[Federal Register Volume 65, Number 39 (Monday, February 28, 2000)]
[Proposed Rules]
[Pages 10450-10464]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 00-4389]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405 and 491

[HCFA-1910-P]
RIN 0938-AJ17


Medicare Program; Rural Health Clinics: Amendments to 
Participation Requirements and Payment Provisions; and Establishment of 
a Quality Assessment and Performance Improvement Program

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend our regulations to revise 
certification and payment requirements for Rural Health Clinics (RHCs) 
as required by the Balanced Budget Act of 1997 (BBA 1997). It would 
include new refinements of what constitutes a qualifying rural shortage 
area in which a Medicare RHC must be located; establish criteria for 
identifying RHCs essential to delivery of primary care services that 
can continue to be approved as Medicare RHCs in areas no longer 
designated as medically underserved; and limit waivers of certain 
nonphysician practitioner staffing requirements. It also would impose 
payment limits on provider-based RHCs and prohibit ``commingling'' the 
use of the space, equipment, and other resources of an

[[Page 10451]]

RHC with another entity. Finally, the rule would require RHCs to 
establish a quality assessment and performance improvement program that 
goes beyond current regulations.
    This proposed rule would make other revisions for clarity and 
uniformity and to improve program administration.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on April 
28, 2000.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1910-P, P.O. Box 26676, 
Baltimore, MD 21207-0476.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses: Room 443-G, Hubert H. 
Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, 
or Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    Comments may also be submitted electronically to the following e-
mail address: HCFA1910P@hcfa.gov. For e-mail comment procedures, see 
the beginning of SUPPLEMENTARY INFORMATION. For further information on 
ordering copies of the Federal Register containing this document and on 
electronic access, see the beginning of SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: David Worgo, (410) 786-5919 or Mary 
Collins (quality issues) (410) 786-3186.

SUPPLEMENTARY INFORMATION:

E-mail, Comments, Availability of Copies, and Electronic Access

    E-mail comments must include the full name, postal address, and 
affiliation (if applicable) of the sender and must be submitted to the 
referenced address to be considered. All comments must be incorporated 
in the e-mail message because we may not be able to access attachments.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-1910-P. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 443-G of 
the Department's offices at 200 Independence Avenue, SW., Washington, 
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Friday, except for Federal holidays.

I. Background

A. General

    The Rural Health Clinic Services Act of 1977, Public Law 95-210, 
enacted December 13, 1977, amended the Social Security Act (the Act) by 
enacting section 1861(aa) to extend Medicare and Medicaid entitlement 
and payment for primary and emergency care services furnished at a 
rural health clinic (RHC) by physicians and certain nonphysician 
practitioners, and for services and supplies incidental to their 
services. ``Nonphysician practitioners'' included nurse practitioners 
and physician assistants. (Subsequent legislation extended the 
definition of covered RHC services to include the services of clinical 
psychologists, clinical social workers, and certified nurse midwives).
    According to House Report No. 95-548(I), the purpose of Public Law 
95-210 was to address an inadequate supply of physicians to serve 
Medicare beneficiaries and Medicaid recipients in rural areas. The 
program addressed this problem by providing qualifying clinics located 
in rural, medically underserved communities with Medicare beneficiaries 
and Medicaid recipients with payment on a cost-related basis for 
outpatient physician and certain nonphysician services. (The Medicare 
payment provisions for rural health clinics are in sections 1833(a)(3) 
and 1833(f) of the Act and in our regulations beginning at 42 CFR 
405.2462.)
    Qualifying clinics, among other criteria, had to be located in a 
nonurbanized area as defined by the Census Bureau and in a medically 
underserved area as designated by the Health Resources and Services 
Administration or (since the Omnibus Budget Reconciliation Act of 1989, 
section 6213(c)) the chief executive officer of the State. (See section 
1861(aa)(2) of the Act, following subparagraph (K).) There are three 
types of shortage area designations applicable to RHC qualification: 
health professional shortage areas, medically underserved areas, and 
governor-designated shortage areas. The clinic's service area must 
have, in addition to being located in a nonurbanized area, one of these 
shortage area designations if the clinic is to qualify to receive RHC 
status.
    Qualifying clinics also had to employ a physician assistant or 
nurse practitioner and, to meet requirements of the Omnibus Budget 
Reconciliation Act of 1989, had to have a nurse practitioner, a 
physician assistant, or a certified nurse midwife available to furnish 
patient care services at least 50 percent of the time the RHC operates.
Growth of RHCs in the Medicare Program
    After a slow start, the program has recently grown at a rapid 
rate--from less than 1,000 Medicare-approved RHCs in 1992 to more than 
3,500 in early 1998. While part of this increase has improved access to 
primary care services in rural areas for Medicare and Medicaid 
beneficiaries, there are instances in which these additional RHCs have 
not expanded access.
Continuing Participation
    A significant factor in the growth of RHCs stems from the original 
RHC legislation, which included a ``grandfather clause'' to promote the 
development of RHCs. (Section 1(e) of Public Law 95-210, 42 U.S.C. 
1395x

[[Page 10452]]

note. Also see Sec. 491.5(b)(2).) In addition, the third sentence of 
section 1861(aa)(2) of the Act stated that:

    A facility that is in operation and that qualifies as a rural 
health clinic * * * [under the Medicare or Medicaid program] and 
that subsequently fails to satisfy the requirements of clause (i) 
[in the second sentence of section 1861(aa)(2), pertaining to the 
rural and underserved location requirement], shall be considered * * 
* as still satisfying the requirement of such clause.

This provision protected the clinic's RHC status despite any possible 
changes to the rural or underserved status of its service area. It 
allowed clinics to remain in the RHC program even though their service 
areas were no longer considered rural or medically underserved.
    The Congress established this protection to encourage clinics to 
attract needed health care professionals to underserved rural areas and 
to retain them without being concerned about losing the shortage area 
designation, which would make the clinics ineligible for RHC status and 
its reimbursement incentives. In other words, once the clinic 
successfully attracted the needed health care professionals to the 
area, the Congress wanted to ensure that the service area did not 
return to its previous underserved status because we removed the 
clinic's RHC status and reimbursement incentives.
    Although the grandfather provision was based on justifiable policy 
considerations, we are now confronted with RHC participation in some 
service areas with extensive health care delivery systems where 
Medicare and Medicaid beneficiaries are not having difficulty obtaining 
primary care. Both the General Accounting Office and the Department of 
Health and Human Services' Inspector General recommended the 
establishment of a mechanism, under the survey and certification 
process for Medicare facilities, to discontinue RHC status and its 
payment incentives in those service areas where they are no longer 
justified. (See the next paragraph.) In section 4205(d)(3) of the 
Balanced Budget Act of 1997 (BBA) (Public Law 105-33), the Congress 
responded to these recommendations by amending the grandfather 
provision to provide protection only to clinics essential to the 
delivery of primary care.
Government Reports
    Both the General Accounting Office and the Department of Health and 
Human Services' Inspector General concluded, based on recent studies, 
that the number of RHCs is growing out of proportion to the need and 
some RHCs remain in the program after the need for payment incentives 
no longer exists. They also concluded that the payment methodology for 
provider-based RHCs lacks sufficient cost controls and recommended 
establishing payment limits and screens on reasonable costs for these 
providers. (A provider-based RHC is an integral and subordinate part of 
a Medicare-participating hospital, skilled nursing facility, or home 
health agency, and is operated with other departments of the provider 
under common licensure, governance, and professional supervision. All 
other RHCs are considered to be independent.) For more information on 
these reports see ``Rural Health Clinics: Rising Program Expenditures 
Not Focused on Improving Care in Isolated Areas'' (GAO/HEHS-97-24, 
November 22, 1996), and ``Rural Health Clinics: Growth, Access and 
Payment'' (OEI-05-94-00040, July 1996).
Medically Underserved Designations
    Another reason for the continued growth of the RHC program was that 
two types of shortage area designations, specifically the Medically 
Underserved Area (MUA) and Governor's designations, did not have a 
statutory requirement for regular review and have not been 
systematically reviewed and updated for some time. As a result, some 
new RHCs may have been certified in areas that would no longer be 
designated as underserved if reviewed with current data. In response, 
as discussed below, the Congress amended the legislation by requiring 
that only those clinics located in shortage areas that have been 
recently designated or updated will qualify for purposes of the RHC 
program.
Commingling
    We define the term ``commingling'' to mean the simultaneous 
operation of an RHC and another physician practice, thereby mixing the 
two practices. The two practices share hours of operation, staff, 
space, supplies, and other resources. Commingling occurs in RHCs that 
are an integral part of another provider, such as a hospital, as well 
as in RHCs that are independent.
    Examples of Commingling. Industry sources have told us that many 
providers combine provider-based RHCs and non-RHC emergency room staffs 
and location to furnish services to beneficiaries seeking primary care, 
emergency services, or both. In such situations, Medicare payment has 
been made separately on a reasonable cost basis for hospital outpatient 
department services and for the RHC services. Also, emergency room 
physician services are payable according to the Part B physician fee 
schedule.
    We also understand that some providers use skeleton emergency room 
staffs, routinely assign RHC staff members to the emergency room or 
other parts of the provider, and bill the Medicare program not only for 
full RHC costs, but also for non-RHC Part B benefits (hospital 
outpatient department services and physician services). When these 
situations occur, Medicare pays the RHC's administrative costs, which 
include the costs for RHC staff salaries (including physician and 
practitioner salaries) and for any Part B services performed by the RHC 
staff, whether performed within the clinic setting or in other provider 
departments. The provider receives two payments for the cost of 
services furnished by a particular staff member who had simultaneous 
assignments.
    A common approach taken by independent RHCs is to operate a private 
physician practice in the RHC at the same time the physician is 
furnishing RHC services to patients. We believe this creates the 
opportunity for incorrect bills or duplicate payments.

