[Federal Register Volume 73, Number 125 (Friday, June 27, 2008)]
[Proposed Rules]
[Pages 36696-36719]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-13280]



[[Page 36695]]

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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 410, and 491



Medicare Program; Changes in Conditions of Participation Requirements 
and Payment Provisions for Rural Health Clinics and Federally Qualified 
Health Centers; Proposed Rule

Federal Register / Vol. 73, No. 125 / Friday, June 27, 2008 / 
Proposed Rules

[[Page 36696]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, and 491

[CMS-1910-P2]
RIN 0938-AJ17


Medicare Program; Changes in Conditions of Participation 
Requirements and Payment Provisions for Rural Health Clinics and 
Federally Qualified Health Centers

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish location requirements 
including exception criteria for rural health clinics (RHCs). It would 
also require RHCs to establish a quality assessment and performance 
improvement (QAPI) program. In addition, it would: Clarify our policies 
on ``commingling'' of an RHC with another entity; revise the RHC and 
Federally Qualified Health Centers (FQHC) payment methodology and 
exceptions to the per-visit payment limit to implement statutory 
requirements; revise RHC and FQHC payment requirements for services 
furnished to skilled nursing facility (SNF) patients; allow RHCs to 
contract with RHC nonphysician providers under certain circumstances; 
and update the regulations pertaining to waivers to the staffing 
requirements. This proposed rule would also add requirements for RHCs 
and FQHCs to maintain and document an infection control process and to 
post RHC or FQHC hours of clinical services. In addition, this proposed 
rule would update the requirements under the emergency services 
standard and patient health records condition for certification (CfC) 
to reflect advancements in technology and treatment. Finally, this 
proposed rule solicits comments on payment for high cost drugs and the 
appropriateness of a mental health specialty clinic as an exception to 
the location requirements.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on August 26, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1910-P2. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the CMS-1910-P2 to find the 
document accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1910-P2, P.O. Box 8010, Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1910-P2, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Corinne Axelrod, (410) 786-5620. Rural 
health clinic location requirements and exceptions, staffing and 
payment. Mary Collins, (410) 786-3189 and Scott Cooper (410) 786-9465. 
Quality assessment and performance improvement and health and safety 
standards.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Abbreviations and Acronyms

AED--Automated External Defibrillator
BBA--Balanced Budget Act of 1997
BIPA--Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000
CAH--Critical Access Hospital
CDC--Centers for Disease Control and Prevention
CfC--Condition for Certification
CMS--Centers for Medicare & Medicaid Services
CNM--Certified Nurse-Midwife
CNS--Clinical Nurse Specialist
CoP--Condition of Participation
CP--Clinical Psychologist
CSW--Clinical Social Worker
DRA--Deficit Reduction Act
DSMT--Diabetes Self-Management Training
FI--Fiscal Intermediary
FQHC--Federally Qualified Health Center
GAO--Government Accountability Office
GDSC--Governor-Designated and Secretary-Certified Shortage Areas
HHS--Department of Health and Human Services
HPSA--Health Professional Shortage Area
HRSA--Health Resources and Services Administration
MAC--Medicare Administrative Contractor

[[Page 36697]]

MMA--Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003
MUA--Medically Underserved Area
MUP--Medically Underserved Population
NP--Nurse Practitioner
OBRA--Omnibus Budget Reconciliation Act
OIG--Office of the Inspector General
OMB--Office of Management and Budget
PA--Physician Assistant
PHS--Public Health Service
PPS--Prospective Payment System
PRA--Paperwork Reduction Act
QAPI--Quality Assessment and Performance Improvement
RFA--Regulatory Flexibility Act
RHC--Rural Health Clinic
RO--Regional Office
RUCA--Rural Urban Commuting Area
SCHIP--State Children's Health Insurance Program
SNF--Skilled Nursing Facility
UA--Urbanized Area
UIC--Urban Influence Code
USDA--United States Department of Agriculture

Table of Contents

I. Background
    A. Publication and Suspension of the December 24, 2003 Final 
Rule
    B. Summary of Provisions of the December 24, 2003 Final Rule
    C. Origin of the RHC/FQHC Programs
    D. Growth of the RHC Program
    1. Continuing Participation
    2. Medically Underserved/Shortage Area Designations
    3. Expansion of Eligible Designations for RHC Certification
    4. Commingling
    E. Government Reports on RHCs
II. Provisions of This Proposed Rule
    A. RHC Location Requirements and Exceptions
    1. RHC Location Requirements
    2. Essential Provider Requirements
    3. Location Exception Criteria
    4. Process for Essential Providers Status and Timeline
    B. Staffing Requirements, Waivers, and Contracts
    1. Staffing Requirements
    2. Temporary Staffing Waivers
    3. Contractual Arrangements
    C. Payment Issues
    1. Payment Methodology for RHC and FQHCs
    2. Exceptions to the Per Visit Payment Limit
    3. Commingling
    4. Payment for Services to Hospital Patients
    5. Payment for Services to Skilled Nursing Facility (SNF) 
Patients
    6. Payment for Certain Physician Assistant Services
    7. Screening Mammography
    8. Payment for High Cost Drugs
    D. Health and Safety, and Quality
    1. Quality Assessment & Performance Improvement Program (QAPI)
    2. Infection Control
    3. Hours of Operation
    a. Posting of Hours
    b. Use of the RHC Facility
    4. Emergency Services and Training
    5. Patient Health Records
    E. Other Proposed Changes
    1. General
    2. FQHCs
III. Collection of Information Requirements
IV. Regulatory Impact Analysis
Regulation Text

I. Background

A. Publication and Suspension of the December 24, 2003 Final Rule

    On February 28, 2000, we published a proposed rule in the Federal 
Register (65 FR 10450) entitled ``Rural Health Clinics: Amendments to 
Participation Requirements and Payment Provisions; and Establishment of 
a Quality Assessment and Performance Improvement Program.'' This 
proposed rule revised certification and payment requirements for rural 
health clinics (RHCs) as required by the Balanced Budget Act of 1997 
(BBA), Public Law 105-33, enacted on August 5, 1997. We issued the 
final RHC rule on December 24, 2003 (68 FR 74792).
    On December 8, 2003, the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted. 
Section 902 of the MMA amended section 1871(a) of the Social Security 
Act (the Act) and requires the Secretary, in consultation with the 
Director of the Office of Management and Budget (OMB), to establish and 
publish timelines for the publication of Medicare final regulations 
based on the previous publication of a Medicare proposed or interim 
final regulation. Section 902 of the MMA also states that ``[s]uch 
timeline may vary among different regulations based on differences in 
the complexity of the regulation, the number and scope of comments 
received, and other relevant factors, but shall not be longer than 3 
years except under exceptional circumstances.''
    To comply with the MMA requirement to publish a final rule not more 
than 3 years after a proposed rule, we suspended the effectiveness of 
the December 24, 2003 final rule on September 22, 2006 (71 FR 55341). 
The Code of Federal Regulations currently reflects the regulations in 
effect before December 2003.
    While section 902 of the MMA did not explicitly prohibit the 
Secretary from finalizing all proposed rules that were published as an 
interim or proposed rule more than 3 years before December 8, 2003, we 
chose to take this opportunity to propose additional updates and 
clarifications of the provisions published in the previous rule, and 
provide the public with the opportunity to comment on these proposals.

