specific claim or issue in the appeal recurs for multiple cost 
years.
    (b) Group appeals. (1) In order to satisfy the amount in controversy 
requirement under Sec. 405.1837(a)(3) of this subpart for a Board 
hearing as a group appeal, the group must demonstrate that if its appeal 
were successful, the total program reimbursement for the cost reporting 
periods under appeal would increase, in the aggregate, by at least 
$50,000.
    (2) Aggregation of claims. (i) For purposes of satisfying the amount 
in controversy requirement, group members are not allowed to aggregate 
claims involving different issues.

[[Page 226]]

    (A) A group appeal must involve a single question of fact or 
interpretation of law, regulations, or CMS Ruling that is common to each 
provider (as described in Sec. 405.1837(a)(2) of this subpart).
    (B) The single issue that is common to each provider may exist over 
different cost reporting periods.
    (ii) For purposes of satisfying the amount in controversy 
requirement, a provider may appeal multiple cost reporting periods and 
different providers in the group may appeal different cost reporting 
periods.
    (c) Limitations on change in Medicare reimbursement. (1) In order to 
satisfy the applicable amount in controversy requirement for a single 
provider appeal or a group appeal, an appeal favorable to the 
provider(s) on all specific matters at issue in the appeal increases 
program reimbursement for the provider(s) in the cost reporting 
period(s) at issue by an amount that equals or exceeds the applicable 
amount in controversy threshold.
    (2) The applicable amount in controversy requirement is not 
satisfied if the result of a favorable appeal decreases program 
reimbursement for the provider(s) in the cost reporting year(s) at issue 
in the appeal.
    (3) Any effects that a favorable appeal might have on program 
reimbursement for the provider(s) in cost reporting period(s) not at 
issue in the appeal have no bearing on whether the amount in controversy 
requirement is satisfied for the cost year(s) at issue in the appeal.
    (4) When a provider (or group of providers) has requested a hearing 
before an intermediary under Sec. 405.1811 of this subpart, and the 
amount in controversy is subsequently determined to be at least $10,000 
(for example, due to a reassessment of the amount in controversy by the 
intermediary hearing office or due to adding an issue), the appeal is 
transferred to the Board. The Board is not bound by any jurisdictional 
finding of the intermediary hearing officer(s).
    (5) When a provider or group of providers has requested a hearing 
before the Board under Sec. 405.1835 or Sec. 405.1837 of this subpart, 
and the amount in controversy changes to an amount less than the minimum 
for a Board appeal due to--
    (A) The settlement or partial settlement of an issue, transfer of an 
issue to a group appeal, or the abandonment of an issue in an individual 
appeal, the change in the amount in controversy does not deprive the 
Board of jurisdiction.
    (B) A more accurate assessment of the amount in controversy, the 
Board does not retain jurisdiction.

[73 FR 30252, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1840  Board jurisdiction.

    (a) General rules. (1) After a request for a Board hearing is filed 
under Sec. 405.1835 or Sec. 405.1837 of this part, the Board must 
determine in accordance with paragraph (b) of this section, whether or 
not it has jurisdiction to grant a hearing on each of the specific 
matters at issue in the hearing request.
    (2) The Board must make a preliminary determination of the scope of 
its jurisdiction (that is, whether the request for hearing was timely, 
and whether the amount in controversy requirement has been met), if any, 
over the matters at issue in the appeal before conducting any of the 
following proceedings:
    (i) Determining its authority to decide a legal question relevant to 
a matter at issue (as described in Sec. 405.1842 of this subpart).
    (ii) Permitting discovery (as described in Sec. 405.1853 of this 
subpart).
    (iii) Issuing a subpoena (as described in Sec. 405.1857 of this 
subpart).
    (iv) Conducting a hearing (as described in Sec. 405.1845 of this 
subpart).
    (3) The Board may revise a preliminary determination of jurisdiction 
at any subsequent stage of the proceedings in a Board appeal, and must 
promptly notify the parties of any revised determination. Under 
paragraph (c)(1) of this section, each expedited judicial review (EJR) 
decision (as described in Sec. 405.1842 of this subpart) and hearing 
decision (as described in Sec. 405.1871 of this subpart) by the Board 
must include a jurisdictional finding for each specific matter at issue 
in the appeal.
    (4) If the Board finally determines it lacks jurisdiction over every 
specific

[[Page 227]]

matter at issue in the appeal, the Board must issue a dismissal decision 
under paragraph (c)(2) of this section.
    (5) Final jurisdictional findings and dismissal decisions by the 
Board under paragraphs (c)(1) and (c)(2) of this section are subject to 
Administrator and judicial review in accordance with paragraph (d) of 
this section.
    (b) Criteria. Except with respect to the amount in controversy 
requirement, the jurisdiction of the Board to grant a hearing must be 
determined separately for each specific matter at issue in each 
intermediary or Secretary determination for each cost reporting period 
under appeal. The Board has jurisdiction to grant a hearing over a 
specific matter at issue in an appeal only if the provider has a right 
to a Board hearing as a single provider appeal under Sec. 405.1835 of 
this subpart or as part of a group appeal under Sec. 405.1837 of this 
subpart, as applicable. Certain matters at issue are removed from 
jurisdiction of the Board. These matters include, but are not 
necessarily limited to, the following:
    (1) A finding in an intermediary determination that expenses 
incurred for certain items or services furnished by a provider to an 
individual are not payable under title XVIII of the Act because those 
items or services are excluded from coverage under section 1862 of the 
Act and part 411 of the regulations. Review of these findings is limited 
to the applicable provisions of sections 1155, 1869, and 1879(d) of the 
Act and of subpart I of part 405 and subpart B of part 478 of the 
regulations, as applicable.
    (2) Certain matters affecting payments to hospitals under the 
prospective payment system, as provided in section 1886(d)(7) of the Act 
and Sec. 405.1804 of this subpart.
    (3) Any self-disallowed cost, except as permitted in Sec. Sec. 
405.1835(a)(1)(ii) and 405.1837(a)(1) of this subpart.
    (c) Board's jurisdictional findings and jurisdictional dismissal 
decisions. (1) In issuing an EJR decision under Sec. 405.1842 of this 
subpart or a hearing decision under Sec. 405.1871 of this subpart, as 
applicable, the Board must make a separate determination of whether it 
has jurisdiction for each specific matter at issue in each intermediary 
or Secretary determination under appeal. A decision by the Board must 
include specific findings of fact and conclusions of law as to whether 
the Board has jurisdiction to grant a hearing on each matter at issue in 
the appeal.
    (2) Except as provided in Sec. Sec. 405.1836(e)(1) and 
405.1842(f)(2)(i) of this subpart, where the Board determines it lacks 
jurisdiction to grant a hearing for every specific matter at issue in an 
appeal, it must issue a dismissal decision dismissing the appeal for 
lack of Board jurisdiction. The decision by the Board must include 
specific findings of fact and conclusions of law explaining the Board's 
determination that it lacks jurisdiction to grant a hearing on each 
matter at issue in the appeal. A copy of the Board's decision must be 
mailed promptly to each party to the appeal (as described in Sec. 
405.1843 of this subpart).
    (3) A dismissal decision by the Board under paragraph (c)(2) of this 
section is final and binding on the parties unless the decision is 
reversed, affirmed, modified or remanded by the Administrator under 
Sec. 405.1875(a)(2)(ii) and Sec. 405.1875(e) or Sec. 405.1875(f) of 
this subpart, no later than 60 days after the date of receipt by the 
provider of the Board's decision. The Board decision is inoperative 
during the 60-day period for review of the decision by the 
Administrator, or in the event the Administrator reverses, affirms, 
modifies or remands that decision within that period. A final Board 
decision under paragraphs (c)(2) and (c)(3) of this section may be 
reopened and revised by the Board in accordance with Sec. Sec. 405.1885 
through 405.1889 of this subpart.
    (d) Administrator and judicial review. Any finding by the Board as 
to whether it has jurisdiction to grant a hearing on a specific matter 
at issue in an appeal is not subject to further administrative and 
judicial review, except as provided in this paragraph. The Board's 
jurisdictional findings as to specific matters at issue in an appeal may 
be reviewed solely during the course of Administrator review of one of 
the Board decisions specified as final, or deemed to be final by the 
Administrator, under Sec. 405.1875(a)(2) of this subpart, or during the 
course of judicial

[[Page 228]]

review of a final agency decision as described in Sec. 405.1877(a) of 
this subpart, as applicable.

[73 FR 30253, May 23, 2008]



Sec. 405.1842  Expedited judicial review.

    (a) Basis and scope. (1) This section implements provisions in 
section 1878(f)(1) of the Act that give a provider the right to seek EJR 
of a legal question relevant to a specific matter at issue in a Board 
appeal if there is Board jurisdiction to conduct a hearing on the matter 
(as described in Sec. 405.1840 of this subpart), and the Board 
determines it lacks the authority to decide the legal question (as 
described in Sec. 405.1867 of this subpart, which explains the scope of 
the Board's legal authority).
    (2) A provider may request a Board decision that the provider is 
entitled to seek EJR or the Board may consider issuing a decision on its 
own motion. Each EJR decision by the Board must include a specific 
jurisdictional finding on the matter(s) at issue, and, where the Board 
determines that it does have jurisdiction on the matter(s) at issue, a 
separate determination of the Board's authority to decide the legal 
question(s).
    (3) The Administrator may review the Board's jurisdictional finding, 
but not the Board's authority determination.
    (4) The provider has a right to seek EJR of the legal question under 
section 1878(f)(1) of the Act only if--
    (i) The final EJR decision of the Board or the Administrator, as 
applicable, includes a finding of Board jurisdiction over the specific 
matter at issue and a determination by the Board that it has no 
authority to decide the relevant legal question; or
    (ii) The Board fails to make a determination of its authority to 
decide the legal question no later than 30 days after finding 
jurisdiction over the matter at issue and notifying the provider that 
the provider's EJR request is complete.
    (b) General--(1) Prerequisite of Board jurisdiction. The Board (or 
the Administrator) must find that the Board has jurisdiction over the 
specific matter at issue before the Board may determine its authority to 
decide the legal question.
    (2) Initiating EJR procedures. A provider or group of providers may 
request the Board to grant EJR of a specific matter or matters under 
appeal, or the Board on its own motion may consider whether to grant EJR 
of a specific matter or matters under appeal. Under paragraph (c) of 
this section, the Board may initiate own motion consideration of its 
authority to decide a legal question only if the Board makes a 
preliminary finding that it has jurisdiction over the specific matter at 
issue to which the legal question is relevant. Under paragraphs (d) and 
(e) of this section, a provider may request a determination of the 
Board's authority to decide a legal question, but the 30-day period for 
the Board to make a determination under section 1878(f)(1) of the Act 
does not begin to run until the Board finds jurisdiction to conduct a 
hearing on the specific matter at issue in the EJR request and notifies 
the provider that the provider's request is complete.
    (c) Board's own motion consideration. (1) If the Board makes a 
finding that it has jurisdiction to conduct a hearing on a specific 
matter at issue in accordance with Sec. 405.1840(a) of this part, it 
may then consider on its own motion whether it lacks the authority to 
decide a legal question relevant to the matter at issue.
    (2) The Board must initiate its own motion consideration by issuing 
a written notice to each of the parties to the appeal (as described in 
Sec. 405.1843 of this subpart). The notice must--
    (i) Identify each specific matter at issue for which the Board has 
made a finding that it has jurisdiction under Sec. 405.1840(a) of this 
part, and for each specific matter, identify each relevant statutory 
provision, regulation, or CMS Ruling; and
    (ii) Specify a reasonable period of time for the parties to respond 
in writing.
    (3) After considering any written responses made by the parties to 
its notice of own motion consideration, the Board must determine whether 
it has sufficient information to issue an EJR decision for each specific 
matter and legal question included in the notice. If