B. Legislation

Refinement of Shortage Area Requirements
    Refinement of the shortage area requirements involves two phases.
    1. Phase I. Paragraphs(d)(1) and (2) of section 4205 of the BBA 
concern the requirements in the second sentence of section 1861(aa)(2) 
of the Act that RHCs must be located in a nonurbanized area as defined 
by the Bureau of the Census, as well as in a Health Professional 
Shortage Area, a medically underserved area, or in a shortage area 
designated by a State governor. The Congress amended those provisions 
to state that the rural area must also be one in which there are 
insufficient numbers of needed health care practitioners as determined 
by the Department. The Congress also amended that sentence to specify 
that, to be used in RHC certification, shortage area designations made 
by the Department or by a State governor must have been made within the 
previous 3-year period.
    2. Phase II. In paragraph(d)(3)(A) of section 4205 of the BBA, 
which amended the third sentence of section 1861(aa)(2) of the Act, the 
Congress revised the ``grandfather clause'' that permitted an exception 
to the termination of RHC status for a clinic located in an area that 
that is no longer a rural area or a shortage area. This revision 
amended the grandfather clause to specify that an exception is 
available

[[Page 10453]]

only if the RHC is determined to be essential to the delivery of 
primary care services that would otherwise be unavailable in the 
geographic area served by the RHC. These amendments were made effective 
upon issuance of implementing regulations that the Congress directed us 
to issue by January 1, 1999.
Staffing Waiver
    Section 4161(b)(2) of the Omnibus Budget Reconciliation Act of 1990 
added section 1861(aa)(7) to the Act to provide us with the authority 
to grant a 1-year waiver of the requirement that an RHC must employ a 
physician assistant, nurse practitioner, or certified nurse midwife and 
must furnish their services 50 percent of the time the RHC operates, if 
the clinic can demonstrate that it has been unable, in the previous 90-
day period, to hire one of these nonphysician primary care providers.
    In section 4205(c) of the BBA, the Congress amended, effective 
January 1, 1998, section 1861(aa)(7)(B) of the Act to restrict further 
our authority to waive the requirement that each RHC must hire a 
physician assistant, nurse practitioner, or certified nurse midwife. A 
waiver may now be granted only to a participating RHC. That is, the 
waiver cannot be granted before the clinic has been determined by us to 
meet all the requirements for Medicare participation as an RHC and is 
actually participating as an RHC.
Payment Limits for Provider-Based RHCs
    Before the BBA, the payment methodology for an RHC depended on 
whether it was ``provider-based'' or ``independent.'' Payment to 
provider-based RHCs for services furnished to Medicare beneficiaries 
was made on a reasonable cost basis by the provider's fiscal 
intermediary in accordance with our regulations at part 413. Payment to 
independent RHCs for services furnished to Medicare beneficiaries was 
made on the basis of a uniform all-inclusive rate payment methodology 
in accordance with part 405, subpart X. Payment to independent RHCs was 
also subject to a maximum payment per visit as set forth in section 
1833(f) of the Act.
    The BBA, at section 4205(a), amended section 1833(f) of the Act. It 
now holds provider-based RHCs to the same payment limit and all-
inclusive payment methodology as independent RHCs. This provision also 
provides an exception to the payment limit for those clinics based in 
small rural hospitals with fewer than 50 beds.
Quality Assessment Program
    Currently, quality of RHC care is addressed in Sec. 491.11, which 
requires a clinic to evaluate its total program annually. The 
evaluation must include reviewing the utilization of the clinic's 
services, a representative sample of both active and closed clinical 
records, and the clinic's health care policies. The purpose of the 
evaluation is to determine whether the utilization of services was 
appropriate, the established policies were followed, and any changes 
are needed. The clinic's staff considers the findings of the evaluation 
and takes the necessary corrective action. These requirements focus on 
the meeting and documentation of the clinic's evaluation of its quality 
care and do not account for the outcome of these activities. Section 
4205(b) of the BBA amended section 1861(aa)(2)(I) of the Act to 
authorize us to require that an RHC have a quality assessment and 
performance improvement program. A quality assessment and performance 
improvement program enables the organization to systematically review 
its operating systems and processes of care to identify and implement 
opportunities for improvement.

II. Provisions of This Proposed Rule

Definition of Shortage Area for RHC Certification

    Section 6213 of OBRA 1989 amended 1861(aa)(2) of the Social 
Security Act to expand the types of shortage areas eligible for RHC 
certification. Until then, the eligible areas included only those 
designated by the Secretary as areas having a shortage of personal 
health services under section 330(b)(3) of the PHS Act (medically 
underserved areas), and those designated as geographic health 
professional shortage areas under section 332(a)(1)(A) of the PHS Act. 
The OBRA 1989 amendment expanded the eligible areas to also include 
high impact migrant areas designated under section 329(a)(5) of the PHS 
Act; areas containing a population group HPSA designated under section 
332(a)(1)(B) of the PHS Act; and areas designated by the Governor of a 
State and certified by the Secretary as having a shortage of personal 
health services. Later, however, the Health Centers Consolidation Act 
of 1996 (Public Law 104-299) renumbered section 329 and repealed the 
requirement for designation of high migrant impact areas. We would 
amend section 491.2 to conform the regulations to the above statutory 
changes, by defining shortage areas for RHC purposes to include all 
four remaining types of designated areas.
    Section 330(b)(3) of the PHS Act defines medically underserved 
populations (MUPs) to include both areas and population groups 
designated by the Secretary as having a shortage of personal health 
services. However, Section 1861(aa)(2) of the Social Security Act 
specifically limits eligibility for the rural health clinic program to 
areas designated under this statute (known as medically underserved 
areas, MUAs). Thus, a clinic located in an area which contains only a 
population group designation under section 330(b)(3) is not eligible 
for participation in the Medicare or Medicaid programs as an RHC. 
Accordingly, our amendment of the regulation reflects inclusion of 
medically underserved areas (MUAs) but exclusion of medically 
underserved population groups (MUPs) for RHC certification.
    Although the expansion of eligible areas by section 6213 of OBRA 
1989 and the exclusion of population groups (MUPs) for RHC 
certification have already been implemented by regional office and 
State operation manuals, we need to conform the regulations.

A. Refinement of Shortage Area Requirements

    As noted above, section 4205(d)(1) of the BBA amended the second 
sentence of section 1861(aa)(2) of the Act to require the use of 
shortage areas designated ``within the previous 3-year period.'' We 
propose to implement this by amending Sec. 491.3(b) to refer to ``a 
current shortage area whose designation has been made or updated within 
the current year or the previous 3 years.''
    Before the BBA, clinics entering the RHC program were required to 
be located in a shortage area designated by the Health Resources and 
Services Administration or by the State. If the clinic's service area 
was on the Health Resources and Services Administration's or the 
State's list of designated shortage areas, the clinic satisfied the 
definition of shortage area for purposes of Medicare participation. Any 
clinic now applying for Medicare participation as an RHC must be 
located in a shortage area that has been so designated or updated 
within the current year or 1 of the previous 3 calendar years.
    Although these changes have already been implemented in a 
memorandum to our regional offices on February 6, 1998, we need to 
conform the regulations. Therefore, we would include the 3-year 
provision in Sec. 491.3(b) to provide that all RHCs applying for 
Medicare

[[Page 10454]]