B. Summary of the Provisions of the December 24, 2003 Final Rule

    The December 24, 2003 final rule addressed comments received on the 
February 28, 2000 proposed rule, and finalized policies regarding RHC 
and federally qualified health center (FQHC) payment and participation 
in the Medicare program. It established: (1) Criteria and a process to 
decertify RHCs which no longer serve rural or medically underserved 
areas (MUAs), as required by the BBA; (2) a policy that would have 
prohibited the commingling of RHC resources with another entity's 
resources; and (3) a requirement that RHCs establish a quality 
assessment and performance improvement (QAPI) program.
    The December 24, 2003 final rule also updated payment policies and 
regulations to conform to statutory requirements of the Omnibus Budget 
Reconciliation Acts (OBRA) '86, '87, '89, and '90 and the MMA.
    For the reasons specified in section I.A. of this proposed rule, 
these provisions have been suspended.

C. Origin of the RHC/FQHC Programs

    The Rural Health Clinic Services Act of 1977 (Pub. L. 95-210) 
enacted on December 13, 1977, amended the Act by adding section 
1861(aa) of the Act to extend Medicare and Medicaid entitlement and 
payment for primary and emergency care services furnished at an RHC by 
physicians and certain ``nonphysician practitioners,'' and for services 
and supplies incidental to their services. ``Nonphysician 
practitioners'' included nurse practitioners (NPs) and physician 
assistants (PAs). (Subsequent legislation extended the definition of 
covered RHC services to include the services of clinical psychologists 
(CPs), clinical social workers (CSWs), and certified nurse-midwives 
(CNMs).)
    According to House Report No. 95-548(I), the purpose of the Rural 
Health Clinic Services Act was to address an inadequate supply of 
physicians serving Medicare beneficiaries and Medicaid recipients in 
rural areas. The legislation addressed this problem by authorizing CMS 
and States to pay qualifying clinics on a cost-related basis for 
providing Medicare beneficiaries and Medicaid recipients, respectively, 
with outpatient physician and certain nonphysician services. (The 
Medicare payment provisions for RHCs are in sections 1833(a)(3) and 
1833(f) of the Act and in regulations at Sec.  405.2462 through Sec.  
405.2468.) Payment to RHCs for services furnished to beneficiaries is

[[Page 36698]]

made on the basis of an all-inclusive payment methodology subject to a 
maximum payment per-visit and annual reconciliation.
    Qualifying clinics, among other criteria, must be located in an 
area that is determined to be nonurbanized by the U.S. Census Bureau. 
The clinic also must be located in an area designated as a shortage 
area either by the Health Resources and Services Administration (HRSA) 
or by the chief executive officer of the State and certified by the 
Secretary, Department of Health and Human Services (HHS). (See section 
1861(aa)(2) of the Act, following subparagraph (K).)
    Qualifying clinics also must employ a PA or NP and, to meet 
requirements of the OBRA '89, must have a NP, a PA, or a CNM available 
to furnish patient care services at least 5.0 percent of the time the 
RHC operates.
    The FQHC Medicare coverage and payment benefit was provided for in 
OBRA '90, Public Law 101-508, enacted on November 5, 1990, and 
implemented in the Federal Register (57 FR 24961) on June 12, 1992. On 
April 3, 1996, we published a final regulation (61 FR 14640) that 
addressed the issues raised by commenters on the June 1992 rule.
    OBRA '90 defines an FQHC as an entity that is receiving a grant 
under section 329, section 330, or section 340 of the Public Health 
Service Act (PHS). The definition of an FQHC was expanded by section 
13556(a)(3) of OBRA '93 (Pub. L. 103-66) enacted on August 10, 1993, 
effective as if included in OBRA '90 on October 1, 1991. The expanded 
definition included outpatient programs or facilities operated by a 
tribal organization under the Indian Self-Determination Act, or by an 
urban Indian organization receiving funds under Title V of the Indian 
Health Care Improvement Act.
    The FQHC scope of benefits for core services is similar to the RHC 
benefit, that is, physician, nonphysician practitioner, and mental 
health professional services. The FQHC benefit also includes a number 
of preventive services.
    Each FQHC is reimbursed its reasonable costs based on an all-
inclusive per-visit methodology subject to tests of reasonableness, and 
is subject to an overall payment limit similar to RHCs. The national 
FQHC payment limit is based on the costs of providing primary care 
physician and prevention services. For FQHC services, there are two 
upper payment limits: One limit is for centers located in urban areas 
and the other is for centers located in rural areas.

D. Growth of the RHC Program

    The RHC program has grown from less than 1,000 Medicare-approved 
RHCs in 1992 to more than 3,700 in 2008. However, since 2001, growth in 
the program has leveled off. While part of this increase has improved 
access to primary care services in rural areas for Medicare 
beneficiaries and Medicaid recipients, there are instances in which 
these additional RHCs have not expanded access.
1. Continuing Participation
    A significant factor in the growth of RHCs stems from the original 
(pre-BBA) RHC legislation, which included a ``grandfather clause'' to 
promote the development of RHCs. (See section 1(e) of the Health Clinic 
Services Act of 1977 (Pub. L. 95-210) enacted December 13, 1977, 42 
U.S.C. 1395x note. Also see Sec.  491.5(b)(2) of the regulations.) 
Section 1861(aa)(2) of the Act stated that any RHC that subsequently 
failed to satisfy the requirements pertaining to the rural and 
underserved location requirement still would be deemed to have 
satisfied the requirement of that clause.
    These provisions protected the clinics' RHC status regardless of 
any changes to the rural or underserved status of the service areas. It 
allowed clinics to remain in the RHC program even though the service 
areas no longer were considered rural or medically underserved.
    The Congress established these protections 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. 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 clause provision was an appropriate policy 
at the time, we now have RHC participation in some service areas with 
extensive health care delivery systems that provide adequate access to 
primary care for Medicare beneficiaries and Medicaid recipients. Both 
the Government Accountability Office (GAO) and the HHS Office of the 
Inspector General (OIG) 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. In section 4205(d)(3) of the 
BBA, the Congress responded to these recommendations by amending the 
grandfather clause provision to provide protection only to clinics 
essential to the delivery of primary care in the respective service 
area.
2. Medically Underserved/Shortage Area Designations
    Another reason for the continued growth of the RHC program was that 
two of the types of shortage area designations that are used for RHC 
certification, the medically underserved area (MUA) and the Governor-
Designated Secretary-Certified Shortage Area (GDSC) designations, did 
not have a statutory requirement for regular review and were not 
reviewed systematically and updated after their initial designation. As 
a result, some RHCs are in areas that no longer would be designated as 
underserved if reviewed with current data. In response, the Congress 
amended the legislation in section 4205(d) of the BBA by requiring that 
only those clinics located in shortage areas that were designated or 
updated within the previous 3 years would qualify for purposes of the 
RHC program.
3. Expansion of Eligible Designations for RHC Certification
    Section 6213 of OBRA '89 amended section 1861(aa)(2) of the 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 (MUAs)) 
and those designated as geographic health professional shortage areas 
(HPSAs) under section 332(a)(1)(A) of the PHS Act. The OBRA '89 
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. However, later, the Health Centers Consolidation Act 
of 1996 (Pub. L. 104-299) renumbered section 329 of the PHS Act and 
repealed the requirement for designation of high impact migrant areas.
4. Commingling
    The growth of RHCs may have also been stimulated by the practice of