[[Page 229]]

necessary, the Board may request additional information regarding its 
jurisdiction or authority from a party (or parties), and the Board must 
give any other party a reasonable opportunity to comment on any 
additional submission. Once the Board determines it needs no further 
information from the parties (or that any information has not been 
rendered timely), it must issue an EJR decision in accordance with 
paragraph (f) of this section.
    (d) Provider requests. A provider (or, in the case of a group 
appeal, a group of providers) may request a determination by the Board 
that it lacks the authority to decide a legal question relevant to a 
specific matter at issue in an appeal. A provider must submit a request 
in writing to the Board and to each party to the appeal (as described in 
Sec. 405.1843 of this subpart), and the request must include--
    (1) For each specific matter and question included in the request, 
an explanation of why the provider believes the Board has jurisdiction 
under Sec. 405.1840 of this subpart over each matter at issue and no 
authority to decide each relevant legal question; and
    (2) Any documentary evidence the provider believes supports the 
request.
    (e) Board action on provider requests. (1) If the Board makes a 
finding that it has jurisdiction to conduct a hearing on a specific 
matter at issue in accordance with Sec. 405.1840(a) of this part, then 
(and only then) it must consider whether it lacks the authority to 
decide a legal question relevant to the matter at issue. The Board is 
required to make a determination of its authority to decide the legal 
question raised in a review request under paragraph (d)(1) of this 
section by issuing an EJR decision no later than 30 days after receiving 
a complete provider request as defined in paragraph (e)(2) of this 
section.
    (2) Requirements of a complete provider request. A complete provider 
request for EJR consists of the following:
    (i) A request for an EJR decision by the provider(s).
    (ii) All of the information and documents found necessary by the 
Board for issuing a decision in accordance with paragraph (f) of this 
section.
    (3) Board's response to provider requests. After receiving a 
provider request for an EJR decision, the Board must review the request, 
along with any responses to the request submitted by other parties to 
the appeal (as described in Sec. 405.1843 of this subpart). The Board 
must respond to the provider(s) as follows:
    (i) Upon receiving a complete provider request, issue an EJR 
decision in accordance with paragraph (f) of this section no later than 
30 days after receipt of the complete provider request. If the Board 
does not issue a decision within that 30-day period, the provider has a 
right to file a complaint in Federal district court in order to obtain 
EJR over the specific matter(s) at issue.
    (ii) If the provider has not submitted a complete request, issue no 
later than 30 days after receipt of the incomplete request a written 
notice to the provider describing in detail the further information that 
the provider must submit in order to complete the request.
    (f) Board's decision on EJR: Criteria for granting EJR. Subject to 
paragraph (h)(3) of this section, the Board is required to issue an EJR 
decision following either the completion of the Board's own motion 
consideration under paragraph (c) of this section, or a notice issued by 
the Board in accordance with paragraph (e)(3)(i) of this section.
    (1) The Board's decision must grant EJR for a legal question 
relevant to a specific matter at issue in a Board appeal if the Board 
determines the following conditions are satisfied:
    (i) The Board has jurisdiction to conduct a hearing on the specific 
matter at issue in accordance with Sec. 405.1840 of this subpart.
    (ii) The Board lacks the authority to decide a specific legal 
question relevant to the specific matter at issue because the legal 
question is a challenge either to the constitutionality of a provision 
of a statute, or to the substantive or procedural validity of a 
regulation or CMS Ruling.
    (2) The Board's decision must deny EJR for a legal question relevant 
to a

[[Page 230]]

specific matter at issue in a Board appeal if any of the following 
conditions are satisfied:
    (i) The Board determines that it does not have jurisdiction to 
conduct a hearing on the specific matter at issue in accordance with 
Sec. 405.1840 of this subpart.
    (ii) The Board determines it has the authority to decide a specific 
legal question relevant to the specific matter at issue because the 
legal question is neither a challenge to the constitutionality of a 
provision of a statute, nor a challenge to the substantive or procedural 
validity of a regulation or CMS Ruling.
    (iii) The Board does not have sufficient information to determine 
whether the criteria specified in paragraph (f)(1)(i) or (f)(1)(ii) of 
this section are met.
    (3) A copy of the Board's decision must be sent promptly to--
    (i) Each party to the Board appeal (as described in Sec. 405.1843 
of this subpart) and
    (ii) The Office of the Attorney Advisor.
    (g) Further review after the Board issues an EJR decision--(1) 
General rules. (i) Under Sec. 405.1875(a)(2)(iii) of this subpart, the 
Administrator may review, on his or her own motion, or at the request of 
a party, the jurisdictional component only of the Board's EJR decision.
    (ii) Any review by the Administrator is limited to the question of 
whether there is Board jurisdiction over the specific matter at issue; 
the Administrator may not review the Board's determination of its 
authority to decide the legal question.
    (iii) An EJR decision by the Board becomes final and binding on the 
parties unless the decision is reversed, affirmed, modified, or remanded 
by the Administrator under Sec. 405.1875(a)(2)(iii), Sec. 405.1875(e), 
and Sec. 405.1875(f) of this subpart no later than 60 days after the 
date of receipt by the provider of the Board's decision.
    (iv) A Board decision is inoperative during the 60-day period for 
review by the Administrator, or in the event the Administrator reverses, 
affirms, modifies, or remands that decision within that period.
    (v) Any right of the provider to obtain EJR from a Federal district 
court is specified at paragraphs (g)(2) and (g)(3) of this section (when 
the Board issues a timely EJR decision) and paragraph (g)(4) of this 
section (in the absence of a timely Board decision).
    (vi) A final Board decision under paragraph (f) of this section, and 
a final Administrator decision made upon review of a final Board 
decision (as described in Sec. 405.1875(a)(2) and (e) of this subpart) 
may be reopened and revised in accordance with Sec. Sec. 405.1885 
through 405.1889 of this subpart.
    (2) Board grants EJR. If the Board grants EJR, the provider may file 
a complaint in a Federal district court in order to obtain EJR of the 
legal question. If the Administrator renders, no later than 60 days 
after the date of receipt by the provider of the Board's decision 
granting EJR, a decision finding that the Board has no jurisdiction over 
the matter at issue, the Board's decision is nonfinal and the provider 
has no right to obtain judicial review based on the Board's decision (as 
described in Sec. 405.1877(a)(3) and (b)(3) of this subpart).
    (3) Board denies EJR. If the Board's decision denies EJR because the 
Board finds that it has the authority to decide the legal question 
relevant to the matter at issue, the Administrator may not review the 
Board's authority determination, and the provider has no right to obtain 
EJR. If the Board denies EJR based on a finding that it lacks 
jurisdiction over the specific matter, the provider has no right to 
obtain EJR unless--
    (i) The Administrator renders timely a final decision reversing the 
Board, finding the Board has jurisdiction over the matter at issue, and 
remanding to the Board; or
    (ii) A court reverses the Board's or Administrator's decision as to 
jurisdiction, the Administrator remands to the Board, and the Board 
subsequently issues on remand from the Administrator an EJR decision 
granting EJR on the basis that it lacks the authority to decide the 
legal question.
    (4) No timely EJR decision. The Board must issue an EJR decision no 
later than 30 days after the date of a written notice under paragraph 
(e)(3)(i) of this

[[Page 231]]

section, when the provider submits a complete request for EJR. If the 
Board does not issue an EJR decision within a 30-day period, the 
provider(s) has a right to seek EJR under section 1878(f)(1) of the Act.
    (h) Effect of final EJR decisions and lawsuits on further Board 
proceedings--(1) Final decisions granting EJR. If the final decision of 
the Board or the Administrator, as applicable (as described in 
Sec. Sec. 405.1842(g)(1) and 405.1875(e)(4) of this subpart), grants 
EJR, the Board may not conduct any further proceedings on the legal 
question. The Board must dismiss--
    (i) The specific matter at issue from the appeal.
    (ii) The entire appeal if there are no other matters at issue that 
are within the Board's jurisdiction and can be fully decided by the 
Board.
    (2) Final decisions denying EJR. If the final decision:
    (i) Of the Board denies EJR solely on the basis that the Board 
determines it has the authority to decide the legal question relevant to 
the specific matter at issue, the Board must conduct further proceedings 
on the legal question and issue a decision on the matter at issue in 
accordance with this subpart.
    Exception: If the provider(s) file(s) a lawsuit pertaining to the 
legal question, and for a period that is covered by the Board's decision 
denying EJR, the Board may not conduct any further proceedings under 
this subpart on the legal question or the matter at issue before the 
lawsuit is finally resolved.
    (ii) Of the Board (or the Administrator) denies EJR on the basis 
that the Board lacks jurisdiction over the specific matter at issue, the 
Board (or the Administrator) must, as applicable, dismiss the specific 
matter at issue from the appeal, or dismiss the appeal entirely if there 
are no other matters at issue that are within the Board's jurisdiction 
and can be fully decided by the Board. If only the specific matter(s) is 
dismissed from the appeal, judicial review may be had only after a final 
decision on the appeal is made by the Board or Administrator, as 
applicable (as described in Sec. Sec. 405.1840(d) and 405.1877(a) of 
this subpart). If the Board or the Administrator, as applicable, 
dismisses the appeal entirely, the decision is subject to judicial 
review under Sec. 405.1877(a) of this subpart.
    (3) Provider lawsuits. (i) If the provider files a lawsuit seeking 
judicial review (whether on the basis of the EJR provisions of section 
1878(f)(1) of the Act or on some other basis) pertaining to a legal 
question that is allegedly relevant to a specific matter at issue in a 
Board appeal to which the provider is a party and that is allegedly not 
within the Board's authority to decide, the Office of the Attorney 
Advisor must promptly provide the Board with written notice of the 
lawsuit and a copy of the complaint.
    (ii) If the lawsuit is filed after a final EJR decision by the Board 
or the Administrator, as applicable (as described in Sec. Sec. 
405.1842(g)(1) and 405.1875(e)(4) of this subpart), on the legal 
question, the Board must carry out the applicable provisions of 
paragraphs (h)(1) and (h)(2) of this section in any pending Board appeal 
on the specific matter at issue.
    (iii) If the lawsuit is filed before a final EJR decision is issued 
on the legal question, the Board may not conduct any further proceedings 
on the legal question or the matter at issue until the lawsuit is 
resolved.

[73 FR 30254, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1843  Parties to proceedings in a Board appeal.

    (a) When a provider files a request for a hearing before the Board 
in accordance with Sec. 405.1835 or Sec. 405.1837 of this subpart, the 
parties to all proceedings in the Board appeal include the provider, an 
intermediary, and, where applicable, any other entity found by the Board 
to be a related organization of the provider under the principles 
enunciated in Sec. 413.17 of this chapter.
    (b) Neither the Secretary nor CMS may be made a party to proceedings 
in a Board appeal.
    (1) The Board may call as a witness any employee or officer of the 
Department of Health and Human Services or CMS having personal knowledge 
of the facts and the issues in controversy in an appeal.

[[Page 232]]

    (2) The regulations at 45 CFR Part 2 (Testimony by employees and 
production of documents in proceedings where the United States is not a 
party) apply as to whether such employee or officer will appear.
    (c) An intermediary may designate a representative from the 
Secretary or CMS, who may be an attorney, to represent the intermediary 
in proceedings before the Board.
    (d) Although CMS is not a party to proceedings in a Board appeal, 
there may be instances where CMS determines that the administrative 
policy implications of a case are substantial enough to warrant comment 
from CMS (as described in Sec. 405.1863 of this subpart). CMS--
    (1) May file amicus curiae (friend of the court) briefing papers 
with the Board in accordance with a schedule to be determined by the 
Board.
    (2) Must promptly mail copies of any documents filed with the Board 
to each party to the appeal.
    (e) A nonparty other than CMS may seek leave from the Board to file 
amicus curiae briefing papers with the Board.
    (f) The Board may exclude from the record all or part of an amicus 
curiae briefing paper. When the Board excludes from the record all or 
part of an amicus curiae briefing paper submitted by CMS, it states for 
the record its reason(s) in writing.