participation must be located in a current shortage area in order to be 
approved for participation in Medicare as an RHC.
    Under the provisions of the BBA, existing RHCs whose locations no 
longer meet rural and/or shortage area requirements must be 
disqualified from further participation in the Medicare program as RHCs 
unless they are deemed essential to the delivery of primary care that 
would otherwise be unavailable in the geographic area served by the 
clinic. Under these statutory requirements, we propose to establish, in 
Secs. 491.3 and 491.5, the procedures and standards for granting an 
exception to clinics essential to the delivery of primary care that 
would otherwise be unavailable in the geographic area served by the 
clinic.
Eligibility for an Exception
    We would specify, in Sec. 491.3, that an RHC located in a rural 
area that is no longer designated as medically underserved, is eligible 
to apply for an exception. Those RHCs located in an area no longer 
designated as a nonurbanized area as defined by the Census Bureau are 
not eligible to apply for an exception.
    We believe that to extend the grandfather provision to clinics in 
nonrural areas through the exception process would be contrary to the 
fundamental definition of an RHC as an entity located in a rural area.
    Process. We would specify, in Sec. 491.3(c), the following 
procedures for submitting an exception request:
     In order to apply for an exception from the requirement 
that it meets the criteria in section 1861(aa)(2)(I) of the Act, the 
affected RHC must submit a request to its HCFA regional office for 
review.
     An RHC will have 90 days, from the date of notification 
from HCFA that its location no longer meets the definition of shortage 
area, to submit an exception request to the HCFA regional office.
     The HCFA regional office will have authority to grant a 3-
year exemption to any RHC that it determines, under the criteria 
discussed below, is essential to the delivery of primary care that 
would otherwise be unavailable in the geographic area served by the 
clinic. The 3-year exemption time period is consistent with the 
shortage redetermination period of 3 years and would be 
administratively easy to manage.
    Termination of RHCs located in areas that lose their shortage area 
designation. RHCs ineligible for an exception would be denied RHC 
participation in the Medicare program 90 days following the initial 
HCFA notification that its location no longer meets the definition of a 
shortage area.
    RHCs eligible to apply for an exception but unable to satisfy the 
criteria for an exception would be denied RHC participation in the 
Medicare program 90 days following the HCFA notification that its 
application for an exception has been rejected. We are allowing this 
period in part to permit the health care professionals of these clinics 
time to arrange to receive payment from the Medicare carrier for their 
services under other Medicare payment provisions for which they may 
qualify. An RHC that does not request an exception will have its 
Medicare participation as an RHC terminated 90 days following the 
initial HCFA notification that its location no longer meets shortage 
area requirements.
Criteria for Exception
    We propose, in Sec. 491.5, to accord an exception to an existing 
RHC that can satisfy one of the following tests:
    Sole Community Provider. We are proposing to classify an existing 
RHC as ``essential'' if it is the only Medicare or Medicaid primary 
care provider within the service area. To determine whether it is the 
only participating provider, we would apply a time and distance 
standard that would be measured by a travel time greater than 30 
minutes from the RHC applying for the exception to other Medicare and 
Medicaid participating primary care providers. The standard that 
primary care services should be available and accessible within 30 
minutes travel time has been in use by Health Resources and Services 
Administration programs, which deal extensively with primary care 
providers and access to these services, since the 1970s. For purposes 
of this test, primary care provider means an RHC, a Federally Qualified 
Health Center (FQHC), or a physician practicing in either general 
practice, family practice, or general internal medicine.
    The following criteria could potentially be used in determining 
distances corresponding to 30 minutes travel time: under normal 
conditions with primary roads available--20 miles; in areas with only 
secondary roads available--15 miles; in flat terrain or in areas 
connected by interstate highways--30 miles.
    The geographic test would address the principal reason the Congress 
established the original grandfather provision: to ensure that the 
service area does not return to its previous medically underserved 
status because of the removal of the clinic's RHC status and 
reimbursement incentives.
    This test is being proposed because RHCs are currently the sole 
providers for many underserved rural communities in this country that 
could lose their status as underserved with the addition of one or two 
health care professionals. When these RHCs' successful recruitment of 
additional health care professionals results in a dedesignation of the 
shortage area, we want to make sure that the RHC and its new 
professionals remain in the service area as viable providers. Without 
the clinic's presence in the community, the area could potentially 
return to its medically underserved status. RHCs applying for an 
exception under this test would be expected to demonstrate that they 
accept Medicare (where applicable), Medicaid and uninsured patients 
that present themselves for treatment.
    Traditional Community Providers. We are also proposing to classify 
an existing RHC as essential if it is the sole RHC for its community 
and the only primary care provider that has traditionally served 
Medicare, Medicaid, and uninsured patients in the community despite the 
fact that there may be other primary care providers that have recently 
begun participating within reasonable travel time of the RHC. We 
believe it is necessary to accord these RHCs an exception if the recent 
presence of other primary care provider(s) caused the shortage area to 
lose its designation as underserved. In this situation, where the 
recent presence of other primary care providers, such as one or two new 
physician practices, in the service area triggered the shortage area 
dedesignation. We believe such an area may be too unstable in terms of 
access to primary care to warrant the removal the clinic's RHC status 
and cost-based reimbursement. We believe this is particularly true if 
the sole RHC has been serving its community for many years and has 
accepted Medicare, Medicaid, and uninsured patients that presented 
themselves for treatment.
    However, if there are several primary care providers who have been 
actively treating Medicare, Medicaid, and uninsured patients for a 
number of years and these providers are within 30 minutes travel time 
of the RHC, we believe the RHC should not be granted an exception as an 
essential clinic because the service area would now appear to be 
stable. For example, if the RHC's service area (30 minutes travel time) 
has two or more participating primary care providers that have been 
actively treating Medicare, Medicaid, and uninsured patients for a 
minimum of 5 years, we would not grant the exception. Consequently, we 
would

[[Page 10455]]

only accord an exception to sole RHCs that are actively treating 
Medicare and Medicaid beneficiaries and the uninsured located in 
unstable service areas as described above.
    Major Community Provider. We are also proposing to classify an 
existing RHC as essential if it is treating a disproportionate greater 
share of the patients in its community compared to other RHCs that are 
within 30 minutes travel time. We are proposing this test to address 
the situation (as reported by the General Accounting Office, DHHS 
Inspector General, and State Medicaid agencies) of RHC concentrations, 
such as RHCs located next door to or across the street from each other.
    Concentrations of RHCs have developed in a number of service areas 
since 1990, and it is possible that some of these communities have 
already lost or will lose their medically underserved designation. It 
is also possible that no RHCs within the cluster would be able to 
qualify for an exception, under the criteria described above. However, 
within this group there may nonetheless be an ``essential'' RHC. To 
address this situation, we are proposing this test to identify whether 
there is a major community provider within a concentration of RHCs.
    The premise behind this test is to grant an exception to an RHC 
that is a major community provider to Medicare and Medicaid 
beneficiaries and the uninsured in service areas where other RHCs do 
not provide or limit services to these groups. Granting an exception to 
a clinic under this test is not meant to be a routine occurrence. The 
RHC applying for an exception would have to make a compelling case that 
services it provides would be otherwise unavailable in the geographic 
area served by the clinic.
    Specialty Clinic Test. We are proposing to classify an existing RHC 
as ``essential'' if it exclusively provides pediatric services or 
obstetrical/gynecological (OB/GYN) services for its community.
    The purpose of this test is to recognize RHCs that are providers of 
pediatric or OB/GYN health care for their communities. In general, 
clinics applying for an exception are in jeopardy of losing RHC status 
because their service areas are no longer designated as medically 
underserved, which means there is an adequate supply of health care 
professionals within the community. Although the local delivery system 
may consist of several primary care practitioners, it may be that the 
RHC is the only provider furnishing pediatric or OB/GYN care for the 
community. If the specialty clinic(s) cannot remain financially viable, 
the community could be left without any OB/GYN or pediatric services. 
Therefore, in rural communities where these services are limited 
despite an otherwise adequate supply of health care professionals, we 
would classify the specialty clinic as essential to the delivery of 
primary care and grant it an exception. RHCs applying for an exception 
under this test would be expected to demonstrate that they accept 
Medicare (where applicable), Medicaid, and uninsured patients that 
present themselves for treatment.
    Graduate Medical Education (GME) Test. We are proposing to classify 
an existing RHC as ``essential'' if it is actively participating in an 
accredited GME program. We would accord an exception to any RHC located 
in a rural area that is part of a medical residency training program 
approved by the Accreditation Council for Graduate Medical Education of 
the American Medical Association.
    Under section 4625 of the BBA, the Congress specifically recognized 
RHCs as qualified non-hospital providers for GME payments, to encourage 
more training of future physicians in non-hospital settings. Without 
RHC status, rural clinics that are part of a GME program would lose 
their Medicare funding for primary care medical education. This could 
cause a clinic to discontinue its training, which is currently in high 
demand and needed in rural communities. Therefore, RHCs that are 
actively serving as rural primary care training sites should be 
accorded an exception. For additional information regarding eligibility 
as nonhospital providers for GME payments, see the Federal Register, 
May 8, 1998.

B. Payment Limits for Provider-Based RHCs

    We would amend Sec. 405.2462 to provide payment to all RHCs on the 
basis of an all-inclusive rate per visit, subject to the per-visit 
payment limit. We would also include within this section the definition 
for identifying small rural hospitals with fewer than 50 beds for 
purposes of the exception to the payment limit. Although these 
statutory changes have already been implemented in administrative 
instructions, we need to conform the regulations.
    To implement this provision, we released Program Memorandum A-97-
20, ``Per-Visit Rates in Rural Health Clinics and Federally Qualified 
Health Centers,'' in January 1998. That instruction directed Medicare 
fiscal intermediaries to determine which RHCs are eligible for the 
exception by counting the number of a provider's beds in accordance 
with the regulations at Sec. 412.105(b). That regulation is part of the 
provisions on calculating a teaching hospital's indirect medical 
education adjustment under the prospective payment system for inpatient 
hospital services and is based on ``available bed days.'' The latter 
term means that the bed must be permanently maintained for lodging 
inpatients and must be available for use and housed in patient rooms or 
wards. Section 2405.3.G of the Medicare Provider Reimbursement Manual 
contains further administrative guidance on ``available bed days.''
    In defining rural and urban areas for the Medicare program, we have 
consistently used the definition of ``Metropolitan Statistical Area'' 
(MSA) established by the Office of Management and Budget. For example, 
the MSA definition is applied to identify hospitals eligible for an 
exception to the prospective payment system as rural referral centers. 
It is also used to determine an institution's eligibility for the 
critical access hospital program and for many other purposes.
    Section 4205(a) of the BBA provides an exception to the RHC payment 
limit for clinics of small rural hospitals (fewer than 50 beds) for the 
purpose of helping them remain financially viable. RHCs affiliated with 
small rural hospitals were targeted by this provision because they are 
typically located in very rural areas and represent the sole source of 
health care for their communities.
    As mentioned above, we issued a Program Memorandum to implement 
this new payment provision, which instructed Medicare fiscal 
intermediaries to use the available bed definition at Sec. 412.105(b) 
for determining eligibility for the exception. Despite its 
reasonableness, we recognize that some very rural providers may not 
qualify for an exception using the available bed definition. To assure 
continued access to primary care services in thinly populated rural 
areas where the hospital and its clinic(s) are the primary source of 
health care for their communities, we are proposing to adopt an 
alternative definition of hospital bed size.
    For hospitals that are the primary source of health care in their 
community as defined at Sec. 412.92, we are proposing to look to the 
hospital's average daily census rather than bed size in determining 
whether RHC services are subject to the upper payment limit. We believe 
average daily census may be a more appropriate measure of inpatient 
capacity in certain situations (for example, rural areas that