[[Page 36699]]

``commingling.'' The term ``commingling'' is used to describe the 
sharing of RHC space, staff, supplies, records, or other resources with 
a private Medicare practice or other entity operated by the same 
physician and nonphysician practitioners working for the RHC, during 
RHC hours of operation. We recognize that providing care in rural areas 
that have limited infrastructure and providers requires the 
coordination of scarce resources, and permit the sharing of resources 
in certain situations. In some of these situations, however, it is 
believed that commingling has been used to maximize Medicare payment by 
obtaining RHC status for an integrated practice that submits both RHC 
and non-RHC Medicare claims.

E. Government Reports on RHCs

    The GAO report, ``Rural Health Clinics: Rising Program Expenditures 
Not Focused on Improving Care in Isolated Areas'' (GAO/HHS-97-24, 
November 22, 1996), and the HHS/IG report ``Rural Health Clinics: 
Growth, Access and Payment'' (OEI-05-94-00040, July 1996), both 
concluded that the growth of RHCs is not proportional to community need 
and that many RHCs no longer require cost-based reimbursement as a 
payment incentive. 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, critical access hospital (CAH), 
skilled nursing facility (SNF), or home health agency (HHA), and is 
operated with other departments of the provider under common 
governance, professional supervision, and usually licensure. All other 
RHCs are considered to be independent.)
    In August 2005, the OIG issued a followup report, ``Status of the 
Rural Health Clinic Program'' (OEI-05-03-00170), which recommended that 
HRSA review shortage designations within the requisite 3-year period 
and publish regulations to revise its shortage designation criteria. 
The report also suggested that CMS issue regulations to: (1) Ensure 
that RHCs determined to be essential providers remain certified as 
RHCs; and (2) require prospective RHCs to document need on access to 
health care in rural underserved areas.

II. Provisions of This Proposed Rule

A. RHC Location Requirements and Exceptions

1. RHC Location Requirements
    In sections 4205(d)(1) and (2) of the BBA, the Congress amended 
section 1861(aa)(2) of the Act. As revised, the statute states that 
RHCs may include only a facility which is located in: (1) A 
nonurbanized area, as defined by the U.S. Census Bureau; (2) an area in 
which there are an insufficient number of needed health care 
practitioners as determined by the Secretary; and (3) an area that has 
been designated or certified by the Secretary within the previous 3 
years as having an insufficient number of needed health care 
practitioners.
    Section 4205(d)(3)(A) of the BBA, which amended the third sentence 
of section 1861(aa)(2) of the Act, revised the ``grandfather clause'' 
that permitted an exception to the termination of RHC status for a 
clinic located in an area that is no longer a rural area or a shortage 
area. This revision specified that an exception was available only if 
the RHC was 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 CMS to issue by 
January 1, 1999. The BBA requirement that every RHC must have a current 
shortage area designation (made or updated within the previous 3-year 
period), has been implemented for new RHCs through administrative 
instructions.
    To determine if a facility is in a nonurbanized area, we propose 
that the most recently available U.S. Census Bureau list of Urbanized 
Areas (UA) be used. An area that is not in a UA would be considered a 
nonurbanized area. Information on whether an area is urbanized can be 
found at http://factfinder.census.gov or by contacting the appropriate 
CMS Regional Office (RO) at http://www.cms.hhs.gov/RegionalOffices.
    To determine if a facility is in an area that has a current 
designation as an underserved or shortage area, the most current HRSA 
list of these designations would be used. Information on designation 
status, including the date of the most recent designation or update, is 
available on the HRSA Web site at http://hpsafind.hrsa.gov/ and http://
muafind.hrsa.gov or by contacting the appropriate CMS RO.
    Health professional shortage area (HPSA) and MUA designations 
establish initial eligibility for Federal and State programs to improve 
access to health care services. They are based on established criteria 
(42 CFR part 5) to identify geographic areas or population groups with 
a shortage of primary health care services. HPSA designations are based 
primarily on the population to provider ratio in a defined service 
area. MUA designations utilize an Index of Medical Underserviced which 
calculates a score for each area based on a weighted combination of the 
ratio of primary medical care physicians per 1,000 population, infant 
mortality rate, percentage of the population with incomes below the 
poverty level, and percentage of the population age 65 or over.

    (Note: HRSA has proposed a revision of the methodology used for 
determining HPSA and MUA designations. If necessary, this 
description of the designations will be updated in the final rule. 
Any change that HRSA makes to the methodology used to determine 
designations will not alter the requirements for the RHC program.)

    Any of the following types of designations are acceptable for the 
purpose of RHC certification and compliance with this proposed 
requirement:
     Geographic Primary Care HPSAs (section 332(a)(1)(A) of the 
PHS Act)
     Population-group Primary Care HPSAs (section 332(a)(1)(B) 
of the PHS Act)
     MUAs (This does not include population group Medically 
Underserved Population designations) (Section 330(b)(3) of the PHS Act)
     Governor-designated and Secretary-certified shortage 
areas. (section 6213(c) of OBRA '89 (Pub. L. 101-239))
    In section 302(a)(1)(A) of the Health Care Safety Amendments of 
2002 (Pub. L. 107-251, October 26, 2002), the Congress amended section 
332 of the PHS Act to create a new type of HPSA designation for FQHCs 
and RHCs referred to as an ``automatic'' HPSA designation. This type of 
designation is available to any RHC or FQHC irrespective of its 
physical location that utilizes sliding scale fees consistent with 
section 330 of the PHS Act for the purpose of National Health Service 
Corps eligibility. Facilities with these automatic HPSA designations 
are sometimes referred to as ``safety net facilities.'' However, we are 
proposing not to include the automatic HPSA designations as an eligible 
shortage area for purposes of Medicare qualifications as an RHC. 
Section 1861(aa)(2) of the Act specifically requires RHCs to be located 
in one of four specified designation types in which the Secretary has 
determined that there are