[73 FR 30256, May 23, 2008]



Sec. 405.1845  Composition of Board; hearings, decisions, and remands.

    (a) The Board will consist of five members appointed by the 
Secretary. All shall be knowledgeable in the field of cost 
reimbursement. At least one shall be a certified public accountant. Two 
Board members shall be representative of providers of services.
    (b) The term of office for Board members shall be 3 years, except 
that initial appointments may be for such shorter terms as the Secretary 
may designate to permit staggered terms of office. No member shall serve 
more than two consecutive 3-year terms of office. The Secretary shall 
have the authority to terminate a Board member's term of office for good 
cause.
    (c) Composition of the Board. The Secretary designates one member of 
the Board as Chairperson. The Chairperson coordinates and directs the 
administrative activities of the Board and the conduct of proceedings 
before the Board. CMS provides administrative support for the Board. 
Under the direction of the Chairperson, the Board is solely responsible 
for the content of its decisions.
    (d) Quorum. (1) The Board must have a quorum in order to issue one 
of the decisions specified as final, or deemed final by the 
Administrator, under Sec. 405.1875(a)(2)(i), (a)(2)(iii), and 
(a)(2)(iv), but a quorum is not required for other Board actions.
    (2) Three Board members, at least one of whom is representative of 
providers, are required in order to constitute a quorum.
    (3) The opinion of the majority of those Board members issuing a 
decision specified as final, or deemed as final by the Administrator, 
under Sec. 405.1875(a)(2), constitutes the Board's decision.
    (e) Hearings. The Board may conduct a hearing and issue a hearing 
decision (as described in Sec. 405.1871 of this subpart) on a specific 
matter at issue in an appeal, provided it finds jurisdiction over the 
matter at issue in accordance with Sec. 405.1840 of this part and 
determines it has the legal authority to fully resolve the issue (as 
described in Sec. 405.1867 of this subpart).
    (f) Oral hearings. (1) In accordance with paragraph (d) of this 
section, the Board does not need a quorum in order to hold an oral 
hearing (as described in Sec. 405.1851 of this subpart). The 
Chairperson of the Board may designate one or more Board members to 
conduct an oral hearing (where less than a quorum conducts the hearing). 
Because the presence of all Board members is not required at an oral 
hearing, the Board, at its discretion, may hold more than one oral 
hearing at a time.
    (2) Waiver of oral hearings. With the intermediary's agreement and 
the Board's approval, the provider (or, in the case of group appeals, 
the group of providers) and any related organizations (as described in 
Sec. 405.1843(a) of this subpart) may waive any right to an oral 
hearing and stipulate that the

[[Page 233]]

Board may issue a hearing decision on the written record. An on-the-
written-record hearing consists of all the evidence and written argument 
or comments submitted to the Board and included in the record (as 
described in Sec. 405.1865 of this subpart).
    (g) Hearing decisions. The Board's hearing decision must be based on 
the transcript of any oral hearing before the Board, any matter admitted 
into evidence at a hearing or deemed admissible evidence for the record 
(as described in Sec. 405.1855 of this subpart), and any written 
argument or comments timely submitted to the Board (as described in 
Sec. 405.1865 of this subpart).
    (h) Remands. (1) Except as provided in paragraph (h)(3) of this 
section, a Board remand order may be reviewed solely during the course 
of Administrator review of one of the Board decisions specified in Sec. 
405.1875(a)(2) of this subpart), or of judicial review of a final agency 
decision as described in Sec. 405.1877(a) and (c)(3) of this part, as 
applicable.
    (2) The Board may order a remand requiring specific actions of a 
party to the appeal. In ordering a remand, the Board must--
    (i) Specify any actions required of the party and explain the 
factual and legal basis for ordering a remand;
    (ii) Issue the remand order in writing; and
    (iii) Mail the remand order promptly to the parties and any affected 
nonparty, such as CMS, to the appeal.
    (3) A Board remand order is not subject to immediate Administrator 
review unless the Administrator determines that the remand order might 
otherwise evade his or her review (as described in Sec. 
405.1875(a)(2)(iv) of this subpart).

[39 FR 34515, Sept. 26, 1974, as amended at 41 FR 52051, Nov. 26, 1976. 
Redesignated at 42 FR 52826, Sept. 30, 1977, as amended at 73 FR 30256, 
May 23, 2008]



Sec. 405.1847  Disqualification of Board members.

    No Board member shall join in the conduct of a hearing in a case in 
which he is prejudiced or partial with respect to any party or in which 
he has any interest in the matter pending for decision before him. 
Notice of any objection which a party may have with respect to a Board 
member shall be presented in writing to such Board member by the 
objecting party at its earliest opportunity. The Board member shall 
consider the objection and shall, in his discretion, either proceed to 
join in the conduct of the hearing or withdraw. If he does not withdraw, 
the objecting party may petition the Board, presenting its objection and 
reasons therefor, and be entitled to a ruling thereon before the hearing 
can proceed.



Sec. 405.1849  Establishment of time and place of hearing by the Board.

    The Board shall fix the time and place for the hearing and shall 
mail written notice thereof to the parties at their last known 
addresses, not less than 30 days prior to the scheduled time. Either on 
its own motion or for good cause shown by a party, the Board may, as 
appropriate, reschedule, adjourn, postpone, or reopen the hearing, 
provided that reasonable written notice is given to the parties.



Sec. 405.1851  Conduct of Board hearing.

    The Board hearing shall be open to the parties, to representatives 
of the Centers for Medicare & Medicaid Services, and to such other 
persons as the Board deems necessary and proper. The Board shall inquire 
fully into all of the matters at issue and shall receive into evidence 
the testimony of witnesses and any documents which are relevant and 
material to such matters. If the Board believes that there is relevant 
and material evidence available which has not been presented at the 
hearing, it may at any time prior to the mailing of notice of the 
decision, reconvene the hearing for the receipt of such evidence. The 
order in which the evidence and the allegations shall be presented and 
the conduct of the hearing shall be at the discretion of the Board.



Sec. 405.1853  Board proceedings prior to any hearing; discovery.

    (a) Preliminary narrowing of the issues. Upon receiving notification 
that a request for a Board hearing is submitted, the intermediary must--

[[Page 234]]

    (1) Promptly review both the materials submitted with the provider 
hearing request, and the information underlying each intermediary or 
Secretary determination for each cost reporting period under appeal.
    (2) Expeditiously attempt to join with the provider in resolving 
specific factual or legal issues and submitting to the Board written 
stipulations setting forth the specific issues that remain for Board 
resolution based on the review; and
    (3) Ensure that the evidence it considered in making its 
determination, or, where applicable, the evidence the Secretary 
considered in making his or her determination, is included in the 
record.
    (b) Position papers. (1) After any preliminary narrowing of the 
issues, the parties must file position papers in order to narrow the 
issues further. In each case, and as appropriate, the Board establishes 
the deadlines as to when the provider(s) and the intermediary must 
submit position papers to the Board.
    (2) The Board has the discretion to extend the deadline for 
submitting a position paper. Each position paper must set forth the 
relevant facts and arguments regarding the Board's jurisdiction over 
each remaining matter at issue in the appeal (as described in Sec. 
405.1840 of this subpart), and the merits of the provider's Medicare 
payment claims for each remaining issue.
    (3) In the absence of a Board order or general instructions to the 
contrary, any supporting exhibits regarding Board jurisdiction must 
accompany the position paper. Exhibits regarding the merits of the 
provider's Medicare payment claims may be submitted in a timeframe to be 
decided by the Board through a schedule applicable to a specific case or 
through general instructions.
    (c) Initial status conference. (1) Upon review of the parties' 
position papers, one or more members of the Board may conduct an initial 
status conference. An initial status conference may be conducted in 
person or telephone, at the discretion of the Board.
    (2) The Board may use the status conference to discuss any of the 
following:
    (i) Simplification of the issues.
    (ii) The necessity or desirability of amendments to the pleadings, 
including the need for a more definite statement.
    (iii) Stipulations and admissions of fact or as to the content and 
authenticity of documents.
    (iv) Whether the parties can agree to submission of the case on a 
stipulated record.
    (v) Whether a party may waive appearance at an oral hearing and 
submit only documentary evidence (the admissibility of which is subject 
to objection from other parties) and written argument.
    (vi) Limitation of the number of witnesses.
    (vii) Scheduling dates for the exchange of witness lists and of 
proposed exhibits.
    (viii) Discovery as permitted under this section.
    (ix) The time and place for the hearing.
    (x) Potential settlement of some or all of the issues.
    (xi) Other matters that the Board deems necessary and appropriate. 
The Board may issue any orders at the conference found necessary and 
appropriate to narrow the issues further and expedite further 
proceedings in the appeal.
    (3) After the status conference, the Board may--
    (i) Issue in writing a report and order specifying what transpired 
and formalizing any orders issued at the conference; and
    (ii) Require the parties to submit (jointly or otherwise) a proposed 
report and order, in order to facilitate issuance of a final report and 
order.
    (d) Further status conferences. Upon a party's request, or on its 
own motion, the Board may conduct further status conferences where it 
finds the proceedings necessary and appropriate.
    (e) Discovery--(1) General rules. (i) Discovery is limited in Board 
proceedings.
    (ii) The Board may permit discovery of a matter that is relevant to 
the specific subject matter of the Board hearing, provided the matter is 
not privileged or otherwise protected from disclosure and the discovery 
request is not unreasonable, unduly burdensome

[[Page 235]]

or expensive, or otherwise inappropriate.
    (iii) Any discovery initiated by a party must comply with all 
requirements and limitations of this section, and with any further 
requirements or limitations ordered by the Board.
    (iv) The applicable provisions of the Federal Rules of Civil 
Procedure and Rules 401 and 501 of the Federal Rules of Evidence serve 
as guidance for any discovery that is permitted under this section or by 
Board order.
    (2) Limitations on discovery. Any discovery before the Board is 
limited as follows:
    (i) A party may request of another party, or of a nonparty other 
than CMS, the Secretary or any Federal agency, the reasonable production 
of documents for inspection and copying.
    (ii) A party may also request another party to respond to a 
reasonable number of written interrogatories.
    (iii)(A) A party may not take the deposition, upon oral or written 
examination, of another party or a nonparty, unless the proposed 
deponent agrees to the deposition or the Board finds that the proposed 
deposition is necessary and appropriate under the criteria set forth in 
Federal Rules of Civil Procedure 26 and 32(a)(3) in order to secure the 
deponent's testimony for a Board hearing.
    (B) The regulations at 45 CFR Part 2 (Testimony by employees and 
production of documents in proceedings where the United States is not a 
party) apply as to whether an employee or officer of CMS or HHS will 
appear for a deposition.
    (iv) A party may not request admissions or take any other form of 
discovery not authorized under this section.
    (3) Time limits. (i) A party's discovery request is timely if the 
date the request is served on another party or nonparty, as applicable, 
is no later than 120 days before the initially scheduled starting date 
of the Board hearing, unless the Board extends the time for the request.
    (ii)(A) Depositions. (1) In the absence of an order or instruction 
by the Board setting a schedule for the holding of a deposition, a party 
desiring to take a deposition must give reasonable notice in writing to 
the deponent of a scheduled deposition.
    (2) A deposition may not be held any later than 45 days before the 
initially scheduled starting of the Board hearing, unless the Board 
orders otherwise.
    (B) Responses. (1) In the absence of a Board order or general 
instructions of the Board setting a schedule for responses, responses to 
interrogatories and requests for production of documents are due 
according to the schedule agreed upon by the party serving discovery and 
the party to which the discovery is directed, or within the time 
allotted by the Federal Rules of Civil Procedure.
    (2) Responses by a party to interrogatories, and responses by a 
party or nonparty to requests for production of documents, must be 
served no later than 45 days before the initially scheduled starting 
date of the Board hearing, unless the Board orders otherwise.
    (iii) Before ruling on a request to extend the time for requesting 
discovery or for conducting or responding to discovery, the Board must 
give the other parties to the appeal, and any nonparty subject to a 
discovery request, a reasonable period to respond to the extension 
request.
    (iv) The Board has the discretion to extend the time in which to 
request discovery or conduct or respond to discovery.
    (v) If the Board grants the extension request, it sets a new 
discovery deadline and has the discretion to reschedule the hearing 
date.
    (4) Rights of nonparties. If a discovery request is made of a 
nonparty to the Board appeal, the nonparty has the rights any party has 
in responding to a discovery request. The rights of the nonparty 
include, but are not limited to, the right to select and use any 
attorney or other representative, and to submit discovery responses, 
objections, or motions to the Board.
    (5) Motions to compel or for protective order. (i) Each party is 
required to make a good faith effort to resolve or narrow any discovery 
dispute, regardless of whether the dispute is with another party or a 
nonparty.
    (ii) A party may submit to the Board a motion to compel discovery 
that is permitted under this section or any