[[Page 10456]]

experience seasonal fluctuations due to logging or commercial fishing). 
To identify hospitals located in thinly populated rural areas, we 
propose to use the Urban Influence Codes, a 9-category measure 
developed by the U.S. Department of Agriculture. These Codes rank all 
U.S. counties, ranging from 1 for large, densely populated metropolitan 
counties to 9 for the most remote, sparsely populated counties. This 
definition takes into account each county's largest city or town and 
its proximity to counties with large urban areas. We propose to accept 
an 8-level and 9-level Urban Influence Code for purposes of this 
provision. An 8-level code is a county not adjacent to a metropolitan 
area, but has a town with a population of 2,500 to 9,999. A 9-level is 
a county not adjacent to a metropolitan area, with no place greater 
than a population of 2,500. A list of the Urban Influence Codes is 
available on the United States Department of Agriculture website at the 
following address:http://www.econ.ag.gov/briefing/rural/data/
urbinfl.txt. We believe an 8 or 9-level reflects a degree of rurality 
to sufficiently target hospitals located in extremely remote areas that 
may need the flexibility in the bed definition to accommodate 
potentially significant fluctuations in patient census.
    To assure that hospitals possess the unique characteristics of 
significant fluctuations in its average daily census, we are proposing 
a specific fluctuation threshold for patient census at or above 150 
percent of the lowest monthly average daily census. We believe this 
demonstrates a degree of fluctuation sufficient to warrant an 
alternative definition of hospital bed size.
    This proposed alternative definition for the aforementioned 
hospitals would recognize the needs of extremely rural hospitals with 
an average daily census of 40 or less to carry a larger number of 
available beds in order to address seasonal fluctuations. Absent 
seasonal fluctuations in patient census, it would be reasonable to 
expect a hospital with an average daily census of 40 acute care 
inpatients to require no more than 50 beds to meet random fluctuations 
in patient census. A hospital seeking an exception on this basis would 
have to submit with its cost report a summary by month of its average 
acute care census. This alternative definition should afford every RHC 
that was truly targeted--clinics of sole community hospitals located in 
sparsely populated rural areas--an opportunity to receive an exception 
to the RHC payment limit.

C. Staffing Requirements

Practitioners Available 50 Percent of the Time
    Under our current regulations at Sec. 491.8(a)(6), a nurse 
practitioner or physician assistant must be available to furnish 
patient care services at least 60 percent of the time the RHC operates. 
However, section 6213(a)(3) of OBRA 1989 amended the staffing 
requirements for an RHC, described in section 1861(aa)(2)(J) of the 
Act, to require that a nurse practitioner, physician assistant, or 
certified nurse midwife be available to furnish patient care services 
at least 50 percent of the time the RHC operates.
    Therefore, we propose to revise Sec. 491.8(a) to require that a 
nurse practitioner, physician assistant, or certified nurse midwife 
must be available to furnish patient care at least 50 percent of the 
time the RHC operates.
Temporary Staffing Waiver
    As noted, section 1861(aa)(2)(J) of the Act requires an RHC to have 
a nurse practitioner, physician assistant, or certified nurse midwife 
available to furnish patient care services at least 50 percent of the 
time the clinic operates. In addition, clause (iii) of the second 
sentence of section 1861(aa)(2) of the Act requires an RHC to employ a 
nurse practitioner or physician assistant. Section 1861(aa)(7) requires 
us to waive one or both of these requirements for a 1-year period, if 
the facility has been unable, despite reasonable efforts, to hire a 
nurse practitioner, physician assistant, or certified nurse midwife in 
the previous 90-day period. Before the BBA, temporary staffing waivers 
were available both to RHC applicants and participating RHCs. However, 
section 4205(c)(1) of the BBA amended section 1861(aa)(7)(B) of the Act 
to limit waivers to RHCs that have been found qualified for Medicare 
participation. Therefore, we would amend our regulations at Sec. 491.8 
to provide that only currently participating RHCs (not facilities 
applying for participation) are eligible for this waiver.
Procedures
    We would also amend Sec. 491.8 to include procedures for when the 
waiver expires. We would terminate an RHC from participation in the 
Medicare program if the RHC has not recruited the required mid-level 
practitioner. We would notify the RHC 15 days before the termination 
date, which cannot be earlier than the day after the waiver expires.
Six-month Interim Period
    Section 1861(aa)(7)(B) of the Act prohibits the Secretary from 
granting a waiver if the RHC requests the waiver before 6 months after 
the expiration of any previous waiver has elapsed. During this interim 
6-month period, some facilities with physicians or other medical 
personnel who are authorized to furnish Part B services outside of the 
RHC setting and to bill Medicare on a fee-for-service basis may choose 
to continue operations, while other facilities may choose to cease 
operations.
Subsequent Waivers
    The granting of a waiver under Sec. 491.8(d) in the past would not 
preclude the granting of subsequent waiver requests if a waiver again 
becomes necessary. There would be no limit to the number of staffing 
waivers that a participating RHC would be able to obtain as long as the 
subsequent waiver is requested no earlier than 6 months after the 
expiration of the previous waiver and the clinic demonstrates it has 
made a reasonable effort over the previous 90-day period to hire the 
required staff.

D. Commingling

Proposed Policy
    In order to achieve a clear distinction between an RHC and another 
entity when the RHC is open to furnish services, and in order to remove 
opportunities for duplicate billing and payments, we propose to 
prohibit the use of RHC space, professional staff, equipment, and other 
resources by another health care professional. This would mean that 
physicians, nonphysician practitioners, and mental health professionals 
(clinical psychologists and clinical social workers) cannot bill Part B 
for payment for their services furnished in RHC space when the RHC is 
open to furnish services to its patients.
    Our proposal would prohibit these health care professionals from 
using RHC space, staff, supplies, records, and other resources to 
conduct a private Medicare practice. However, physicians, nonphysician 
practitioners, and mental health professionals can bill Part B as long 
as they clearly separate their private practices from RHC hours of 
operation.
    To assure that all RHC services furnished by the clinic are billed 
as RHC services, we propose to revise Sec. 405.2401(b) of our 
regulations, ``Scope and definitions,'' to clarify that the term 
``rural health clinic'' means, in part, a facility that, in addition to 
filing an

[[Page 10457]]

agreement with us to furnish RHC services under Medicare and being 
approved as a Medicare RHC it is not operated simultaneously with, and 
does not share professional staff, space, supplies, records, and other 
resources with another entity.
Problems With Commingling
    Both independent and provider-based RHCs must meet the RHC staffing 
requirements in section 1861(aa)(2)(J) of the Act. The statute requires 
a nonphysician practitioner to be present in the RHC to furnish 
services more than 50 percent of the time the clinic is open. Providers 
that routinely reassign RHC mid-level practitioners to other parts of 
the provider risk failure of meeting the RHC staffing requirements. 
Also, when RHC professionals and other resources are shared, they are 
not available to the RHC. Therefore, the RHC is no longer meeting the 
Medicare participation requirements. A complaint investigation, 
undertaken by a Medicare State survey agency, could find an RHC 
deficient. That deficiency could result in the termination of the RHC's 
Medicare participation agreement if the RHC does not resolve the 
deficiency quickly.
    When RHC staff members use RHC space and resources to conduct a 
private practice, Medicare could provide two payments for the 
administrative cost of services furnished by a particular staff member 
who had simultaneous assignments. We do not want to continue an 
environment in which duplicate payments could result, because the cost, 
both direct and indirect, for professional services is included in 
setting the RHC payment rate. We believe that the Congress never 
intended to provide opportunities for RHCs to shift between functioning 
as RHCs and as other entities, such as private physician practices, 
merely to achieve higher payment.
    We studied several proposals to address the consequences of 
commingling because we do not believe it is consistent with the statute 
and often lends itself to abusive, fraudulent practices. It is an 
intolerable situation that requires action on our part to eliminate its 
effects. If commingling is not eliminated, incorrect and duplicate 
payments could continue to be made to RHCs and physicians.
    The beneficiary is disadvantaged when commingling occurs. When the 
physician's billing decisions for services are based on which Medicare 
payment for the services is higher (the RHC's all-inclusive rate, or 
the amounts payable under the non-RHC Part B payment provisions), the 
result is an inflated Medicare payment and an inflated coinsurance 
amount charged to the beneficiary.
    Commonly, RHCs maintain a unit record for each patient, but patient 
visits to the RHC and to the physician practice are not well 
differentiated. By combining patient records, these RHCs call into 
question the correctness of their payments, the proper maintenance of 
records as required by Sec. 491.10(a), and the appropriateness of 
payment to the physician.
Exception to Commingling
    Although we believe strong action is needed, we want to make sure 
our proposed policy does not create hardship for physicians and 
patients in rural underserved communities, such as frontier areas with 
limited medical resources. Therefore, with sufficient documentation 
allocating costs associated with the sharing of staff, we propose 
offering critical access hospitals the option to share common staff 
between the RHC and the emergency room. We believe this exception is 
necessary because recruitment of physicians into rural communities is 
very difficult. An isolated community often does not have the ability 
to hire and maintain a sufficient number of practitioners to staff both 
the RHC and emergency room simultaneously within a critical access 
hospital. We are also inviting the public to offer additional 
suggestions regarding how to address the negative effects of 
commingling.
Cost Reports
    To assure that physicians clearly separate their private practices 
from the RHC, we have revised the Medicare cost report for independent 
and provider-based clinics to collect information that may be used by 
the fiscal intermediary to determine if commingling exists at an 
approved RHC. This will help assure that RHCs do not claim the cost of 
services that Medicare is paying for outside the RHC payment system. 
This cost report information, which includes describing any other 
entity that occupies RHC space and hours of operation, would alert the 
fiscal intermediary to the existence of possible commingling and allow 
the fiscal intermediary to determine if it should examine the costs 
reported in more detail.