[[Page 36700]]

insufficient numbers of needed practitioners. Consequently, we would 
not recognize automatic HPSA designations for purposes of RHC 
certification or protecting a currently participating clinic from RHC 
decertification.
    New and existing RHCs would have to be in a rural area that is 
currently designated as one of the four types of shortage areas listed 
previously. A designation is considered current for not more than 3 
years after the date of the original designation or the date of the 
most recent update to the designation. An existing RHC that no longer 
meets would not be decertified based on the loss of its shortage area 
designation if: (1) A complete designation application has been 
received by HRSA before the end of the 3-year period since the shortage 
area designation date or most recent update; or (2) we have determined 
that the RHC is an essential provider. If either of these conditions is 
not met, the clinic would be terminated from participation in the 
Medicare program as an RHC 180 days after the date that the RHC no 
longer meets the location requirements, effective the last day of the 
month. States are encouraged to submit designation applications and 
updates to HRSA in a timely manner and may apply or reapply for a 
designation at any time.
2. Essential Provider Requirements
    The RHC program was established for the purpose of improving and 
maintaining access to primary care for rural underserved communities. 
RHCs that apply to CMS for an exception to the location requirements 
must be able to show that they satisfy this program objective.
    In accordance with section 1861(aa)(2) of the Act, an existing RHC 
may be considered essential to the delivery of primary care (a so-
called ``essential provider'') if the care otherwise would be 
unavailable in the geographic area served by the clinic. The Secretary 
is directed by the Act to set the criteria by which ``essential 
provider'' status is to be determined. The Secretary has determined 
that an RHC may be considered an essential provider and be granted an 
exception to the location requirements if the clinic is no longer in a 
nonurbanized area or it is no longer in a currently designated shortage 
area, and it meets the criteria of an essential provider. An RHC that 
is neither in a rural area nor a designated area would not be 
considered an essential provider. Proposed criteria for essential 
provider status were published in the February 2000 proposed rule and 
have been revised based on comments that were received and other 
relevant information.
    Under this authority, we are proposing the following requirements 
for essential provider status:
    If an RHC is located in an area that has been classified as a UA by 
the U.S. Census Bureau, it would have to be in a level 4 or higher 
Rural Urban Commuting Area (RUCA) to assure that it is in a rural area. 
Under section 330A of the PHS Act, HRSA's Office of Rural Health Policy 
determines eligibility for its rural grant programs through the use of 
the RUCA code methodology. Under this methodology, any census tract 
that is in a RUCA level 4 or higher is determined to be a rural census 
tract. For the purposes of an exception to the RHC nonurbanized area 
location requirement, we would use the RUCA level 4 as the minimum 
level of rurality to meet this requirement.
    Additionally, an RHC that is located in an area that has been 
classified as a UA by the U.S. Census Bureau would have to demonstrate 
that at least 51 percent of its patients reside in an adjacent nonurban 
area in order to be considered essential for the purposes of an 
exception to the location requirements. We prefer to give RHCs 
flexibility in establishing that at least 51 percent of their patients 
reside in an adjacent nonurban area; however, this could generally 
include the identification of the nonurban area(s) and a retrospective 
review of patient visits to determine residence, or other factors to 
support that the requirement has been met.
3. Location Exception Criteria
    We are proposing to revise Sec.  491.5 to specify that an RHC that 
meets the previously stated requirements may apply for an exception if 
it meets any one of the following criteria:
     Sole Community Provider (proposed Sec.  491.5(c)(1)): The 
RHC is the only participating primary care provider that meets either 
of the following requirements:
    ++ The RHC is at least 25 miles from the nearest participating 
primary care provider; or
    ++ The RHC is at least 15 miles but less than 25 miles from the 
nearest participating primary care provider and can demonstrate that it 
is more than 30 minutes from the nearest primary care provider based on 
local topography, predictable weather conditions, or posted speed 
limits. (These criteria are based on the criteria established for sole 
community hospitals in Sec.  412.92.) For purposes of this exception, a 
participating primary care provider would mean another RHC, FQHC, or 
primary care provider that is actively accepting and treating Medicare 
beneficiaries, Medicaid recipients, low-income patients, and the 
uninsured (regardless of their ability to pay).
     Major Community Provider (proposed Sec.  491.5 (c)(2)): 
The RHC meets the following requirements:
    ++ Has a Medicare, Medicaid, low-income, and uninsured patient 
utilization rate greater than or equal to 51 percent, or a low-income 
patient utilization rate greater than or equal to 31 percent; and
    ++ Is actively accepting and treating a major share of Medicare, 
Medicaid, low-income and uninsured patients (regardless of their 
ability to pay) compared to other participating primary care providers 
that are within 25 miles of the RHC.
     Specialty Clinic: Obstetrics/Gynecology (Ob/Gyn) or 
Pediatrics (proposed Sec.  491.5(c)(3)): The RHC meets the following 
requirements:
    ++ Exclusively provides ob/gyn or pediatric health services (as 
applicable).
    ++ Is the sole or major source of ob/gyn or pediatrics for Medicare 
(where applicable), Medicaid, and uninsured patients (regardless of 
their ability to pay) and is either of the following:

--At least 25 miles from the nearest participating provider of ob/gyn 
or pediatric services.
--At least 15 miles but less than 25 miles from the nearest 
participating provider of ob/gyn or pediatric services, and can 
demonstrate that it is more than 30 minutes from the nearest 
participating primary care provider providing these services based on 
local topography, predictable weather conditions, or posted speed 
limits.

    ++ Is actively accepting and treating Medicare, Medicaid, low-
income, and uninsured patients.
    ++ Has a Medicare, Medicaid, low-income patient and uninsured 
utilization rate greater than or equal to 31 percent.
    ++ Provides ob/gyn (including prenatal care) or pediatric services 
onsite to clinic patients.
     Extremely Rural Community Provider (Proposed Sec.  
491.5(c)(4)): The RHC meets the following requirements:
    ++ Is actively accepting and treating Medicare, Medicaid, low-
income, and uninsured patients (regardless of their ability to pay).
    ++ Is located in a frontier county (a county with 6 or less persons 
per square mile) or in census tract or zip code with a RUCA code 10.
    In the December 2003 final rule, we included RHC's that are mental 
health