[[Page 236]]

Board order, and a party or nonparty may submit a motion for a 
protective order regarding any discovery request to the Board.
    (iii) Any motion to compel or for protective order must include a 
self-sworn declaration describing the movant's efforts to resolve or 
narrow the discovery dispute.
    (iv) A self-sworn declaration describing the movant's efforts to 
resolve or narrow the discovery dispute must be included with any 
response to a motion to compel or for protective order.
    (v) The Board must decide any motion in accordance with this section 
and any prior discovery ruling.
    (vi)(A) The Board must issue and mail to each party and any affected 
nonparty a discovery ruling that grants or denies, in whole or in part, 
the motion to compel or the motion for a protective order, if 
applicable.
    (B) The discovery ruling must--
    (1) Specifically identify any part of the disputed discovery request 
upheld and any part rejected, and
    (2) Impose any limits on discovery the Board finds necessary and 
appropriate.
    (vii) Nothing in this section authorizes the Board to compel any 
action from the Secretary or CMS.
    (6) Reviewability of discovery and disclosure rulings--(i) General 
rule. A Board discovery ruling, or a Board disclosure ruling, such as 
one issued at a hearing, is not subject to immediate review by the 
Administrator (as described in Sec. 405.1875(a)(3) of this subpart). 
The ruling may be reviewed solely during the course of Administrator 
review of one of the Board decisions specified as final or deemed to be 
final, by the Administrator, under Sec. 405.1875(a)(2)of this subpart, 
or of judicial review of a final agency decision as described in Sec. 
405.1877(a) and (c)(3) of this subpart, as applicable.
    (ii) Exception. To the extent a ruling authorizes discovery or 
disclosure of a matter for which an objection based on privilege, or 
other protection from disclosure such as case preparation, 
confidentiality, or undue burden, was made before the Board, that 
portion of the discovery or disclosure ruling may be reviewed 
immediately by the Administrator in accordance with Sec. 
405.1875(a)(3)(i) of this subpart. Upon notice to the Board that a party 
or nonparty, as applicable, intends to seek Administrator review of the 
ruling,--
    (A)(1) The Board must stay all proceedings affected by the ruling.
    (2) The Board determines the length of the stay under the 
circumstances of a given case, but in no event may the length of the 
stay be less than 15 days after the day on which the Board received 
notice of the party or nonparty's intent to seek Administrator review.
    (B) If the Administrator--
    (1) Grants a request for review, or takes own motion review, of a 
ruling, the ruling is stayed until the time the Administrator issues a 
written decision that affirms, reverses, modifies, or remands the 
Board's ruling.
    (2) Does not grant a request or take own motion review within the 
time allotted for the stay, the stay is lifted and the ruling is not 
subject to immediate review.

[73 FR 30257, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1855  Evidence at Board hearing.

    Evidence may be received at the Board hearing even though 
inadmissible under the rules of evidence applicable to court procedure. 
The Board shall give the parties opportunity for submission and 
consideration of facts and arguments and during the course of the 
hearing should, in ruling upon admissibility of evidence, exclude 
irrelevant, immaterial, or unduly repetitious evidence. The Board shall 
render a final ruling on the admissibility of evidence.



Sec. 405.1857  Subpoenas.

    (a) Time limits. (1) The Board may issue a subpoena--
    (i) To a party to a Board appeal or to a nonparty other than CMS or 
the Secretary or any Federal agency, requiring the attendance and 
testimony of witnesses or the production of documents for inspection and 
copying, provided the Board makes a preliminary finding of its 
jurisdiction over the matters at issue in accordance with Sec. 
405.1840(a) of this subpart.

[[Page 237]]

    (ii) At the request of a party for purposes of discovery (as 
described in Sec. 405.1853 of this subpart) or an oral hearing (as 
described in Sec. 405.1845 of this subpart); and
    (iii) On its own motion solely for purposes of a hearing.
    (2) The date of receipt by the Board of a party's subpoena request 
may not be any later than for subpoenas requested for purposes of--
    (i) Discovery, 120 days before the initially scheduled starting date 
of the Board hearing; and
    (ii) An oral hearing, 45 days before the scheduled starting date of 
the Board hearing.
    (3) Subject to paragraph (4) of this section, the Board may not 
issue a subpoena any later than for purposes of--
    (i) Discovery, 90 days before the initially scheduled starting date 
of the Board hearing; and
    (ii) An oral hearing, whether issued at a party's request or on the 
Board's own motion, 30 days before the scheduled starting date of the 
Board hearing.
    (4) The Board may extend the deadlines specified in paragraphs 
(a)(2) and (a)(3) of this section provided the Board gives each party to 
the appeal and any nonparty subject to the subpoena request or subpoena 
a reasonable period of time to comment on any proposed extension. If the 
Board extends a deadline, it retains the discretion to reschedule the 
hearing date.
    (b) Criteria--(1) Discovery subpoenas. The Board may issue a 
subpoena for purposes of discovery if all of the following are 
applicable:
    (i) The subpoena was requested in accordance with the requirements 
of paragraph (c)(1) of this section.
    (ii) The party's discovery request complies with the applicable 
provisions of Sec. 405.1853(e) of this part.
    (iii) A subpoena is necessary and appropriate to compel a response 
to the discovery request.
    (2) Hearing subpoenas. The Board may issue a subpoena for purposes 
of an oral hearing if--
    (i) The party's subpoena request meets the requirements of paragraph 
(c)(1) of this section;
    (ii) A subpoena is necessary and appropriate to compel the 
attendance and testimony of witnesses or the production of documents for 
inspection or copying, provided the testimony or documents are relevant 
and material to a matter at issue in the appeal but not unduly 
repetitious (as described in Sec. 405.1855 of this subpart); and
    (iii) The subpoena does not compel the disclosure of matter that is 
privileged or otherwise protected from disclosure for reasons such as 
case preparation, confidentiality, or undue burden.
    (iv) The subpoena does not impose undue burden or expense on the 
party or nonparty subject to the subpoena, and is not otherwise 
unreasonable or inappropriate.
    (3) Guiding principles. In determining whether to issue, quash, or 
modify a subpoena under this section, the Board uses the applicable 
provisions of the Federal Rules of Civil Procedure and Rules 401 and 501 
of the Federal Rules of Evidence for guidance.
    (c) Procedures--(1) Subpoena requests. The requesting party must 
mail any subpoena request submitted to the Board promptly to the party 
or nonparty subject to the subpoena, and to any other party to the Board 
appeal. The request must--
    (i) Identify with particularity any witnesses (and their addresses, 
if known) or any documents (and their location, if known) sought by the 
subpoena, and the means, time, or location for securing any witness 
testimony or documents;
    (ii) Describe specifically, in the case of a hearing subpoena, the 
facts any witnesses, documents, or tangible materials are expected to 
establish, and why those facts cannot be established without a subpoena; 
and
    (iii) Explain why a subpoena is appropriate under the criteria 
prescribed in paragraph (b) of this section.
    (2) Contents of subpoenas. A subpoena issued by the Board, whether 
on its own motion or at the request of a party, must be in writing and 
either sent promptly by the Board to the party or nonparty subject to 
the subpoena by certified mail or overnight delivery (and to any other 
party and affected nonparty to the appeal by regular mail), or hand-
delivered. Each subpoena must--

[[Page 238]]

    (i) Be issued in the name of the Board, and include the case number 
and name of the appeal;
    (ii) Provide notice that--
    (A) The subpoena is issued in accordance with section 1878(e) of the 
Act and Sec. 405.1857 of this subpart; and
    (B) CMS must pay the fees and the mileage of any witnesses, as 
provided in section 205(d) of the Act.
    (iii) If applicable, require named witnesses to attend a particular 
proceeding at a certain time and location and to testify on specific 
subjects; and
    (iv) If applicable, require the production of specific documents for 
inspection or copying at a certain time and location.
    (3) Rights of nonparties. If a nonparty to the Board appeal is 
subject to the subpoena or subpoena request, the nonparty has the rights 
any party has in responding to a subpoena or subpoena request. The 
rights of the nonparty include, but are not limited to, the right to 
select and use any attorney or other representative, and to submit 
responses, objections, motions, or any other pertinent materials to the 
Board regarding the subpoena or subpoena request.
    (4) Board action on subpoena requests and motions. After issuing a 
subpoena or receiving a subpoena request, the Board must do the 
following:
    (i) Give the party or nonparty subject to the subpoena or subpoena 
request a reasonable period of time for the submission of any responses, 
objections, or motions.
    (ii) Consider the subpoena or subpoena request, and any responses, 
objections, or motions related thereto, under the criteria specified in 
paragraph (b) of this section.
    (iii)(A) Issue in writing and mail promptly to each party and any 
affected nonparty an order granting or denying any motion to quash or 
modify a subpoena, or granting or denying any subpoena request in whole 
or in part; and
    (B) Issue, if applicable, an original or modified subpoena in 
accordance with paragraph (c)(2) of this section.
    (d) Reviewability--(1) General rules. (i) If the Board issues, 
quashes, or modifies, or refuses to issue, quash, or modify, a subpoena 
under paragraphs (c)(2) or (c)(4) of this section, the Board's action is 
not subject to immediate review by the Administrator (as described in 
Sec. 405.1875(a)(3) of this subpart).
    (ii) Any Board action on a subpoena may be reviewed solely during 
the course of Administrator review of one of the Board decisions 
specified in Sec. 405.1875(a)(2) of this subpart, or of judicial review 
of a final agency decision as described in Sec. 405.1877(a) and (c)(3) 
of this subpart, as applicable.
    (2) Exception. (i) To the extent a subpoena compels disclosure of a 
matter for which an objection based on privilege, or other protection 
from disclosure such as case preparation, confidentiality, or undue 
burden, was made before the Board, the Administrator may review 
immediately that portion of the subpoena in accordance with Sec. 
405.1875(a)(3)(ii) of this subpart.
    (ii) Upon notice to the Board that a party or nonparty, as 
applicable, intends to seek Administrator review of the subpoena, the 
Board must stay all proceedings affected by the subpoena.
    (iii) The Board determines the length of the stay under the 
circumstances of a given case, but in no event may the stay be less than 
15 days after the day on which the Board received notice of the party or 
nonparty's intent to seek Administrator review.
    (iv) If the Administrator grants a request for review, or takes own 
motion review, of the subpoena, the subpoena or portion of the subpoena, 
as applicable, is stayed until such time as the Administrator issues a 
written decision that affirms, reverses, modifies, or remands the 
Board's action on the subpoena.
    (v) If the Administrator does not grant review or take own motion 
review within the time allotted for the stay, the stay is lifted and the 
Board's action is not immediately reviewable.
    (e) Enforcement. (i) If the Board determines, whether on its own 
motion or at the request of a party, that a party or nonparty subject to 
a subpoena issued under this section has refused to comply with the 
subpoena, the Board may request the Administrator to seek enforcement of 
the subpoena in accordance with section 205(e) of the Act.
    (ii) Any enforcement request by the Board must consist of a written 
notice

[[Page 239]]

to the Administrator describing in detail the Board's findings of 
noncompliance and its specific request for enforcement, and providing a 
copy of the subpoena and evidence of its receipt by certified mail by 
the party or nonparty subject to the subpoena.
    (iii) The Board must promptly mail a copy of the notice and related 
documents to the party or nonparty subject to the subpoena, and to any 
other party and affected nonparty to the appeal.