E. Quality Assessment and Performance Improvement Program

    During the last decade, the health care industry has moved beyond 
the problem-focused approach of quality assurance in favor of focusing 
on systemic quality improvement. We have followed suit. Our revised 
approach to our quality assurance responsibilities is linked closely 
both to the Administration's commitment to reinventing government. Our 
revised quality initiatives are now focused on stimulating improved 
health outcome and patient satisfaction. To achieve this objective, we 
are now developing revised requirements for several health care 
providers; that is, hospitals, hospices, end-stage renal disease 
facilities, and home health agencies. These requirements are directed 
at improving outcomes of care and satisfaction for patients while 
eliminating unnecessary procedural requirements. This was, largely, the 
impetus for the revised legislation concerning requiring a quality 
improvement program for RHCs discussed above.
    A quality assessment and performance improvement (QAPI) program 
should be based on a continuous, proactive approach to both managing 
the RHC and improving outcomes of care and satisfaction for patients.
    Instead of continuing to prescribe the structure and processes by 
which an RHC evaluates its services, we have identified the outcome 
expected of an RHC that assesses its performance and improves the 
services that it provides to beneficiaries. For this condition of 
certification, we are proposing to eliminate structural or process-
oriented requirements that we believe are no longer necessary (such as 
prescriptive details concerning policies and procedures, reviewing 
medical records, etc.). At this time, we are not making changes to all 
of part 491 to make it outcome oriented. Maybe, in the future, we will 
change all of part 491 to focus on outcomes.
    A recent study of the Institute of Medicine (IOM) of the National 
Academies discussed medical errors as one of the nation's leading 
causes of death and injury. The study estimated that more people die 
from medical errors each year than from highway accidents, breast 
cancer, or autoimmune deficiency syndrome. We have been concerned about 
medical errors for some time and are exploring how to address this 
issue through our rulemaking process.
    We want to make it clear that the requirements of QAPI set forth in 
this proposed rule for RHCs will address the issues of measuring and 
prioritizing the medical errors of underuse, overuse, and misuse. These 
issues are clearly concerns of the public, healthcare providers, and 
others, as highlighted by the IOM study. RHCs will be required to

[[Page 10458]]

develop and implement programs that will foster continuous and 
proactive approaches to discovering and prioritizing opportunities to 
improve patient outcomes. Medical errors would clearly be a priority 
area for improvement actions.
    We are proposing to replace the current requirements in Sec. 491.11 
with the proposed QAPI condition that contains three standards: the 
first addresses the components of a performance improvement program; 
the second addresses monitoring performance activities; and the third 
addresses program responsibilities.
Clinical Effectiveness
    The first proposed standard charges each RHC with the 
responsibility to carry out a performance improvement program of its 
own design to improve the quality of care furnished to its patients. 
Each clinic would have to develop, implement, maintain, and evaluate an 
effective, data-driven, QAPI program based on its individual needs and 
resources. This requirement would stimulate an RHC to monitor and 
improve its own performance continuously and to be responsive to the 
needs and desires of its patients to ensure their satisfaction. The 
program would be required to reflect the complexity of the RHC's 
organization and services. We believe that the gathering and reviewing 
of data are important steps in the process to improve the quality of 
services provided to beneficiaries of the Medicare and Medicaid 
programs. As a result of the evaluation of improvement measures, RHCs 
would be able to support the sharing of best practices among their 
peers.
    The RHC's QAPI program should achieve, through ongoing measurement 
and intervention, demonstrable and sustained improvement in significant 
aspects of clinical care and nonclinical services that can be expected 
to affect the population it serves. With an effective QAPI program, the 
RHC would, on a continuous basis, be able to identify and reinforce 
activities that it is doing well and identify and respond to 
opportunities for improvement.
    We would not prescribe the structures and methods for implementing 
this requirement and would focus the condition for certification on the 
expected results of the program; that is, improved quality of care. 
This would provide flexibility to the RHC, as it would be free to 
develop a creative program that meets the RHC's needs and reflects the 
scope of its services.
    Key Elements. The RHC should develop its program that meets the 
RHC's needs (and reflects the scope of its services) with four key 
elements in mind:
     Identify and prioritize opportunities to improve health 
status and health care.
     Conduct intervention(s) developed to target specific 
populations.
     Include documentation of results.
     Identify additional opportunities to improve health status 
and health care.
    We would require that an RHC set priorities for performance 
improvement based on the prevalence and severity of identified 
problems. Of course, we expect that an RHC would immediately correct 
problems that are identified through its quality assessment and 
performance improvement program that actually or potentially affect the 
health and safety of patients. For example, if a clinic's QAPI process 
identifies problems with accuracy of medication administration, it 
would not be enough for the clinic to consider this area a candidate 
for an improvement program that may or may not be chosen from a 
priority list of potential projects. Rather, since accuracy of 
medication administration is critical to the health and safety of 
patients, the clinic would have to intervene with a correction and 
improvement program immediately. Overall, a clinic would be expected to 
give priority to improvement activities that most affect clinical 
outcomes.
    Critical Areas. Specifically, we would require that an RHC 
objectively evaluate the following areas that we believe are critical 
to an RHC's performance:
Domain 1. Clinical Effectiveness
     Appropriateness of Care. This area evaluates the 
appropriateness of care provided to the patients. That is, it evaluates 
whether needed tests, procedures, treatment, and services are provided 
to a patient in a timely and appropriate manner.
     Prevention. There are no requirements for the provision of 
preventive health services for an RHC. However, if these services are 
provided, there should be continuous evaluation of the areas as part of 
the clinic's QAPI program. Preventive health services may include 
medical social services, nutritional assessment and referral, 
preventive health education, children's eye and ear examinations, 
perinatal services, well-child services, preventive health screenings, 
immunizations, and voluntary family planning services.
Domain 2. Access to Care
    Access is a multifaceted concept that encompasses transportation 
and geographic location, outreach, cultural relevance, financial 
barriers, patient acceptance, and convenient practice hours. By 
identifying quality concerns and the development of corrective actions 
in this area, it is anticipated that access to covered services would 
improve. Also, patient satisfaction should increase.
     Availability and Accessibility. The RHC would have to 
assure that all services are available (that is, it has employed 
appropriately qualified practitioners and providers) and that these 
practitioners and providers have sufficient capacity to make services 
available to the patient population. The RHC would also have to ensure 
accessibility: that is, patients could obtain available services in a 
timely fashion, with consideration of travel time, waiting time, and 
potential access barriers for special populations, such as the disabled 
or non-English speaking members.
     Cultural Competency. This includes the attainment of 
knowledge, skills, and attitudes that enable administrators and 
practitioners within systems of care to provide and support effective 
health care delivery for diverse populations. Focuses for Domain 2 
could include: decreasing the waiting times when appointments are 
scheduled and after arriving at the clinic; improving the access rates 
for patients with chronic disorders or patients with special needs; 
examining the effectiveness of an outreach program for a specific 
population; identifying current and potential barriers to care; 
evaluating staffing needs to ensure service availability.
     Emergency Intervention. An RHC is required to provide 
medical emergency procedures as a first response to common life-
threatening injuries and acute illnesses. The definition of first 
response is service that is commonly provided in a physician's office. 
There are no specific requirements for an RHC to directly provide on 
call coverage. However, the RHC would have to arrange for access to 
care; that is, referral to a hospital outpatient department. Therefore, 
focuses could include follow-up activities to examine the effectiveness 
of the initial assessment and treatment.
Domain 3. Patient Satisfaction
    Soliciting feedback from patients on the quality of care they 
receive (including complaints and grievances) is not only reflective of 
good patient care, but it is also a sound business practice.
    Quality of care can typically be categorized in two ways: perceived 
and technical. We have discussed the technical aspects of measuring 
quality in the section ``Clinical Effectiveness.''