[[Page 36701]]

specialty clinics as an acceptable category for an exception to the 
location requirements. However, section 1861(aa)(2)(iv) of the Act 
prohibits RHC status from being applied to clinics which are 
``primarily for the care and treatment of mental diseases.'' We 
interpret ``primarily'' to mean that mental health services provided by 
the RHC cannot constitute more than 50 percent of the total services 
provided by the RHC.
    In order to assure that the regulation and statue are consistent, 
we are asking for comments on--(1) whether it is appropriate to allow 
an exception to the location requirements for RHCs based on the 
provision of mental health services in light of the fact that RHC 
status cannot be granted to a facility providing more than 50 percent 
of its total services in mental health; and (2) if so, what should be 
the minimum level of mental health services provided in order to 
qualify for an exception. This would apply only to existing an RHC that 
no longer meet the location requirements, either because it is no 
longer in a non-urbanized area, or because it is no longer designated 
by HRSA as an underserved or shortage area. Existing RHCs that are in 
compliance with the location requirements may continue to provide 
mental health services as long as the mental health services provided 
do not exceed 50 percent of the total clinic services.
4. Process for Essential Provider Status and Timeline
    An RHC that is located in (a) an area that has not been designated 
or its designation was not been updated for more than 3 years, or (b) 
an urbanized area that is defined by the Census Bureau, would have 90 
calendar days from the effective date of the final rule to apply to CMS 
RO for an exception to the location requirement. The RHC may continue 
to operate as an RHC for an additional 90 days, for a total of 180 
calendar days after the end of the 3-year period. To assist with the 
cost reporting and payment reconciliation process, decertification 
would be effective on the last day of the month in which the 180-day 
limit was met.
    An RHC would have 180 days after the date that it does not meet the 
location requirements to continue operating as an RHC. We expect that 
most RHCs that do not meet the location requirements would want to know 
as soon as possible if they would receive an exception to the location 
requirements and would want as much time as possible to make other 
arrangement for the provision of services after the 180 days, so it is 
in the interest of the RHC to apply for an exception to the location 
requirements as soon as possible.
    An RHC which is located in an area which has been found by HRSA to 
no longer qualify for one of the 4 types of eligible designations would 
have 90 calendar days from the date HRSA determined that the area no 
longer qualified for one of the eligible designations to apply to CMS 
RO for an exception from decertification. This would include 
designations that are proposed for withdrawal, as well as areas whose 
designations type has changed to one that does not meet the RHC 
criteria.
    For example, if HRSA determines on April 1, 2009, that the area no 
longer qualifies for one of the designations required for RHC purposes, 
the RHC would have until June 30, 2009 to submit an application to the 
appropriate RO for a location exception, and would be protected until 
September 30, 2009 from decertification based on not meeting the 
location requirements.
    An RHC which is located in an area whose designation has not been 
updated in a timely manner and which does not apply for a location 
exception may continue to operate as an RHC for 180 calendar days after 
the 3 years from the date of the last designation, effective the last 
day of the month.
    An RHC may be decertified 180 days after the 3-year date of the 
area's designation if it does not provide a complete application for a 
location exception within 90 days from the date it no longer meets the 
location requirements, or if the application for a location exception 
is not approved. In rare circumstances, the RO may request an extension 
from the CMS Central Office if it has not been possible to process the 
location exception request before the RHC would be decertified.
    For example, (see accompanying sample timeline) if an area was 
designated (either a new designation or an update) on January 2, 2006 
(1 on sample timeline), the designation would be considered 
valid for RHC purposes for 3 years, which would be January 2, 2009 
(2). If an application to update the designation is submitted 
to HRSA by January 2, 2009 (3), the RHC would be protected 
from decertification while the HPSA application is under review 
(3.1). If the area qualifies as a HPSA and is updated 
(3.2), then no further action would be needed for purposes of 
the RHC designation for 3 years from the date of the designation update 
(3.3). If a HPSA application is submitted by January 2, 2009 
(3), but is determined to not qualify as a HPSA 
(3.1.1), then the RHC would have 90 days from the date of that 
determination to submit an application for an exception 
(3.1.2).
    If an application to update the designation is not submitted to 
HRSA by January 2, 2009 (4), the RHC would have until April 3, 
2009 (4.1), to submit an application for a location exception. 
If the RHC does not submit an application for a location exception to 
CMS by April 3, 2009 (4.2), it would be decertified on July 
31, 2009 (4.3). (Decertification is effective the final day of 
the month.)
    An RHC that submits an application for a location exception would 
be protected from decertification while the application is under review 
(5). If the application is approved (5.1), then no 
further action would be needed for purposes of the RHC recertification 
for 3 years from the date of the exception (5.1.1). If the 
application is not approved (5.2), the RHC would be 
decertified 90 days from the date of notification that the application 
was not approved (5.2.1).
    The process to appeal a denial of certification is described in 
Sec.  498.3(b)(5). For the purpose of an appeal, RHCs and FQHCs are 
considered suppliers, not providers.
    In the December 24, 2003 final rule, we stated that an RHC would 
have 120 days from the date of notification that it was no longer in a 
designated area and therefore not compliant with the RHC requirements 
to submit an application to update its MUA or HPSA designation. 
Although HRSA regulations do not preclude RHCs from submitting a 
designation application, it is usually the State not the RHC that 
submits the designation application. The State should not wait until a 
designation is more than 3 years old to prepare and submit an update 
for RHC purposes. As noted previously, an existing RHC is protected 
from decertification based on its designation status as long as an 
application has been submitted for an updated designation. We encourage 
RHC to work with the applicable State Primary Care Office to assure 
that any necessary information is provided to HRSA in a timely manner. 
A list of the State Primary Care Offices is available online at http://
hrsa.gov/grants and then by selecting ``HRSA Grantees by Program or 
State'' and then by selecting ``State Primary Care Offices'', or by 
contacting the State's Department of Health.
    An RHC that chooses to apply for an exception to the location 
requirements would send its application with the necessary 
documentation to the appropriate RO. An RHC that applied for an 
exception would not be

[[Page 36702]]

disqualified as an RHC based on not meeting the location requirements 
while its application is under review. If approved, the exception would 
be for a period of 3 years. Every 3 years, an RHC may reapply for an 
exception to the location requirements to continue its RHC eligibility.
    Some provider-based RHCs that do not meet the location requirements 
and do not qualify for an exception may want to continue to operate as 
another type of Medicare provider. In some cases, these entities will 
need to go through the standard Medicare application process, which 
includes an application and, for entities wishing to enroll as a 
``provider of services'' under 1861(u), a state survey. We have been 
informed that the waiting time for a state survey can be several 
months, so we are proposing that provider-based RHCs that do not meet 
the location requirements and do not qualify for an exception and have 
submitted an application to CMS to be another type of Medicare provider 
that requires a State survey for certification may receive an 
additional 120-day extension of their status as an RHCs while their 
application is being processed.
    We propose to revise Sec.  491.2 to redefine ``shortage areas'' as 
geographic and population group HPSAs, MUAs, and areas designated by 
the Governor of the State and certified by the Secretary.
    We propose to amend Sec.  491.3 as follows by adding paragraphs 
(a)(1) through (a)(3) to specify general certification requirements, 
and (b)(1) to specify permanent and mobile unit requirements.
    We propose to amend Sec.  491.5 as follows:
     Adding paragraphs (a)(1) through (a)(3) to specify the 
location requirements for RHCs and FQHCs.
     Adding paragraph (a)(4) to specify when a clinic would be 
terminated from the RHC program.
     Adding paragraphs (a)(5) and (a)(6) to specify the 
requirements for being considered an essential provider.
     Adding paragraph (a)(7) to specify the time period for a 
clinic's essential provider status.
     Adding paragraph (a)(8) to specify the time period that a 
decertified RHC may continue to operate.
     Adding paragraph (a)(9) to specify that conditions for an 
extension of RHC status when the location requirements are not met and 
the clinic does not qualify for an exception.
     Adding paragraphs (b)(1) through (b)(4) to specify the 
criteria for an exception from the location requirements.
     Adding paragraphs (c)(1) and (c)(2) to specify the 
conditions for termination.
     Adding paragraphs (d)(1) through (d)(8) to set forth the 
circumstances and timeline for submitting a request for an exception to 
the location requirements.
BILLING CODE 4120-01-P