[73 FR 30258, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1859  Witnesses.

    Witnesses at the hearing shall testify under oath or affirmation, 
unless excused by the Board for cause. The Board may examine the 
witnesses and shall allow the parties or their representatives to do so. 
Parties to the proceeding may also cross-examine witnesses.



Sec. 405.1861  Oral argument and written allegations.

    The parties, upon their request, shall be allowed a reasonable time 
for the presentation of oral argument or for the filing of briefs or 
other written statements of allegations as to facts or law. Copies of 
any brief or other written statement shall be filed in sufficient number 
that they may be made available to all parties and to the Centers for 
Medicare & Medicaid Services.



Sec. 405.1863  Administrative policy at issue.

    Where a party to the Board hearing puts into issue an administrative 
policy which is interpretative of the law or regulations, the Board will 
promptly notify to the Centers for Medicare & Medicaid Services.



Sec. 405.1865  Record of administrative proceedings.

    (a)(1) The Board and, if applicable, the Administrator must maintain 
a complete record of all proceedings in each appeal.
    (2) For proceedings before the Board, the administrative record 
consists of all evidence, documents and any other tangible materials 
submitted by the parties to the appeal and by any nonparty (as described 
in Sec. Sec. 405.1853(e)(4) and 405.1857(c)(3) of this subpart), along 
with all Board correspondence, rulings, subpoenas, orders, and 
decisions.
    (3) The term ``record'' is intended to encompass both the unappended 
record and any appendix to the record (as described in Sec. 405.1865(b) 
of this subpart).
    (4) The record includes a complete transcription of the proceedings 
at any oral hearing before the Board.
    (5) A copy of any transcription must be made available to any party 
upon written request.
    (b) Any evidence ruled inadmissible by the Board (as described in 
Sec. 405.1855 of this subpart) and any other submitted matter that the 
Board declines to consider (whether as untimely or otherwise) must be, 
to the extent practicable, clearly identified and segregated in an 
appendix to the record for purposes of any further review (as described 
in Sec. Sec. 405.1875 and 405.1877 of this subpart).
    (c) To the extent applicable, the administrative record also 
includes all documents (including written submissions) and any other 
tangible materials submitted to the Administrator by the parties to the 
appeal or by any nonparty (as described in Sec. Sec. 405.1853(e)(4) and 
405.1857(c)(3) of this subpart), in addition to all correspondence from 
the Administrator or the Office of the Attorney Advisor, and all 
rulings, orders, and decisions by the Administrator. The provisions of 
paragraph (b) of this section also pertain to any proceedings before the 
Administrator, to the extent the Administrator finds evidence 
inadmissible or declines to consider a specific matter (whether as 
untimely or otherwise).

[73 FR 30260, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1867  Scope of Board's legal authority.

    In exercising its authority to conduct proceedings under this 
subpart, the Board must comply with all the provisions of Title XVIII of 
the Act and regulations issued thereunder, as well as CMS Rulings issued 
under the authority of the Administrator as described in Sec. 401.108 
of this subchapter. The

[[Page 240]]

Board shall afford great weight to interpretive rules, general 
statements of policy, and rules of agency organization, procedure, or 
practice established by CMS.

[48 FR 22925, May 23, 1983, as amended at 73 FR 30260, May 23, 2008; 73 
FR 49356, Aug. 21, 2008]



Sec. 405.1868  Board actions in response to failure to follow Board rules.

    (a) The Board has full power and authority to make rules and 
establish procedures, not inconsistent with the law, regulations, and 
CMS Rulings, that are necessary or appropriate to carry out the 
provisions of section 1878 of the Act and of the regulations in this 
subpart. The Board's powers include the authority to take appropriate 
actions in response to the failure of a party to a Board appeal to 
comply with Board rules and orders or for inappropriate conduct during 
proceedings in the appeal.
    (b) If a provider fails to meet a filing deadline or other 
requirement established by the Board in a rule or order, the Board may--
    (1) Dismiss the appeal with prejudice;
    (2) Issue an order requiring the provider to show cause why the 
Board should not dismiss the appeal; or
    (3) Take any other remedial action it considers appropriate.
    (c) If an intermediary fails to meet a filing deadline or other 
requirement established by the Board, the Board may--
    (1) Take other actions that it considers appropriate, such as--
    (i) Issuing a decision based on the written record submitted to that 
point; or
    (ii) Issuing a written notice to CMS describing the intermediary's 
actions and requesting that CMS take appropriate action, such as review 
of the intermediary's compliance with the contractual requirements of 
Sec. Sec. 421.120, 421.122, and 421.124 of this chapter; and
    (2) Not use its authority to take an action such as, a sanction, 
reversing or modifying the intermediary's or Secretary's determination 
for the cost reporting period under appeal, or ruling against the 
intermediary on a disputed issue of law or fact in the appeal.
    (d)(1) If the Board dismisses the appeal with prejudice under this 
section, it must issue a dismissal decision dismissing the appeal. The 
decision by the Board must be in writing and include an explanation of 
the reason for the dismissal. A copy of the Board's dismissal decision 
must be mailed promptly to each party to the appeal (as described in 
Sec. 405.1843 of this subpart).
    (2) A dismissal decision by the Board is final and binding on the 
parties unless the decision is reversed, affirmed, modified, or remanded 
by the Administrator under Sec. 405.1875(a)(2)(ii), and Sec. 
405.1875(e) or Sec. 405.1875(f) of this part, no later than 60 days 
after the date of receipt by the provider of the Board's decision.
    (i) The Board decision is inoperative during the 60-day period for 
review by the Administrator, or in the event the Administrator reverses, 
affirms, modifies, or remands the decision within the period.
    (ii) The Board may reopen and revise a final Board decision in 
accordance with Sec. Sec. 405.1885 through 405.1889 of this subpart.
    (e)(1) Any action taken by the Board under this section other than 
dismissal of the appeal is not subject to immediate Administrator review 
(as described in Sec. 405.1875(a)(3) of this subpart) or judicial 
review (as described in Sec. 405.1877(a)(3) of this subpart).
    (2) A Board action other than dismissal of the appeal may be 
reviewed solely during the course of Administrator review of one of the 
Board decisions specified as final, or deemed to be final by the 
Administrator, under Sec. 405.1875(a)(2) of this subpart, or of 
judicial review of a final agency decision as described in Sec. 
405.1877(a) of this subpart, as applicable.
    (f) Ex parte communications with Board staff concerning procedural 
matters are not prohibited.
    (g) Upon receipt of a credible allegation that a party's 
representative has divulged to that party, or to the Board, information 
that was obtained during the course of the representative's relationship 
(such as legal counsel or employee) with an opposing party and that was 
intended by that party to be kept confidential, the Board--

[[Page 241]]

    (1) Investigates the allegation; and
    (2) May take remedial action when it determines that it is 
appropriate to do so, against the party or the representative (such as 
prohibiting the representative from appearing before it, excluding such 
information from the record, or if the overall fairness of the hearing 
has been compromised, dismissing the case).

[73 FR 30260, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1869  Scope of Board's authority in a hearing decision.

    (a) If the Board has jurisdiction to conduct a hearing on a specific 
matter at issue under section 1878(a) or (b) of the Act and Sec. 
405.1840 of this subpart, and the legal authority to fully resolve the 
matter in a hearing decision (as described in Sec. Sec. 405.1842(f), 
405.1867, and 405.1871 of this subpart), section 1878 of the Act, and 
paragraph (a) of this section give the Board the power to affirm, 
modify, or reverse the intermediary's findings on each specific matter 
at issue in the intermediary determination for the cost reporting period 
under appeal, and to make additional revisions on specific matters 
regardless of whether the intermediary considered the matters in issuing 
the intermediary determination. The Board's power to make additional 
revisions in a hearing decision does not authorize the Board to consider 
or decide a specific matter at issue for which it lacks jurisdiction (as 
described in Sec. 405.1840(b) of this subpart) or which was not timely 
raised in the provider's hearing request. The Board's power under 
section 1878(d) of the Act and paragraph (a) of this section to make 
additional revisions is limited to those revisions necessary to resolve 
fully a specific matter at issue if--
    (1) The Board has jurisdiction to grant a hearing on the specific 
matter at issue under section 1878(a) or (b) of the Act and Sec. 
405.1840 of this subpart; and
    (2) The specific matter at issue was timely raised in an initial 
request for a Board hearing filed in accordance with Sec. 405.1835 or 
Sec. 405.1837 of this subpart, as applicable, or in a timely request to 
add issues to a single provider appeal submitted in accordance with 
Sec. 405.1835(c) of this subpart.
    (b)(1) If the Board has jurisdiction to conduct a hearing on a 
specific matter at issue solely under Sec. Sec. 405.1840 and 405.1835 
or Sec. 405.1837 of this subpart, as applicable, and the legal 
authority to fully resolve the matter in a hearing decision (as 
described in Sec. Sec. 405.1842(f), 405.1867, and 405.1871 of this 
subpart), the Board is authorized to do the following:
    (i) Affirm, modify, or reverse the intermediary's or Secretary's 
findings on each specific matter at issue in the intermediary or 
Secretary determination under appeal.
    (ii) Make additional revisions on each specific matter at issue 
regardless of whether the intermediary considered these revisions in 
issuing the intermediary determination under appeal, provided the Board 
does not consider or decide a specific matter for which it lacks 
jurisdiction (as described in Sec. 405.1840(b) of this subpart) or that 
was not timely raised in the provider's hearing request.
    (2) The Board's authority under this section to make the additional 
revisions is limited to those revisions necessary to resolve a specific 
matter at issue.

[73 FR 30261, May 23, 2008]



Sec. 405.1871  Board hearing decision.