[[Page 10459]]

Perceived quality deals with the assessment of quality as experienced 
by the patient. Patients often base their satisfaction on how well they 
were treated by the staff--the amount of time spent waiting to be seen, 
and the time and attention given to their concerns.
    The clinic could utilize a standardized survey instrument for 
purposes of determining whether the patients served by the clinic are 
satisfied with the care received, or they may design their own survey 
instrument. Elements in the survey should capture--
    Access, communication and interaction with health care 
professionals;
     Continuity and coordination of care;
     Preventive care (where applicable);
     Paperwork burden on the patient;
     Complaints and grievances;
     Utilization of health services;
     Health status; and
     Respondent characteristics.
    Information collected could be used to improve quality of care or 
adjust practice patterns to better meet the needs of the patient.
Examples of a Quality Improvement Project
    We want to assure RHCs, especially clinics that are operating with 
a limited staff and resources, that our expectations for the use of 
performance measures are commensurate with the size and resources 
available to the clinic. Effective improvement programs can be and are 
often premised on simple, straightforward designs, using measures that 
are direct and uncomplicated. For example, a patient satisfaction 
survey could be used to evaluate whether the clinic should alter 
practice hours to accommodate patients that need evening appointments.
    We are not proposing specific language for a minimum level in the 
regulation text at this time because we recognize that there are many 
ways in which such a level can be set. We are inviting comments on the 
best approaches to achieve this minimum level of effort for clinics 
that currently do not have a performance improvement program and have 
limited resources to develop a QAPI program.
    Among the possible alternatives that we are considering are the 
following:
     Require RHCs to engage in an improvement project in each 
domain annually.
     Require a minimum number of improvement projects (for 
example, two) in any combination of the domains annually. Require a 
minimum number of projects annually based on patient population (for 
example, three projects for every 1,000 patients).
     Rather than requiring a minimum number of projects, 
require RHCs to demonstrate to the survey agency what projects they are 
doing and what progress is being achieved.
    We are certain there are other ways to approach the ``minimum-
effort'' discussion. The purpose of these examples is to elicit comment 
and suggestions in this regard, and we welcome alternative approaches. 
We note that although our intention is to specify in the final rule a 
minimum level of effort, it is also possible that, after reviewing all 
the comments, we may conclude that it is neither feasible nor desirable 
to do so.
Monitoring Performance Activities
    The second standard proposed at Sec. 491.11(b) states that, for 
each of the areas listed under standard (a), the clinic must measure, 
analyze, and track aspects of performance that the clinic adopts or 
develops that reflect processes of care and clinic operations. These 
measures must be shown to be predictive of desired outcomes or be the 
outcomes themselves.
    When we use the word ``measure,'' we mean that the RHC would have 
to use objective means of tracking performance that enables a clinic 
(and a surveyor) to identify the differences in performance between two 
points in time. For example, we would not consider a clinic's 
subjective statement that it is ``doing better'' in a given performance 
area as a result of an improvement process to be an acceptable measure. 
We would require identifiable units of measure that a reasonably 
knowledgable person would be able to distinguish as evidence of change. 
Not all objective measures would have to be shown to be valid and 
reliable (that is, subjected to scientific rigor) in order to be usable 
in improvement projects, but they would have to at least identify a 
start point and an end point stated in objective terms, most often, 
numbers that actually relate directly to the objectives and expected or 
desired outcomes of the improvement project.
Program Responsibilities
    Under the third proposed standard, Sec. 491.11(c), we are proposing 
that the RHC's professional staff, administration officials, and 
governing body (where applicable) ensure that there is an effective 
quality assessment and performance improvement program as well as the 
current requirement for assessing utilization. The RHC would have to 
prioritize areas of improvement, considering prevalence and severity of 
identified problems and giving priority of improvement to those 
activities that affect clinical outcomes.
    We anticipate that both large and small RHCs will use a variety of 
performance measures in their QAPI program. These measures may be 
designed by the clinic itself or by other sources outside the RHC. 
Regardless, HCFA intends, through its survey process, to assess the 
clinic's success in collecting data on its operation and measuring 
quality. Each clinic's professional staff should use its judgement, 
which is supported by nationally approved standards, practices and 
reviews of current professional literature, to evaluate the quality of 
care performed in the clinic. The survey process would focus on the 
clinic's ability to demonstrate that it has developed a viable quality 
assessment and performance improvement program. Also, the clinic should 
be able to prove with objective data that sustained improvements have 
taken place in (1) actual care outcomes, patient satisfaction levels, 
and access to care; and/or (2) processes of care and clinic operations 
that are predictive of improved outcomes of care and satisfaction for 
patients. HCFA does not intend and would not be in a position to judge 
the measures themselves; instead, we would assess their utility for the 
clinic in its own efforts to improve its performance. As part of 
oversight, we would expect RHCs to make information on their QAPI 
program available for surveyors during initial certification, routine 
recertification, and complaint surveys to demonstrate how they meet the 
requirement.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the

[[Page 10460]]

affected public, including automated collection techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirements discussed below.

Section 491.3  Rural Health Clinic (RHC) Procedures

    Section 491.3(c)(2) states that an existing RHC located in an area 
no longer considered a shortage area may apply for an exception from 
disqualification by submitting a written request to the HCFA regional 
offices within 90 days from the date HCFA notifies it that it is no 
longer located in a shortage area. We believe that this information 
collection requirement is exempt in accordance with 5 CFR 1320.4(a)(2) 
since this activity is pursuant to the conduct of an investigation or 
audit against specific individuals or entities.

Section 491.8  Staffing and Staff Responsibilities

    Section 491.8(d)(1) states that HCFA may grant a temporary waiver 
if the RHC requests a waiver and demonstrates that it has been unable, 
despite reasonable efforts in the previous 90-day period, to hire a 
nurse midwife, nurse practitioner, or physician assistant to furnish 
services at least 50 percent of the time the RHC operates.
    The burden associated with this requirement is the time and effort 
for the RHC to request a waiver and demonstrate that it has been unable 
to hire a nurse midwife, nurse practitioner, or physician assistant to 
furnish services at least 50 percent of the time the RHC operates. It 
is estimated that this requirement will take each RHC 3 hours. There 
are approximately 45 RHCs that will be affected by this requirement for 
a total of 135 burden hours.
    Section 491.11  Quality Assessment and Performance Improvement
states that the RHC must develop, implement, evaluate, and maintain an 
effective, ongoing, data-driven quality assessment and performance 
improvement program. The RHC's QAPI program must include, but not be 
limited to, the use of objective measures to evaluate clinical 
effectiveness, access to care, patient satisfaction, and utilization of 
clinical services, including at least the number of patients served and 
the volume of services.
    Most of the burden of this section is covered by the paperwork 
requirements of Sec. 491.9(b)(3), patient care policies, which requires 
the RHCs to have in place a description of services the clinic 
furnishes, guidelines for management of health problems, and procedures 
for periodic review and evaluation of clinic services. This burden is 
approved under 0938-0334 and expires in April, 2000.
    To maintain the data required by Sec. 491.11, we estimate it will 
take each clinic one hour per year to meet this requirement. Since 
there are an estimated 3,528 facilities, the total burden associated 
with this requirement is 3,528 annual hours.
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirements described above. 
These requirements are not effective until they have been approved by 
OMB.
    If you comment on any of these information collection and record 
keeping requirements, please mail copies directly to the following:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room NO-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850, 
ATTN.: Louis Blank, HCFA-1910-P; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, ATTN.: Allison EDT, HCFA Desk Officer

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the major comments in the preamble to that 
document.

V. Regulatory Impact Statement

Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). The RFA requires agencies 
to analyze options for regulatory relief of small businesses. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and government agencies. Most hospitals and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of $5 million or less annually. For purposes of 
the RFA, all RHCs are considered to be small entities. Individuals and 
States are not included in the definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any proposed rule that may result in an expenditure in any one 
year by State, local, or tribal government, in the aggregate, or by the 
private sector of $100 million. The proposed rule would not have an 
effect on the governments mentioned, and private sector costs would be 
less than the $100 million threshold.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. The proposed rule would not have an effect on the 
governments mentioned.
    Although we view the anticipated results of these proposed 
regulations as beneficial to the Medicaid and Medicare programs as well 
as to Medicaid recipients and Medicare beneficiaries and State 
governments, we recognize that some of the provisions could be 
controversial and may be responded to unfavorably by some affected 
entities. We also recognize that not all of the potential effects of 
these provisions can definitely be anticipated, especially in view of 
their interaction with other Federal, State, and local activities 
regarding outpatient services. In particular, considering the effects 
of our simultaneous efforts to improve the delivery of outpatient 
services, it is impossible to quantify meaningfully a projection of the 
future effect of all of these provisions on RHC's operating costs or on 
the frequency of substantial

[[Page 10461]]

noncompliance and termination procedures.
    We believe the foregoing analysis concludes that this regulation 
would not have a significant financial impact on a substantial number 
of small entities, such as RHCs. This analysis, in combination with the 
rest of the preamble, is consistent with the standards for analysis set 
forth by the RFA.