[[Page 36703]]

[GRAPHIC] [TIFF OMITTED] TP27JN08.006

BILLING CODE 41210-01-C

[[Page 36704]]

B. Staffing Requirements, Waivers, and Contracts

1. Staffing Requirements
    One of the goals of the RHC program is to encourage the use of 
nonphysician practitioners to provide quality health care in rural 
areas. We propose to amend Sec.  491.8(a)(6) to conform with section 
6213(a)(3) of OBRA '89 (Pub. L. 101-239) which requires that an NP, PA, 
or CNM be available to furnish patient care at least 50 percent of the 
time the RHC operates. An RHC that opens its premises solely to address 
administrative matters or to allow patients shelter from inclement 
weather would not be considered to be in operation as an RHC during 
that period.
2. Temporary Staffing Waivers
    We propose to amend Sec.  491.8(d) to conform with section 
1861(aa)(7) of the Act, which authorizes us to grant a 1-year waiver of 
staffing requirements for nonphysician primary care providers (NPs, 
PAs, or CNMs) upon request from the RHC. The requesting RHC would have 
to demonstrate that it made a good faith effort to recruit and retain 
an adequate number of nonphysician primary care providers, and that it 
has been unable in the 90-day period prior to the request to hire one 
of these providers to meet the staffing requirement. This could include 
activities such as advertising in a newspaper, advertising in a 
professional journal, conducting outreach to an NP, PA, or CNM school, 
or other activities that would demonstrate a good faith effort to 
recruit and retain a nonphysician primary care provider. In accordance 
with section 1861(aa)(7)(B) of the Act, this waiver would be available 
only to existing RHCs that meet the nonphysician primary care 
requirement before seeking the waiver.
    Section 1861(aa)(7) of the Act also specifies that an additional 
waiver cannot be granted until a minimum of 6 months has passed since 
the expiration of the previous waiver.
    We are proposing that an RHC that has not complied with staffing 
requirements for one or more nonphysician primary care providers and 
has not submitted a request for a waiver of this requirement would be 
decertified from the RHC program. The decertification would be 
mandatory, since the noncompliant facility would fail to meet the 
statutory definition of an RHC. An RHC that has submitted a waiver 
request would not be decertified based on this requirement while its 
request was under review. A waiver would be deemed granted after 60 
days, unless written notification is provided that the request has been 
denied. An RHC that is decertified from the RHC program due to failure 
to meet the staffing requirements would no longer be eligible to 
operate as an RHC. However, the RHC could apply to become a physician-
directed clinic, group practice, or a group of individual practitioners 
who would then bill Medicare using the Part B fee-for-service system.
3. Contractual Arrangements
    Due to the difficulty in recruiting and retaining physicians in 
rural areas, RHCs have had the option of hiring physicians either as 
RHC employees or as contractors. However, in order to promote stability 
and continuity of care, the Rural Health Clinic Services Act of 1977 
required RHCs to ``employ a physician assistant or nurse practitioner'' 
(section 1861(aa)(2)(iii) of the Act). We note that the term 
``employee'' is defined in section 3121(d)(2) of the Internal Revenue 
Code of 1986 and is usually evidence by the employer's provision of a 
W-2 form to the employee. Our current regulations at Sec.  
405.2468(b)(1) state that `` * * * (RHCs are not paid for services 
furnished by contracted individuals other than physicians).''
    In the more than 30 years since this legislation was enacted, the 
health care environment has changed dramatically, and RHCs have 
requested that they be allowed to enter into contractual agreements 
with PAs and NPs as well as physicians. To provide RHCs with greater 
flexibility in meeting their staffing requirements, we propose to 
revise Sec.  405.2468(b)(1) by removing the parenthetical ``RHCs are 
not paid for services furnished by contracted individuals other than 
physicians.'' Also, we propose to revise Sec.  491.8(a)(3) to state 
that nonphysician practitioners may furnish services under contract to 
an RHC within the statutory limits.
    RHCs would still be required, under section 1861(aa)(2)(iii) of the 
Act, to employ a PA or NP. However, as long as there is at least one PA 
or NP employed at all times (subject to the waiver provision set forth 
at section 1861(aa)(7) of the Act), an RHC would be free to enter into 
employment contracts with other PAs, NPs, or other nonphysician staff.
    FQHCs already have the option to contract with PAs and NPs. 
Authority to allow contracting for clinical services is provided for in 
the PHS Act. The authority to allow Medicare participating FQHCs to 
contract with any necessary health professional for the purpose of 
treating their patients is further clarified by section 5114 of the 
Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) which amended 
section 1842(b)(6) of the Act to require consolidated billing of 
contracted professional services by adding new subsection (H) with the 
following language: ``in the case of services described in section 
1861(aa)(3) of the Act that are furnished by a health care professional 
under contract with a Federally qualified health center, payment shall 
be made to the center.'' Similar language regarding contracted medical 
professionals was also added to section 1861(aa)(3) of the Act. FQHCs 
and RHCs also have authority to claim the costs of such contracted 
practitioners' services on the Medicare cost report to receive Medicare 
payment.
    A practitioner providing services under contract to the RHC or FQHC 
should have a signed contract that includes his or her responsibilities 
and requirements. All practitioners should be familiar with the clinic 
or center's policies and procedures, and comply with the staffing 
requirements in Sec.  491.8. Practitioners should be employed or 
contracted to the RHC in a manner that enhances continuity and quality 
of care.
    We propose to remove the parenthetical statement at Sec.  
405.2468(b)(1) which states that RHCs are not paid for services 
furnished by contracted individuals other than physicians. We also 
propose to revise Sec.  491.8(a)(3) to state that nonphysician 
practitioners may furnish services under contract to an RHC.