    (a)(1) If the Board finds jurisdiction over a specific matter at 
issue and conducts a hearing on the matter (as described in Sec. Sec. 
405.1840(a) and 405.1845(e) of this subpart), the Board must issue a 
hearing decision deciding the merits of the specific matter at issue.
    (2) A Board hearing decision must be in writing and based on the 
admissible evidence from the Board hearing and other admissible evidence 
and written argument or comments as may be included in the record and 
accepted by the Board (as described in Sec. Sec. 405.1845(g) and 
405.1865 of this subpart).
    (3) The decision must include findings of fact and conclusions of 
law regarding the Board's jurisdiction over each specific matter at 
issue (see Sec. 405.1840(c)(1)), and whether the provider carried its 
burden of production of evidence and burden of proof by establishing, by 
a preponderance of the

[[Page 242]]

evidence, that the provider is entitled to relief on the merits of the 
matter at issue.
    (4) The decision must include appropriate citations to the record 
evidence and to the applicable law, regulations, CMS Rulings, and other 
interpretive rules, general statements of policy, and rules of agency 
organization, procedure, or practice established by CMS. Where the 
Board's decision reverses or modifies an intermediary determination on 
an issue for which the policy expressed in an interpretive rule (other 
than a regulation or a CMS Ruling), general statement of policy or rule 
of agency organization, procedure or practice established by CMS would 
be dispositive of that issue (if followed by the Board), the Board 
decision must explain how it gave great weight to such interpretive rule 
or other such instruction but did not uphold the intermediary's 
determination on the issue.
    (5) A copy of the decision must be mailed promptly to each party to 
the appeal.
    (b)(1) A Board hearing decision issued in accordance with paragraph 
(a) of this section is final and binding on the parties to the Board 
appeal unless the hearing decision is reversed, affirmed, modified, or 
remanded by the Administrator under Sec. 405.1875(a)(2)(i), Sec. 
405.1875(e), and Sec. 405.1875(f) of this subpart, no later than 60 
days after the date of receipt by the provider of the Board's decision.
    (2) A Board hearing decision is inoperative during the 60-day period 
for review of the decision by the Administrator, or in the event the 
Administrator reverses, affirms, modifies, or remands that decision 
within the period.
    (3) A Board hearing decision that is final under paragraph (b)(1) of 
this section is subject to the provisions of Sec. 405.1803(d) of this 
subpart, unless the decision is the subject of judicial review (as 
described in Sec. 405.1877 of this subpart).
    (4) A final Board decision under paragraph (a) and (b) of this 
section may be reopened and revised by the Board in accordance with 
Sec. Sec. 405.1885 through 405.1889 of this subpart.
    (5) When the intermediary's denial of the relief that the provider 
seeks before the Board is based on procedural grounds (for example, the 
alleged failure of the provider to satisfy a time limit) or is based on 
the alleged failure to supply adequate documentation to support the 
provider's claim, and the Board rules that the basis of the 
intermediary's denial is invalid, the Board remands to the intermediary 
for the intermediary to make a determination on the merits of the 
provider's claim.

[73 FR 30261, May 23, 2008]



Sec. 405.1873  [Reserved]



Sec. 405.1875  Administrator review.

    (a) Basic rule: Time limit for rendering Administrator decisions, 
Board decisions, and action subject to immediate review. The 
Administrator, at his or her discretion, may immediately review any 
decision of the Board specified in paragraph (a)(2) of this section. 
Nonfinal decisions or actions by the Board are not immediately 
reviewable, except as provided in paragraph (a)(3) of this section. The 
Administrator may exercise this discretionary review authority on his or 
her own motion, or in response to a request from: a party to the Board 
appeal; CMS; or, in the case of a matter specified in paragraph 
(a)(3)(i) or (a)(3)(ii) of this section, another affected nonparty to a 
Board appeal. All requests for Administrator review and any other 
submissions to the Administrator under paragraph (c) of this section 
must be sent to the Office of the Attorney Advisor. The Office of the 
Attorney Advisor must examine each Board decision specified in paragraph 
(a)(2) of this section, and each matter described in Sec. 
405.1845(h)(3), Sec. 405.1853(e)(6)(ii), or Sec. 405.1857(d)(2) of 
this subpart, of which it becomes aware, together with any review 
requests or any other submission made in accordance with the provisions 
of this section, in order to assist the Administrator's exercise of this 
discretionary review authority. The Board is required to send to the 
Office of the Attorney Advisor a copy of each decision specified in 
paragraphs (a)(2)(i) and (a)(2)(iii) of this section upon issuance of 
the decision.

[[Page 243]]

    (1) The date of rendering any decision after the review by the 
Administrator must be no later than 60 days after the date of receipt by 
the provider of a reviewable Board decision or action. For purposes of 
this section, the date of rendering is the date the Administrator signs 
the decision, and not the date the decision is mailed or otherwise 
transmitted to the parties.
    (2) The Administrator may immediately review:
    (i) A Board hearing decision (as described in Sec. 405.1871 of this 
subpart).
    (ii) A Board dismissal decision (as described in Sec. Sec. 
405.1836(e)(1) and (e)(2), 405.1840(c)(2) and (c)(3), 405.1868(d)(1) and 
(d)(2) of this subpart).
    (iii) A Board EJR decision, but only the question of whether there 
is Board jurisdiction over a specific matter at issue in the decision; 
the Administrator may not review the Board's determination in a decision 
of its authority to decide a legal question relevant to the matter at 
issue (as described in Sec. 405.1842(h) of this subpart).
    (iv) Any other Board decision or action deemed to be final by the 
Administrator.
    (3) Any decision or action by the Board not specified in paragraph 
(a)(2)(i) through (a)(2)(iii) of this section, or not deemed to be final 
by the Administrator under paragraph (a)(2)(iv) of this section, is 
nonfinal and not subject to Administrator review until the Board issues 
one of the decisions specified in paragraph (a)(2) of this section, 
except the Administrator may review immediately the following matters:
    (i) A Board ruling authorizing discovery or disclosure of a matter 
for which an objection was made based on privilege or other protection 
from disclosure such as case preparation, confidentiality, or undue 
burden (as described in Sec. 405.1853(e)(6)(ii) of this subpart).
    (ii) A Board subpoena compelling disclosure of a matter for which an 
objection was made based on privilege or other protection from 
disclosure such as case preparation, confidentiality, or undue burden 
(as described in Sec. 405.1857(d)(2) of this subpart).
    (b) Illustrative list of criteria for deciding whether to review. In 
deciding whether to review a Board decision or other matter specified in 
paragraphs (a)(2) and (a)(3) of this section, either on his or her own 
motion or in response to a request for review, the Administrator 
considers criteria such as whether it appears that--
    (1) The Board made an erroneous interpretation of law, regulation, 
CMS Ruling, or other interpretive rules, general statements of policy, 
or rules of agency organization, procedure, or practice established by 
CMS.
    (2) A Board hearing decision meets the requirements of Sec. 
405.1871(a) of this subpart.
    (3) The Board erred in refusing to admit certain evidence or in not 
considering other submitted matter (as described in Sec. 405.1855 and 
Sec. 405.1865(b) of this subpart), or in admitting certain evidence.
    (4) The case presents a significant policy issue having a basis in 
law and regulations, and review is likely to lead to the issuance of a 
CMS Ruling or other directive needed to clarify a statutory or 
regulatory provision.
    (5) The Board has incorrectly found, assumed, or denied jurisdiction 
over a specific matter at issue or extended its authority in a manner 
not provided for by statute, regulation, CMS Ruling, or other 
interpretive rules, general statements of policy, and rules of agency 
organization, procedure, or practice established by CMS.
    (6) The decision or other action of the Board requires 
clarification, amplification, or an alternative legal basis.
    (7) A remand to the Board may be necessary or appropriate under the 
criteria prescribed in paragraph (f) of this section.
    (c) Procedures--(1) Review requests. (i)(A) A party to a Board 
appeal or CMS may request Administrator review of a Board decision 
specified in paragraph (a)(2) of this section or a matter described in 
paragraph (a)(3) of this section.
    (B) A nonparty other than CMS may request Administrator review 
solely of a matter described in paragraph (a)(3)(i) or (a)(3)(ii) of 
this section.
    (ii) The date of receipt by the Office of Attorney Advisor of any 
review request must be no later than 15 days

[[Page 244]]

after the date the party making the request received the Board's 
decision or other reviewable action.
    (iii) A request for review (or a response to a request) must be 
submitted in writing, identify the specific issues for which review is 
requested, and explain why review is or is not appropriate, under the 
criteria specified in paragraph (b) of this section or for some other 
reason.
    (iv) A copy of any review request (or response to a request) must be 
mailed promptly to each party to the appeal, the Office of the Attorney 
Advisor, and, as applicable, CMS, and any other affected nonparty.
    (2) Exception to time for requesting review. If a party, or 
nonparty, as applicable, seeks immediate review of a matter described in 
Sec. 405.1875(a)(3)(i) or (a)(3)(ii) of this subpart, the request for 
review must be made as soon as practicable, but in no event later than 5 
business days after the day the party or nonparty seeking review 
received notice of the ruling or subpoena. The request must state the 
reason(s) why the ruling was in error and the potential harm that may be 
caused if immediate review is not granted.
    (3) Notice of review. (i) When the Administrator decides to review a 
Board decision or other matter specified in paragraphs (a)(2) or (a)(3) 
of this section, respectively, whether on his or her own motion or upon 
request, the Administrator must send a written notice to the parties, 
CMS, and any other affected nonparty stating that the Board's decision 
is under review, and indicating the specific issues that are being 
considered.
    (ii) The Administrator may decline to review a Board decision or 
other matter, or any issue in a decision or matter, even if a request 
for review is submitted in accordance with paragraph (c)(1) or (c)(2) of 
this section.
    (4) Written submissions on review. If the Administrator accepts 
review of the Board's decision or other reviewable action, a party, CMS, 
or, another affected nonparty that requested review solely of a matter 
described in paragraph (a)(3)(i) or (a) (3)(ii) of this section, may 
tender written submissions regarding the review.
    (i) The date of receipt by the Office of the Attorney Advisor of any 
material must be no later than 15 days after the date the party, CMS or 
other affected nonparty submitting comments received the Administrator's 
notice under paragraph (c)(3) of this section, taking review of the 
Board decision or other reviewable matter.
    (ii) Any submission must be limited to the issues accepted for 
Administrator review (as identified in the notice) and be confined to 
the record of Board proceedings (as described in Sec. 405.1865 of this 
subpart). The submission may include--
    (A) Argument and analysis supporting or taking exception to the 
Board's decision or other reviewable action;
    (B) Supporting reasons, including legal citations and excerpts of 
record evidence, for any argument and analysis submitted under paragraph 
(c)(4)(ii)(A) of this section;
    (C) Proposed findings of fact and conclusions of law;
    (D) Rebuttal to any written submission filed previously with the 
Administrator in accordance with paragraph (c)(4) of this section; or
    (E) A request, with supporting reasons, that the decision or other 
reviewable action be remanded to the Board.
    (d) Ex parte communications prohibited. The Administrator does not 
consider any communication that does not meet the following requirements 
or is not submitted within the required time limits. All communications 
from any party, CMS, or other affected nonparty, concerning a Board 
decision (or other reviewable action) that is being reviewed or may be 
reviewed by the Administrator must--
    (1) Be in writing.
    (2) Contain a certification that copies were served on all other 
parties, CMS, and any other affected nonparty, as applicable.
    (3) Include, but are not limited to--
    (i) Requests for review and responses to requests for review 
submitted under paragraph (c)(1) or (c)(2) of this section; and
    (ii) Written submissions regarding review submitted under paragraph 
(c)(4) of this section.