Anticipated Effects

Effects on Rural Health Clinics
    The total number of participating RHCs under Medicare and Medicaid 
as of March 1, 1998, was 3,528. Participating RHCs that are no longer 
located in rural, underserved areas could lose their RHC status and 
their cost-based reimbursement, which could cause them to reduce 
services or discontinue serving our beneficiaries. To minimize the 
impact of this provision on rural health care, the Congress has 
authorized us to grant, if needed, an exception to clinics essential to 
the delivery of primary care in these affected areas. Our proposed 
criteria in Sec. 491.3 would identify the areas and clinics where RHC 
status and its payment methodology would still be needed despite the 
fact the service area is no longer considered medically underserved.
    Implementing the statutory requirement to replace the current 
payment method used by provider-based RHCs to the payment method used 
by independent RHCs will establish payment equity and consistency 
within the RHC program. Before the BBA, payment to provider-based RHCs 
was made without considering the number of patient visits provided by 
the RHC without a limit on the payment per visit. These criteria are 
applicable to independent RHCs that furnish the same scope of services. 
Our proposal to codify the statutory requirement to pay all RHCs under 
an all-inclusive rate per visit also would avoid allocation of 
excessive administration costs to RHCs. We believe that about a 
thousand RHCs would be affected by this proposal.
    We believe the fiscal impact of limiting payment to provider-based 
RHCs to the independent RHC rate per visit will result in program 
savings. Provider-based RHCs that have costs above the all-inclusive 
cost-per-visit limit required by the law could experience some decrease 
in their current reasonable cost basis payments. To reduce detrimental 
impacts of this decrease, the Congress authorized an exception to the 
annual payment limit to those clinics affiliated with small rural 
hospitals; that is, a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 50 beds.
    This QAPI requirement may increase burden in the short term because 
resources would have to be devoted to the development of a quality 
assessment and performance improvement program that covers the 
complexity and scope of the particular clinic. However, while the 
proposed requirements could result in some immediate costs to an 
individual clinic, we believe that the QAPI program will result in 
real, but difficult to estimate, long-term economic benefits to the 
clinic (such as cost-effective performance practices or higher patient 
satisfaction that could lead to increased business for the clinic).
    Moreover, we are proposing that the QAPI and utilization review 
requirements replace the current annual evaluation requirement. 
Resources that the clinics are currently using for the annual 
evaluation could be devoted to the QAPI program. Therefore, we believe 
that there would be no long-term increased burden to the clinics. 
Currently, a number of RHCS, primarily provider-based, have some type 
of quality improvement program in place. To the extent that clinics are 
familiar with collecting data on their operations and measuring 
quality, the new requirement would not be perceived as a burden.
    OBRA 1989 reduced the nonphysician staffing requirement for RHC 
qualification from 60 percent to 50 percent. This reduction should have 
a positive effect on RHCs by providing them more flexibility in 
satisfying their overall staffing needs.
Effects on Other Providers
    We are aware of situations in which an RHC and a physician's 
private practice occupy the same space and Medicare is billed for the 
service, either as an RHC or physician service, depending upon which 
payment method produces the greater payment. Our proposed revision 
would require an RHC to be a distinct entity that is not used 
simultaneously as a private physician office or the private office of 
any other health care professional. As a result, a private physician or 
other practitioner who has used this approach to take advantage of the 
Medicare program may experience some change in the operation of their 
practices from an administrative standpoint.
Effects on the Medicare and Medicaid Programs
    As a result of this proposed rule, most provider-based RHCs would 
be subject to payment limits and some RHCs would lose their RHC status 
and cost-based payment rates. Although these proposed changes would 
likely result in program savings, we believe the aggregate amount would 
be negligible for both programs. We cannot accurately estimate the 
payment differential between the new payment system for provider-based 
RHCs and the previous payments because the old system made payments 
without considering the number of patient visits. Without these data, 
we cannot precisely determine the fiscal impact.
    However, in light of the fact that total expenditures for this 
program represent a small fraction of the Medicare and Medicaid's total 
budget and that less than half of all RHCs would experience changes to 
their payment rates, we believe any aggregate savings would be 
insignificant. We also believe an insignificant amount of Medicare and 
Medicaid program savings would result from the proposed provision that 
would terminate RHC status for certain providers. Less than 5 percent 
of all participating RHCS could lose their status, and these affected 
clinics would continue to participate under Medicare and Medicaid and 
receive payment for their services on a fee-for-service basis.
Alternatives Considered
    Section 4205 of the BBA imposes new requirements that an RHC 
program must meet. We considered some of the following alternatives to 
implement these provisions:
    ``Essential'' RHCs. Since the statute mandates an exception process 
for essential clinics, we considered using a national utilization test 
to recognize clinics that are accepting and treating a 
disproportionately greater number of Medicare, Medicaid, and uninsured 
patients, compared to other participating RHCs, for the purpose of 
addressing the situation of RHC clusters. For example, using an 
aggregate threshold based on the average Medicare, Medicaid, and 
uninsured utilization rates of participating RHCs, applicants would 
have to demonstrate that their utilization rates exceed the threshold.
    Although the test would be administratively feasible, we concluded, 
based on our analysis of available Medicare and Medicaid RHC data, that 
it would not accurately determine ``essential'' clinics at the 
community level because of the wide variability in

[[Page 10462]]

the percentage of services furnished to Medicare and Medicaid patients 
by RHCs. Despite our rejection of a national utilization test, we are 
open to suggestions on developing a minimum national percentage, which 
could be integrated with our proposed major community provider test.
    QAPI Program. Because the statute mandates that an RHC have a QAPI 
program, and appropriate procedures for review of utilization of clinic 
services, no alternatives for the requirement were considered. However, 
in the preamble section we have proposed alternative ways of satisfying 
the ``minimum level requirement'' for the QAPI program and have asked 
for comments. Among the alternatives that we are considering are the 
following:
     Require RHCs to engage in an improvement project in each 
domain annually.
     Require a minimum number of improvement projects in any 
combination of the domains annually.
     Require a minimum number of projects annually based on 
patient population.
     Rather than requiring a minimum number of projects, 
require RHCs to demonstrate to the survey agency what projects they are 
doing and what progress is being achieved.
Conclusion
    We would not expect a significant change in the operations of RHCs 
generally, nor do we believe a substantial number of small entities in 
the community, including RHCs and a substantial number of small rural 
hospitals, would be adversely affected by these proposed changes. The 
commingling provision of this regulation adds little savings. One 
reason for this conclusion is that the outpatient visit rate for HCPC 
99214 was about $59.00 and the RHC visit was also about $59.00. 
Therefore, if an adjustment made for lower physician overhead than that 
of the RHC, the savings would probably be marginal.
    Therefore, we are not preparing analyses for either the regulatory 
impact analysis or section 1102(b) of the Act since we believe that 
this proposed rule would not result in a significant economic impact on 
a substantial number of small entities and would not have a significant 
impact on the operations of a substantial number of small rural 
hospitals. We solicit public comments on the extent to which any of the 
entities would be significantly economically affected by these 
provisions.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 491

    Grant programs-health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements, Rural areas.
    For the reasons set forth in the preamble, 42 CFR chapter IV would 
be amended as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart X--Rural Health Clinic and Federally Qualified Health 
Center Services

    1. The authority citation for part 405, subpart X, continues to 
read as follows:

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

    2. In Sec. 405.2401(b), the definition of ``rural health clinic'' 
is revised to read as follows:


Sec. 405.2401  Scope and definitions.

* * * * *
    (b) Definitions.
* * * * *
    Rural health clinic (RHC) means an entity that meets the following 
criteria:
    (1) It does not share space, professional staff, supplies, records, 
and other resources during RHC hours of operation with a private 
physician's office or the office of any other health care professional. 
RHCs physically located on the same campus of a critical access 
hospital have the option of sharing common staff between the RHC and 
the emergency room.
    (2) It has filed an agreement with HCFA that meets the basic 
requirements described in Sec. 405.2402 to furnish RHC services under 
Medicare.
    (3) HCFA has determined that the entity meets the requirements of 
section 1861(aa)(2) of the Act and part 491 of this chapter concerning 
RHC services and conditions for approval.
* * * * *
    3. Section 405.2410 is revised to read as follows:


Sec. 405.2410  Application of Part B deductible and coinsurance.

    (a) Application of deductible. (1) Medicare payment for RHC 
services begins only after the beneficiary has incurred the deductible. 
Medicare applies the Part B deductible as follows:
    (i) If the deductible has been fully met by the beneficiary before 
the RHC visit, Medicare pays 80 percent of the all-inclusive rate.
    (ii) If the deductible has not been fully met by the beneficiary 
before the visit and the amount of the RHC's reasonable customary 
charge for the service that is applied to the deductible is--
    (A) Less than the all-inclusive rate, the amount applied to the 
deductible is subtracted from the all-inclusive rate and 80 percent of 
the remainder, if any, is paid to the RHC; or
    (B) Equal to or exceeds the all-inclusive rate, no payment is made 
to the RHC.
    (2) Medicare payment for FQHC services is not subject to the usual 
Part B deductible.
    (b) Application of coinsurance. (1) The beneficiary is responsible 
for the coinsurance amount that cannot exceed 20 percent of the 
clinic's reasonable customary charge for the covered service.
    (2) The beneficiary's deductible and coinsurance liability, with 
respect to any one service furnished by the RHC may not exceed a 
reasonable amount customarily charged by the RHC for that particular 
service.
    (3) For any one service furnished by an FQHC, the coinsurance 
liability may not exceed 20 percent of reasonable amount customarily 
charged by the FQHC for that particular service.
    4. Section 405.2462 is revised to read as follows:


Sec. 405.2462  Payment for rural health clinic services and Federally 
qualified health clinic services.