C. Payment Issues

1. Payment Methodology for RHCs and FQHCs
    Payment to RHCs and FQHCs for covered services furnished to 
Medicare beneficiaries is made on the basis of an all-inclusive rate 
per visit, subject to a payment limit. The Medicare Administrative 
Contractor (MAC) or FI determines the all-inclusive rate in accordance 
with this subpart and instructions issued by CMS.
    With the exception of services provided under Medicare Advantage 
plans to RHCs and FQHCs, the statutory payment requirements for RHC and 
FQHC services are set forth at section 1833(a)(3) of the Act, (as 
amended by the MMA), which states that RHCs and FQHCs are paid 
reasonable costs ``* * * less the amount a provider may charge as 
described in clause of section 1866(a)(2)(A), but in no case may the 
payment exceed 80 percent of such costs[.]'' The beneficiary is 
responsible for the Medicare Part B deductible

[[Page 36705]]

(except for services provided in FQHCs, where there is no Part B 
deductible) and coinsurance amounts. Section 1866(a)(2)(A)(ii) of the 
Act and implementing regulations at Sec.  405.2410(b) establish 
beneficiary coinsurance at an amount not to exceed 20 percent of the 
clinic's reasonable charges for covered services.
    Section 237(c) of the MMA which pertains to cost sharing permitted 
under MA organizations, revised section 1857(e) of the Act. These 
changes were addressed in Sec.  405.2469 as part of the CY 2006 
Physician Fee Schedule final rule with comment period (70 FR 70116).
    In general, the statutory payment methodology requires that except 
for services provided under MA plans to FQHCs in accordance with 
section 1833(a)(3)(B) of the Act, RHCs and FQHCs subtract beneficiary 
coinsurance and deductible amounts, as applicable (based on reasonable 
charges) from reasonable costs to determine the Medicare payment. The 
statute further stipulates that Medicare reimbursement may not exceed 
80 percent of reasonable costs.
    Until now, Medicare has been paying RHCs and FQHCs 80 percent of 
the facility's reasonable costs, regardless of deductible and 
coinsurance amounts billed to Medicare beneficiaries. This allowed RHCs 
and FQHCs to receive, in some instances, payment in excess of 100 
percent of reasonable costs.
    Therefore, to conform existing regulations to the statutory payment 
methodology described above, we propose to revise Sec.  405.2410 and 
Sec.  405.2466(b)(1)(iii) by stipulating that, except for services 
provided under MA plans to FQHCs, Medicare payment is equal to 
reasonable costs less aggregate coinsurance and deductible amounts 
billed, but in no case may total Medicare payment exceed 80 percent of 
reasonable costs.

    Note: Payment for the outpatient treatment of mental, 
psychoneurotic, or personality disorders is subject to the 
limitations on payment in Sec.  410.155

).2. Exceptions to the Per Visit Payment Limit
    Prior to 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 FI in accordance 
with our regulations at 42 CFR 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 
42 CFR part 405, subpart X. Payment to independent RHCs also was 
subject to a maximum payment per visit as set forth in section 1833(f) 
of the Act.
    Section 4205(a) of the BBA amended section 1833(f) of the Act. 
Under the BBA, the independent RHC all-inclusive payment methodology 
and payment limit were applied to provider-based RHCs. This BBA 
provision also provided an exception to the RHC payment limit for those 
RHCs based in small, rural hospitals to help them remain financially 
viable.
    Section 224 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) enacted 
on December 21, 2000, expanded to RHCs based in small, urban hospitals 
the eligibility criteria for receiving an exception to the RHC payment 
limit, effective July 1, 2001. This was implemented through a program 
memorandum on December 6, 2001.
    If an RHC is an integral and subordinate part of a hospital, it can 
receive an exception to the per visit payment limit if the hospital has 
fewer than 50 beds as determined by using one of the following methods:
     The determination of the number of beds at Sec.  
412.105(b); or
     The hospital's average daily patient census count of those 
beds described in Sec.  412.105(b), and the hospital meets all of the 
following conditions:
    ++ It is a sole community hospital as determined in accordance with 
Sec.  412.92 or Sec.  412.109(a).
    ++ It is located in a level 9 or 10 RUCA.
    ++ It has an average daily patient census that does not exceed 40.
    The December 24, 2003 final RHC rule used the 1993 Urban Influence 
Codes (UICs), then a 9-category measure developed by the U.S. 
Department of Agriculture (USDA), to identify hospitals which are 
located in sparsely populated rural areas. Hospitals with a level 8 or 
9-level UIC and which have an average daily census of less than 50 
patients would qualify for an exception to the RHC per visit payment 
limit. The USDA has since changed the UICs to a 12-category measure, 
with levels 9 through 12 comparable to the 1993 levels 8 and 9.
    The UICs are a county-level measurement. Since many counties 
encompass large geographical areas with significant variations in 
population density, demographics, economics, and health care services, 
the UICs do not always provide an accurate assessment of a local area's 
degree of rurality.
    The RUCA system is another method for identifying rural areas. RUCA 
codes classify U.S. census tracts using measures of population density, 
urbanization, and daily commuting. This classification uses 10 numbers 
with subdivisions to reflect commuting flows.
    RUCAs are used by CMS for purposes of determining rurality in the 
hospital and ambulance payment systems. To target the needs of rural 
populations more accurately and to be consistent with other CMS 
programs, we propose to utilize the RUCA methodology instead of the UIC 
methodology. We also propose that RUCA codes 9 and 10 be used for the 
purpose of approving an exception to the per visit payment limit.
    We propose to amend Sec.  405.2462 to provide payment to all RHCs 
and FQHCs on the basis of an all-inclusive rate per visit, subject to 
the per-visit payment limit. For a hospital-based RHC that is the 
primary source of health care in its rural community as defined at 
Sec.  412.92(a) or Sec.  412.109(a), we propose to utilize the 
hospital's average daily census rather than bed count in determining 
whether RHC services are subject to the per-visit payment limit. We 
also propose to utilize RUCAs 9 and 10 to determine eligibility for an 
exception to the per visit payment limit.
3. Commingling
    Commingling refers to the sharing of RHC space, staff (employees or 
contractors), supplies, records, and other resources with an onsite 
Medicare Part B or Medicaid fee-for-service practice operated by the 
same RHC physician(s) or nonphysician practitioner(s) or both. 
Commingling is prohibited when it results in duplicate Medicare or 
Medicaid reimbursement, either due to the inability of the RHC to 
distinguish its actual costs from those that are reimbursed on a fee-
for-service basis, or due to other reasons.
    An RHC and a Medicare fee-for-service practice may not operate 
simultaneously in order to prohibit these shared practices from 
selecting patient encounters for enhanced Medicare Part B billing.
    However, an RHC that is part of a multipurpose clinic may house 
other entities (such as private medical practices, x-ray and lab 
clinics, dental clinics, emergency room) in the non-RHC space. The 
entities occupying the non-RHC space may bill the assigned Medicare 
Administrative Contractor (MAC), Fiscal Intermediary (FI), or carrier 
as appropriate; authority is delegated to the MAC, FI, or carrier to