[[Page 245]]

    (e) Administrator's decision. (1) Upon completion of any review, the 
Administrator may render a written decision that--
    (i) For purposes of review of a Board decision specified in 
paragraph (a)(2) of this section, affirms, reverses, or modifies the 
Board's decision, or vacates that decision and remands the case to the 
Board for further proceedings in accordance with paragraph (f)(1)(i) of 
this section; or
    (ii) For purposes of review of a matter described in paragraph 
(a)(3) of this section, affirms, reverses, modifies, or remands the 
Board's discovery or disclosure ruling, or subpoena, as applicable, and 
remands the case to the Board for further proceedings in accordance with 
paragraph (f)(1)(ii) of this section.
    (2) The date of rendering of any decision by the Administrator must 
be no later than 60 days after the date of receipt by the provider of 
the Board's decision or other reviewable action. The Administrator must 
promptly mail a copy of his or her decision to the Board, to each party 
to the appeal, to CMS, and, if applicable, to any other affected 
nonparty.
    (3) Any decision by the Administrator may rely on--
    (i) Applicable provisions of the law, regulations, CMS Rulings, and 
other interpretive rules, general statements of policy, and rules of 
agency organization, procedure, or practice established by CMS.
    (ii) Prior decisions of the Board, the Administrator, and the 
courts, and any other law that the Administrator finds applicable, 
whether or not cited in materials submitted to the Administrator.
    (iii) The administrative record for the case (as described in Sec. 
405.1865 of this subpart).
    (iv) Generally known facts that are not subject to reasonable 
dispute.
    (4) A timely decision by the Administrator that affirms, reverses, 
or modifies one of the Board decisions specified in paragraph (a)(2) of 
this section is final and binding on each party to the Board appeal (as 
described in Sec. 405.1877(a)(4) of this subpart).
    (i) If the final Administrator decision follows review of a Board 
hearing decision, the Administrator's decision is subject to the 
provisions of Sec. 405.1803(d) of this subpart, unless that final 
decision is the subject of judicial review (as described in Sec. 
405.1877 of this subpart).
    (ii) The Administrator, in accordance with Sec. Sec. 405.1885 
through 405.1889 of this subpart, may reopen and revise a final 
Administrator decision.
    (iii) A decision by the Administrator remanding a matter to the 
Board for further proceedings in accordance with paragraph (f) of this 
section is not a final decision for purposes of judicial review (as 
described in Sec. 405.1877(a)(4) of this subpart) or the provisions of 
Sec. 405.1803(d).
    (f) Remand. (1) A remand to the Board by the Administrator has the 
effect for purposes of review--
    (i) With respect to a Board decision specified in paragraph (a)(2) 
of this section, vacating the Board's decision and requiring further 
proceedings in accordance with the Administrator's decision and this 
subpart; or
    (ii) With respect to a matter described in paragraph (a)(3) of this 
section, affirming, reversing, modifying, or remanding the Board's 
remand order, discovery ruling, or subpoena, as applicable, and 
returning the case to the Board for further proceedings in accordance 
with the Administrator's decision and this subpart.
    (2) The Administrator may direct the Board to take further action 
for the development of additional facts or new issues, or to consider 
the applicability of laws or regulations other than those considered by 
the Board. The following are not acceptable bases for remand:
    (i) Presentation of evidence existing at the time of the Board 
hearing that was known or reasonably may be known.
    (ii) Introduction of a favorable court ruling, regardless of whether 
the ruling was made or was available at the time of the Board hearing or 
at the time the Board issued its decision.
    (iii) Change in a party's representation, regardless when made.
    (iv) Presentation of an alternative legal basis concerning an issue 
in dispute.
    (v) Attempted retraction of a waiver of a right, regardless when 
made.
    (3) After remand, the Board must take the actions required in the 
Administrator's remand order and issue a

[[Page 246]]

new decision in accordance with paragraph (f)(1)(i) of this section, or 
issue under paragraph (f)(1)(ii) of this section an initial decision or 
a further remand order, discovery ruling, or subpoena ruling, as 
applicable.
    (4) Administrator review of any decision or other action by the 
Board after remand is, to the extent applicable, subject to the 
provisions of paragraphs (a)(2) or (a)(3) of this section.
    (5) In addition to ordering a remand to the Board, the Administrator 
may order a remand to any component of HHS or CMS or to an intermediary 
under appropriate circumstances, including, but not limited to, for the 
purpose of effectuating a court order (as described in Sec. 
405.1877(g)(2) of this subpart). When the intermediary's denial of the 
relief, that the provider sought before the Board and that is under 
review by the Administrator, was based on procedural grounds (such as 
the alleged failure of the provider to satisfy a time limit) or was 
based on the alleged failure to supply adequate documentation to support 
the provider's claim, and the Administrator rules that the basis of the 
intermediary's denial is invalid, the Administrator remands to the 
intermediary for the intermediary to make a determination on the merits 
of the provider's claim.

[73 FR 30262, May 23, 2008; 73 FR 49356, 49357, Aug. 21, 2008]



Sec. 405.1877  Judicial review.

    (a) Basis and scope. (1) Notwithstanding the provisions of 5 U.S.C. 
704 or any other provision of law, sections 205(h) and 1872 of the Act 
provide that a decision or other action by a reviewing entity is subject 
to judicial review solely to the extent authorized by section 1878(f)(1) 
of the Act. This section, along with the EJR provisions of Sec. 
405.1842 of this subpart, implements section 1878(f)(1) of the Act.
    (2) Section 1878(f)(1) of the Act provides that a provider has a 
right to obtain judicial review of a final decision of the Board, or of 
a timely reversal, affirmation, or modification by the Administrator of 
a final Board decision, by filing a civil action in accordance with the 
Federal Rules of Civil Procedure in a Federal district court with venue 
no later than 60 days after the date of receipt by the provider of a 
final Board decision or a reversal, affirmation, or modification by the 
Administrator. The Secretary (and not the Administrator or CMS itself, 
or the intermediary) is the only proper defendant in a civil action 
brought under section 1878(f)(1) of the Act.
    (3) A Board decision is final and subject to judicial review under 
section 1878(f)(1) of the Act only if the decision--
    (i) Is one of the Board decisions specified in Sec. 
405.1875(a)(2)(i) through (a)(2)(iii) of this subpart or, in a 
particular case, is deemed to be final by the Administrator under Sec. 
405.1875(a)(2)(iv) of this subpart; and
    (ii) Is not reversed, affirmed, modified, or remanded by the 
Administrator under Sec. 405.1875(e) and Sec. 405.1875(f) of this 
subpart within 60 days of the date of receipt by the provider of the 
Board's decision. A provider is not required to seek Administrator 
review under Sec. 405.1875(c) first in order to seek judicial review of 
a Board decision that is final and subject to judicial review under 
section 1878(f)(1) of the Act.
    (4) If the Administrator timely reverses, affirms, or modifies one 
of the Board decisions specified in Sec. 405.1875(a)(2)(i) through 
(a)(2)(iii) of this subpart or deemed to be final by the Administrator 
in a particular case under Sec. 405.1875(a)(2)(iv) of this subpart, the 
Administrator's reversal, affirmation, or modification is the only 
decision subject to judicial review under section 1878(f)(1) of the Act. 
A remand of a Board decision by the Administrator to the Board vacates 
the decision. Neither the Board's decision nor the Administrator's 
remand is a final decision subject to judicial review under section 
1878(f)(1) of the Act (as described in Sec. 405.1875(e)(4), Sec. 
405.1875(f)(1), and Sec. 405.1875(f)(4) of this subpart).
    (b) Determining when a civil action may be filed--(1) General rule. 
Under section 1878(f)(1) of the Act, the 60-day periods for 
Administrator review of a decision by the Board, and for judicial review 
of any final Board decision, respectively, both begin to run on the same 
day. Paragraphs (b)(2), (b)(3) and (b)(4) of this section identify how 
various actions or inaction by the Administrator

[[Page 247]]

within the 60-day review period determine the scope and timing of any 
right a provider may have to judicial review under section 1878(f)(1) of 
the Act.
    (2) Administrator declines review. If the Administrator declines any 
review of a Board decision specified in Sec. 405.1875(a)(2) of this 
subpart, whether through inaction or in a written notice issued under 
Sec. 405.1875(c)(3) of this subpart, the provider must file any civil 
action seeking judicial review of the Board's final decision under 
section 1878(f)(1) of the Act no later than 60 days after the date of 
receipt by the provider of the Board's decision.
    (3) Administrator accepts review and renders timely decision. When 
the Administrator decides to review, in a notice under Sec. 
405.1875(c)(3) of this subpart, any issue in a Board decision specified 
as final, or deemed as final by the Administrator, under Sec. 
405.1875(a)(2) of this subpart, and he or she subsequently renders a 
decision within the 60-day review period (as described in Sec. 
405.1875(a)(1) of this subpart), the provider has no right to obtain 
judicial review of the Board's decision under section 1878(f)(1) of the 
Act.
    (i) If the Administrator timely reverses, affirms, or modifies the 
Board's decision, the provider's only right under section 1878(f)(1) of 
the Act is to request judicial review of the Administrator's decision by 
filing a civil action no later than 60 days after the date of receipt by 
the provider of the Administrator's decision (as described in Sec. 
405.1877(a)(3) of this subpart).
    (ii) If the Administrator timely vacates the Board's decision and 
remands for further proceedings (as described in Sec. 405.1875(f)(1)(i) 
of this subpart), a provider has no right to judicial review under 
section 1878(f)(1) of the Act of the Board's decision or of the 
Administrator's remand (as described in Sec. 405.1877(a)(3) of this 
subpart).
    (4) Administrator accepts review and timely decision is not 
rendered. If the Administrator decides to review, in a notice under 
Sec. 405.1875(c)(3) of this subpart, any issue in a Board decision 
specified as final, or deemed to be final by the Administrator, under 
Sec. 405.1875(a)(2), but he or she does not render a decision within 
the 60-day review period, this subsequent inaction constitutes an 
affirmation of the Board's decision by the Administrator, for purposes 
of the time in which to seek judicial review. In this case, the provider 
must file any civil action requesting judicial review of the 
Administrator's final decision under section 1878(f)(1) of the Act no 
later than 60 days after the expiration of the 60-day period for a 
decision by the Administrator under Sec. 405.1875(a)(1) and Sec. 
405.1875(e)(2) of this subpart.
    (c) Statutory limitations on and preclusion of judicial review. The 
Act limits or precludes judicial review of certain matters at issue. 
Limitations on and preclusions of judicial review include the following:
    (1) A finding in an intermediary determination that expenses 
incurred for items and services furnished by a provider to an individual 
are not payable under title XVIII of the Act because those items or 
services are excluded from coverage under section 1862 of the Act, and 
the regulations at 42 CFR part 411, is not reviewable by the Board (as 
described in Sec. 405.1840(b)(1) of this subpart) and is not subject to 
judicial review under section 1878(f)(1) of the Act; the finding is 
subject to judicial review solely in accordance with the applicable 
provisions of sections 1155, 1869, and 1879(d) of the Act, and of 
subpart I of part 405 and subpart B of part 478, as applicable.
    (2) Certain matters affecting payments to hospitals under the 
prospective payment system are completely removed from administrative 
and judicial review, as provided in section 1886(d)(7) of the Act, and 
Sec. Sec. 405.1804 and 405.1840(b)(2) of this subpart.
    (3) Any Board remand order, or discovery or disclosure ruling or 
subpoena specified in Sec. 405.1875(a)(3)(i) through (a)(3)(ii) of this 
subpart, or a decision by the Administrator following immediate review 
of a Board remand order, discovery ruling, or subpoena, is not subject 
to immediate judicial review under section 1878(f)(1) of the Act. 
Judicial review of all nonfinal Board actions, including any such Board 
remand order, discovery or disclosure ruling, or subpoena (except as 
provided