    (a) General rules. (1) RHCs and FQHCs are paid on the basis of 80 
percent of an all-inclusive rate per visit determined by the fiscal 
intermediary for each beneficiary visit for covered services, subject 
to an annual payment limit.
    (2) The fiscal intermediary determines the all-inclusive rate in 
accordance with this subpart and instructions issued by HCFA.
    (3) If an RHC is an integral and subordinate part of a rural 
hospital, it can receive an exception to the per-visit payment limit if 
its rural hospital is not located in a metropolitan statistical area as 
defined in Sec. 412.62(f)(1)(ii)(A) of this chapter and has fewer than 
50 beds as determined by using one of the following methods:

[[Page 10463]]

    (i) The definition at Sec. 412.105(b) of this chapter.
    (ii) The hospital's average daily patient census count of those 
beds described in Sec. 412.105(b) of this chapter and the hospital 
meets all of the following conditions:
    (A) It is a sole community hospital as determined in accordance 
with Sec. 412.92 of this chapter.
    (B) It is located in an 8-level or 9-level nonmetropolitan county 
using Urban Influence Codes as defined by the U.S. Department of 
Agriculture.
    (C) It has an average daily patient census that does not exceed 40.
    (D) It has significant fluctuations in its average daily census to 
the extent that the average daily census for 1 or more months is at 
least 150 percent of the lowest monthly average daily census.
    (b) Payment procedures. To receive payment, an RHC or FQHC must 
follow the payment procedures specified in Sec. 410.165 of this 
chapter.
    (c) Mental health limitation. Payment for the outpatient treatment 
of mental, psychoneurotic, or personality disorders is subject to the 
limitations on payment in Sec. 410.155(c) of this chapter part 491.

PART 491--CERTIFICATION OF CERTAIN HEALTH FACILITIES

    1. The authority citation for part 491 continues to read as 
follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302); and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).

    2. Section 491.2 is revised to read as follows:


Sec. 491.2  Definition of shortage area for RHC purposes.

    Shortage area means a geographic area that meets one of the 
following criteria. It has been:
    (a) Designated by the Secretary as an area with shortage of 
personal health services under section 330(b)(3) of the Public Health 
Service Act;
    (b) Designated by the Secretary as a health professional shortage 
area under section 332(a)(1)(A) of that Act because of its shortage of 
primary medical care professionals;
    (c) Determined by the Secretary to contain a population group that 
has a health professional shortage under 332(a)(1)(B) of that Act; or
    (d) Designated by the chief executive officer of the State and 
certified by the Secretary as an area with a shortage of personal 
health services.
    3. Section 491.3 is revised to read as follows:


Sec. 491.3  RHC procedures.

    (a) General. (1) HCFA processes Medicare participation matters for 
RHCs in accordance with Secs. 405.2402 through 405.2404 of this chapter 
and with the applicable procedures in part 486 of this chapter.
    (2) If HCFA approves or disapproves the participation request of a 
prospective RHC, it notifies the State Medicaid agency for that RHC.
    (3) HCFA deems an RHC that is approved for Medicare participation 
to meet the standards for certification under Medicaid.
    (b) Current designation. Applicants requesting entrance into the 
Medicare program as an RHC must be located in a current shortage area, 
whose designation has been made or updated within the current year or 
within the previous 3 years.
    (c) Exception process. (1) An RHC's location fails to satisfy the 
definition of a shortage area if it is no longer designated by the 
Secretary or by the chief executive officer of the State as medically 
underserved.
    (2) An existing RHC may apply for an exception from 
disqualification by submitting a written request to the HCFA regional 
office within 90 days from the date HCFA notifies it that it is no 
longer located in a shortage area. The request must contain all 
information necessary to establish whether an exception is warranted.
    (3) Based on its review of an RHC request, and other relevant 
information, if the HCFA regional office determines that the RHC is 
essential to the delivery of primary care services that otherwise would 
not be available in the geographic area served by the RHC, consistent 
with Sec. 491.5(b), the HCFA regional office may grant a 3-year 
exception to the RHC.
    (4) HCFA terminates an ineligible clinic from participation in the 
Medicare program as an RHC 90 days after HCFA notifies the clinic of 
its ineligibility under this section.
    4. In Sec. 491.5, paragraphs (d) and (e) are removed, paragraph (f) 
is redesignated as paragraph (d), and paragraph (b) is revised to read 
as follows:


Sec. 491.5  Location of clinic.

* * * * *
    (b) Exceptions. If HCFA determines that the RHC has established 
that it is essential to the delivery of primary care that otherwise 
would not be available in the geographic area served by the RHC, HCFA 
does not disqualify the RHC approved for Medicare participation if the 
area in which the RHC is located no longer meets the definition of a 
shortage area. HCFA makes this determination when the RHC meets one of 
the following conditions:
    (1) Sole community provider. The RHC is the only participating 
primary care provider within 30 minutes travel time. For purposes of 
this exception, a participating primary care provider means an RHC, an 
FQHC, or a physician practicing in either general practice, family 
practice, or general internal medicine that is actively accepting and 
treating Medicare beneficiaries and Medicaid recipients. RHCs applying 
for an exception under this test must demonstrate that they accept 
Medicare (where applicable), Medicaid, and uninsured patients that 
present themselves for treatment. HCFA uses the following criteria in 
determining distances corresponding to 30 minutes travel time:
    (i) Under normal conditions with primary roads available--20 miles.
    (ii) In areas with only secondary roads available--15 miles.
    (iii) In flat terrain or in areas connected by interstate 
highways--30 miles.
    (2) Traditional community provider. RHC is the only participating 
RHC within 30 minutes travel time and is actively accepting and 
treating Medicare, Medicaid, and uninsured patients. HCFA does not 
grant an exception under this test if the RHC's service area (30 
minutes travel time) has two or more participating primary care 
providers that have been actively treating Medicare beneficiaries and 
Medicaid recipients for a minimum of 5 years. For purposes of this 
exception, a primary care provider means an FQHC or a physician 
practicing in either general practice, family practice, or general 
internal medicine.
    (3) Major community provider. The RHC is treating a 
disproportionately greater share of Medicare, Medicaid, and uninsured 
patients compared to other participating RHCs that are within 30 
minutes travel time.
    (4) Speciality clinic. The RHC is the sole clinic that provides 
pediatric or obstetrical/gynecological services and actively serves 
Medicare (where applicable), Medicaid, and uninsured patients.
    (5) Graduate medical education test. The RHC is actively part of an 
approved medical residency training program as defined in Secs. 413.86 
and 405.2468(f) of this chapter.
* * * * *
    4. In Sec. 491.8, paragraph (a)(6) is revised and a new paragraph 
(d) is added to read as follows:


Sec. 491.8  Staffing and staff responsibilities.

    (a) * * *
    (6) A physician, nurse practitioner, physician assistant, nurse-
midwife,

[[Page 10464]]

clinical social worker, or clinical psychologist is available to 
furnish patient care services at all times the clinic or center 
operates. In addition, for RHCs, a nurse practitioner, physician 
assistant, or certified nurse midwife is available to furnish patient 
care services at least 50 percent of the time the RHC operates.
* * * * *
    (d) Temporary staffing waiver. (1) HCFA may grant a temporary 
waiver of the RHC staffing requirements in paragraphs (a)(1) and (a)(6) 
of this section for a 1-year period to a qualified RHC, if the RHC 
requests a waiver and demonstrates that it has been unable, despite 
reasonable efforts in the previous 90-day period, to hire a nurse 
midwife, nurse practitioner, or physician assistant to furnish services 
at least 50 percent of the time the RHC operates.
    (2) If the RHC is not in compliance with the provisions waived 
under paragraph (a)(1) and paragraph (a)(6) of this section at the 
expiration of the waiver, HCFA terminates the RHC from participation in 
the Medicare program.
    (3) The RHC may submit its request for an additional waiver of 
staffing requirements under this paragraph no earlier than 6 months 
after the expiration of the previous waiver.
    5. Section 491.11 is revised to read as follows:


Sec. 491.11  Quality assessment and performance improvement.

    The RHC must develop, implement, evaluate, and maintain an 
effective, ongoing, data-driven quality assessment and performance 
improvement (QAPI) program. The program must be appropriate for the 
level of complexity of the RHC's organization and services. The program 
should achieve, through ongoing measurement and intervention, 
demonstrable and sustained improvement in significant aspects of 
clinical care and nonclinical services.
    (a) Standard: Components of a QAPI program. (1) The RHC's QAPI 
program must include, but not be limited to, the use of objective 
measures to evaluate the following:
    (i) Clinical effectiveness (for example, appropriateness of care, 
and prevention).
    (ii) Access to care (for example, availability and accessibility of 
services, cultural competency, and emergency intervention).
    (iii) Patient satisfaction.
    (iv) Utilization of clinic services, including at least the number 
of patients served and the volume of services.
    (2) Projects that focus on clinical areas should include, at a 
minimum, high-volume and high-risk services, the care of acute and 
chronic conditions, and coordination of care.
    (3) Projects that focus on nonclinical services should include, at 
a minimum, criteria to measure convenience and timeliness of available 
services and grievances and complaints.
    (b) Monitoring performance activities. For each of the areas listed 
in paragraph (a)(1) of this section, the RHC must adopt or develop 
performance criteria that reflect processes of care and RHC operations. 
The RHC must use those criteria to analyze and track its performance. 
These performance criteria must be shown to be predictive of desired 
patient outcomes or be the outcomes themselves.
    (c) Program responsibilities. The RHC's professional staff, 
administrative officials, and governing body (if applicable) are 
responsible for ensuring that quality assessment and performance 
improvement efforts effectively address identified priorities. They are 
responsible for identifying or approving those priorities and for the 
development, implementation, and evaluation of improvement actions.

(Catalog of Federal Domestic Assistance Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: March 1, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Dated: September 2, 1999.
Donna S. Shalala,
Secretary.
[FR Doc. 00-4389 Filed 2-25-00; 8:45 am]
BILLING CODE 4120-01-P