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in Sec. 405.1857(e) of this subpart), is limited to review of a final 
agency decision as described in Sec. 405.1877(a) of this subpart.
    (d) Group appeals. If a final decision is issued by the Board or 
rendered by the Administrator, as applicable, in any group appeal 
brought under Sec. 405.1837, those providers in the group appeal that 
seek judicial review of the final decision under section 1878(f)(1) of 
the Act must file a civil action as a group (as described in Sec. 
405.1877(e)(2) of this subpart) for the specific matter at issue and 
common factual or legal question that was addressed in the final agency 
decision in the group appeal.
    (e) Venue for civil actions--(1) Single provider appeals. A civil 
action under section 1878(f)(1) of the Act requesting judicial review of 
a final decision of the Board or the Administrator, as applicable, in a 
single provider appeal under Sec. 405.1835 of this subpart must be 
brought in the District Court of the United States for the judicial 
district in which the provider is located or in the United States 
District Court for the District of Columbia.
    (2) Group appeals. A civil action under section 1878(f)(1) of the 
Act seeking judicial review of a final decision of the Board or the 
Administrator, as applicable, in a group appeal under Sec. 405.1837 of 
this subpart must be brought in the District Court of the United States 
for the judicial district in which the greatest number of providers 
participating in both the group appeal and the civil action are located 
or in the United States District Court for the District of Columbia.
    (f) Service of process. Process must be served as described under 45 
CFR part 4.
    (g) Remand by a court--(1) General rule. Under section 1874 of the 
Act, and Sec. 421.5(b) of this chapter, the Secretary is the real party 
in interest in a civil action seeking relief under title XVIII of the 
Act. The Secretary has delegated to the Administrator the authority 
under section 1878(f)(1) of the Act to review decisions of the Board 
and, as applicable, render a final agency decision. If a court, in a 
civil action brought by a provider against the Secretary as the real 
party in interest regarding a matter pertaining to Medicare payment to 
the provider, orders a remand for further action by the Secretary, any 
component of HHS or CMS, or the intermediary, the remand order must be 
deemed, except as provided in paragraph (g)(3) of this section, to be 
directed to the Administrator in the first instance, regardless of 
whether the court's remand order refers to the Secretary, the 
Administrator, the Board, any other component of HHS or CMS, or the 
intermediary.
    (2) Procedures. (i) Upon receiving notification of a court remand 
order, the Administrator must prepare an appropriate remand order and, 
if applicable, file the order in any Board appeal at issue in the civil 
action.
    (ii) The Administrator's remand order must--
    (A) Describe the specific requirements of the court's remand order;
    (B) Require compliance with those requirements by the pertinent 
component of HHS or CMS or by the intermediary, as applicable; and
    (C) Remand the matter to the appropriate entity for further action.
    (iii) After the entity named in the Administrator's remand order 
completes its response to that order, the entity's response after remand 
is subject to further proceedings before the Board or the Administrator, 
as applicable, in accordance with this subpart. For example--
    (A) If the intermediary issues a revised intermediary determination 
after remand, the provider may request a Board hearing on the revised 
determination (as described in Sec. 405.1803(d) and Sec. 405.1889 of 
this subpart); or,
    (B) If the intermediary hearing officer(s) or the Board issues a new 
decision after remand, a decision may be reviewed by a CMS reviewing 
official or the Administrator, respectively (as described in Sec. 
405.1834 and Sec. 405.1875(f)(4) of this subpart).
    (3) Exception. The provisions of paragraphs (g)(1) and (g)(2) of 
this section do not apply to the extent they may be inconsistent with 
the court's remand order or any other order of the court regarding the 
civil action.
    (h) Implementation of final court judgment. (1) When a final, non-
appealable

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court judgment is issued in a civil action brought by a provider against 
the Secretary as the real party in interest regarding a matter affecting 
Medicare payment, a court judgment is subject to the provisions of Sec. 
405.1803(d) of this subpart.
    (2) The provisions of paragraph (h)(1) of this section do not apply 
to the extent they may be inconsistent with the court's final judgment 
or any other order of a court regarding the civil action.

[73 FR 30264, May 23, 2008]



Sec. 405.1881  Appointment of representative.

    A provider or other party may be represented by legal counsel or any 
other person it appoints to act as its representative at the 
proceedings, conducted in accordance with Sec. Sec. 405.1819 and 
405.1851.



Sec. 405.1883  Authority of representative.

    A representative appointed by a provider or other party may accept 
or give on behalf of the provider or other party any request or notice 
relative to any proceeding before a hearing officer or the Board. A 
representative shall be entitled to present evidence and allegations as 
to facts and law in any proceeding affecting the party he represents and 
to obtain information with respect to a request for an intermediary 
hearing or a Board hearing made in accordance with Sec. Sec. 405.1811, 
405.1835, or 405.1837 to the same extent as the party he represents. 
Notice to a provider or other party of any action, determination, or 
decision, or a request for the production of evidence by a hearing 
officer or the Board sent to the representative of the provider or other 
party shall have the same force and effect as if it had been sent to the 
provider or other party.



Sec. 405.1885  Reopening an intermediary determination or reviewing entity 

decision.

    (a) General. (1) A Secretary determination, an intermediary 
determination, or a decision by a reviewing entity (as described in 
Sec. 405.1801(a) of this subpart) may be reopened, for findings on 
matters at issue in a determination or decision, by CMS (with respect to 
Secretary determinations), by the intermediary (with respect to 
intermediary determinations) or by the reviewing entity that made the 
decision (as described in Sec. 405.1885(c) of this subpart).
    (2) A determination or decision may be reopened either through own 
motion of CMS (for Secretary determinations), the intermediary or 
reviewing entity, by notifying the parties to the determination or 
decision (as specified in Sec. 405.1887), or by granting the request of 
the provider affected by the determination or decision.
    (3) An intermediary's discretion to reopen or not reopen a matter is 
subject to a contrary directive from CMS to reopen or not reopen that 
matter.
    (4) If CMS directs an intermediary to reopen a matter, reopening is 
considered an own motion reopening by the intermediary. A reopening may 
result in a revision of any matter at issue in the determination or 
decision.
    (5) If a matter is reopened and a revised determination or decision 
is made, a revised determination or decision is appealable to the extent 
provided in Sec. 405.1889 of this subpart.
    (6) A determination or decision to reopen or not to reopen a 
determination or decision is not a final determination or decision 
within the meaning of this subpart and is not subject to further 
administrative review or judicial review.
    (b) Time limits--(1) Own motion reopening of a determination not 
procured by fraud or similar fault. An own motion reopening is timely 
only if the notice of intent to reopen (as described in Sec. 405.1887 
of this subpart) is mailed no later than 3 years after the date of the 
determination or decision that is the subject of the reopening. The date 
the notice is mailed is presumed to be the date indicated on the notice 
unless it is shown by a preponderance of the evidence that the notice 
was mailed on a later date.
    (2) Request for reopening of a determination not based on fraud or 
similar fault. (i) A reopening made upon request is timely only if the 
request to reopen is received by CMS, the intermediary, or reviewing 
entity, as appropriate, no later than 3 years after the date of the 
determination or decision

[[Page 250]]

that is the subject of the requested reopening. The date of receipt by 
CMS, the intermediary, or the reviewing entity of the request to reopen 
is conclusively presumed to be the date of delivery by a nationally-
recognized next-day courier, or the date stamped ``Received'' by CMS, 
the intermediary or the reviewing entity (where a nationally-recognized 
next-day courier is not employed), unless it is shown by clear and 
convincing evidence that CMS, the intermediary, or the reviewing entity 
received the request on an earlier date.
    (ii) A request to reopen does not toll the time in which to appeal 
an otherwise appealable determination or decision.
    (iii) A request to reopen that is received within the 3-year period 
described in this paragraph is timely, notwithstanding that the notice 
of reopening required under Sec. 405.1887 of this subpart is issued 
after such 3-year period.
    (3) Reopening of a determination procured by fraud or similar fault. 
A Secretary or intermediary determination or decision by the reviewing 
entity may be reopened and revised at any time if it is established that 
the determination or decision was procured by fraud or similar fault of 
any party to the determination or decision.
    (c) Jurisdiction for reopening. Jurisdiction for reopening an 
intermediary determination or intermediary hearing decision rests 
exclusively with the intermediary or intermediary hearing officer(s) 
that rendered the determination or decision (or, when applicable, with 
the successor intermediary), subject to a directive from CMS to reopen 
or not reopen the determination or decision. Jurisdiction for reopening 
a Secretary determination, CMS reviewing official decision, a Board 
decision, or an Administrator decision rests exclusively with CMS, the 
CMS reviewing official, Board or Administrator, respectively.
    (1) CMS-directed reopenings. CMS may direct an intermediary or 
intermediary hearing officer(s) to reopen and revise any matter, subject 
to the time limits specified in paragraph (b) of this section, and 
subject to the limitation expressed in paragraph (c)(2) of this section, 
by providing explicit direction to the intermediary or intermediary 
hearing officer(s) to reopen and revise.
    (i) Examples. An intermediary determination or intermediary hearing 
decision must be reopened and revised if CMS provides explicit notice to 
the intermediary that the intermediary determination or the intermediary 
hearing decision is inconsistent with the applicable law, regulations, 
CMS ruling, or other interpretive rules, general statements of policy, 
and rules of agency organization, procedure, or practice established by 
CMS in effect, and as CMS understood those legal provisions, at the time 
the determination or decision was rendered by the intermediary. CMS may 
also direct the intermediary to reopen a particular intermediary 
determination or decision in order to implement a final agency decision 
(as described in Sec. 405.1833, Sec. 405.1871(b) and Sec. 405.1875 of 
this subpart), a final, non-appealable court judgment Sec. 405.1877, or 
an agreement to settle an administrative appeal or a lawsuit, regarding 
the same determination or decision.
    (ii) [Reserved]
    (2) Prohibited reopenings. A change of legal interpretation or 
policy by CMS in a regulation, CMS ruling, or other interpretive rules, 
general statements of policy, and rules of agency organization, 
procedure, or practice established by CMS, whether made in response to 
judicial precedent or otherwise, is not a basis for reopening a CMS or 
intermediary determination, an intermediary hearing decision, a CMS 
reviewing official decision, a Board decision, or an Administrator 
decision, under this section.
    (3) Reopening by CMS or intermediary of determination currently on 
appeal to the Board or Administrator. CMS or an intermediary may reopen, 
on its own motion or on request of the provider(s), a Secretary or 
intermediary determination that is currently pending on appeal before 
the Board or Administrator.
    (i) The scope of the reopening may include any matter covered by the 
determination, including those specific matters that are appealed to the 
Board or the Administrator.
    (ii) The intermediary must send a copy of the notice required under

[[Page 251]]

Sec. 405.1887(a) to the Board or to the Administrator, through the 
Office of the Attorney Advisor, specifically informing that the 
matter(s) to be addressed by the reopening is currently under appeal to 
the Board or to the Administrator or is covered by the same 
determination that is under appeal.
    (4) Reopening of determination within the time for appealing that 
determination to the Board. CMS or an intermediary may reopen, on its 
own motion or on request of the provider(s), a Secretary or intermediary 
determination for which no appeal was taken to the Board, but for which 
the time to appeal to the Board has not yet expired, by sending the 
notice specified in Sec. 405.1887(a) of this subpart.

[73 FR 30265, May 23, 2008]



Sec. 405.1887  Notice of reopening; effect of reopening.

    (a) In exercising its reopening authority under Sec. 405.1885, CMS 
(for Secretary determinations), the intermediary or the reviewing 
entity, as applicable, must provide written notice to all parties to the 
determination or decision that is the subject of the reopening. Notices 
of--
    (1) Reopening by a CMS reviewing official or the Board must be sent 
promptly to the Administrator.
    (2) Intermediary reopenings of determinations that are currently 
pending before the Board or the Administrator must meet the requirements 
specified in Sec. 405.1885(c)(3) and (c)(4) of this subpart.
    (b) Upon receipt of the notice required under Sec. 405.1887(a) of 
this subpart, the parties to the prior Secretary or intermediary 
determination or decision by a reviewing entity, as applicable, must be 
allowed a reasonable period of time in which to present any additional 
evidence or argument in support of their positions.
    (c) Upon concluding its reopening, CMS, the intermediary or the 
reviewi