[[Page 36706]]

determine acceptable accounting methods for allocation of staff costs 
between the RHC and other entities to be used in documenting allocation 
of costs. Since in a multipurpose clinic the RHC may share some 
resources in common with the non-RHC entity (for example, waiting room 
or receptionist), the RHC must maintain accurate records to assure that 
the RHC costs that it claims for Medicare reimbursement are only for 
the staff, space, or other resources that are used for RHC purposes. 
Any shared staff, space, or other resources must be allocated 
appropriately between the RHC and non-RHC usage to avoid duplicate 
reimbursement.
    This commingling policy does not prohibit a hospital-based RHC from 
sharing its health care practitioners with the hospital emergency 
department in an emergency, or prohibit an RHC physician from providing 
on-call services for an emergency room, as long as the RHC continues to 
meet the RHC conditions for certification (CfCs) in the absence of the 
practitioner(s) and the RHC is able to allocate appropriately the 
practitioner's salary between RHC and non-RHC time.
    Facilities are encouraged to work with their MAC, FI, or carrier 
and RO in determining permissible resource-sharing situations and 
proper cost reporting methods.
4. Payment for Services to Hospital Patients
    The hospital inpatient bundling provision was enacted on April 20, 
1983 in section 602(e)(3) of the Social Security Act Amendments of 1983 
(Pub. L. 98-21), by adding paragraph (a)(14) to section 1862 of the 
Act. The hospital outpatient bundling provision was enacted in section 
9343(c) of OBRA '86, Public Law 99-509. Taken together, these two 
provisions require bundling of the costs for all nonprofessional 
services furnished to hospital patients. Consequently, section 
1862(a)(14) of the Act now requires hospitals and CAHs to bundle all 
costs, other than those for the professional services specified in the 
statute.
    Only professionals exempt from the hospital bundling provisions are 
permitted to bill for services furnished to hospital patients. RHCs and 
FQHCs cannot bill for services furnished by RHC practitioners to 
hospital patients because RHC and FQHC services are not exempt from the 
hospital bundling provisions.
    Accordingly, any costs incurred by an RHC or FQHC associated with 
the provision of services to hospital patients must be excluded from 
RHC or FQHC allowable costs on their Medicare cost report. However, a 
practitioner who provides services in an RHC or FQHC may, in some 
cases, also have a private practice and be enrolled and qualified to 
bill Medicare under that practice as a Part B practitioner. In these 
situations, the practitioner may be able to bill Medicare Part B under 
their private practice for covered services provided to hospital 
patients.
    Section 1862(a)(14) of the Act places restrictions on the payment 
for services furnished to hospital and CAH patients. We propose to 
revise Sec.  405.2411(b) and (c) to specify that RHC services are 
covered when furnished in an RHC setting or other outpatient setting, 
but are not covered when furnished in a hospital or CAH.
5. Payment for Services to Skilled Nursing Facility (SNF) Patients
    Section 4432(b) of the BBA amended the statute to add a 
consolidated billing provision for SNFs in section 1862(a)(18) of the 
Act. Similar to the hospital bundling provision in section 1862(a)(14) 
of the Act, this provision bundled all Part B services furnished to SNF 
residents during a covered Part A stay into the SNF Prospective Payment 
System (PPS) rates, except those services specifically excluded under 
statute. RHC services were not among the excluded services. Although 
the Congress excluded physician services and several other services 
from the SNF bundle of services, RHC and FQHC services were not among 
the services on the excluded under section 1888(e)(2)(A)(ii) of the 
Act. Consequently, through program instructions to Medicare contractors 
(PM A-99-8, March 1999), we announced that under the statute, RHC and 
FQHC services furnished to SNF residents were subject to the SNF 
consolidated billing provision and could not be billed to Medicare by 
the RHC or FQHC.
    However, section 410 of the MMA amended section 1888(e)(2)(A) of 
the Act by adding a new paragraph (iv) to exclude RHC and FQHC services 
from the SNF consolidated billing provision. This MMA change was 
effective for services furnished on or after January 1, 2005. In 
accordance with this section of the MMA, services included within the 
scope of RHC and FQHC services described at section 1888(e)(2)(A)(ii) 
of the Act are excluded from the SNF consolidated billing provision. 
These services are limited to physician, PA, NP, CP, and CNM services. 
Only this subset of RHC and FQHC services may be covered and paid 
through the RHC and FQHC benefit when furnished to RHC and FQHC 
patients in a Medicare Part A covered SNF stay. Payment for this subset 
of services is made in the usual manner under the RHC and FQHC all-
inclusive payment methodology. All services other than physician, PA, 
NP, CP, and CNM services that an RHC or an FQHC may furnish to a 
patient in a Medicare covered Part A SNF stay are subject to the SNF 
consolidated billing provision. This means any costs associated with 
these other services are excluded from coverage and payment under the 
RHC and FQHC benefit when furnished to a Part A SNF patient.
    We propose to require in Sec.  405.2411(b) and (c) that payment for 
RHC services furnished to patients at the RHC, at the patient's place 
of residence, or at another facility other than a hospital or CAH, be 
made to the RHC. As a result of the provisions in section 1862(a)(14) 
of the Act, RHCs and FQHCs cannot bill for RHC or FQHC services 
furnished by their practitioners to hospital or CAH inpatients.
6. Payment for Certain Physician Assistant Services
    Sections 4511 and 4512 of the BBA removed the restrictions on the 
types of areas and settings in which the Medicare Part B program pays 
for the professional services of NPs, CNSs, and PAs. This provision 
also expanded the professional services benefits for NPs and CNSs by 
authorizing them to bill the program directly for their services when 
furnished in any area or setting. However, these BBA provisions 
maintained the current policy that payment for PA services can be made 
only to the PA's employer regardless of whether the PA is employed 
directly or is serving as an independent contractor.
    Section 4205(d)(3)(B) of the BBA amended section 1842(b)(6)(C) of 
the Act to provide that payment for PA services may be made directly to 
a PA under certain circumstances. This provision permits Medicare to 
directly pay a PA who is the owner of an RHC, as described in section 
1861(aa)(2) of the Act, for a continuous period beginning before the 
date of the enactment of the BBA and ending on the date the Secretary 
determines the RHC no longer meets the requirements of section 
1861(aa)(2) of the Act, for services furnished before January 1, 2003.
    Section 222 of the BIPA amended section 1842(b)(6)(C) of the Act, 
which permits PAs who owned RHCs and subsequently lost RHC status to 
receive direct Medicare payment for their services, effective December 
21, 2000. This BIPA provision eliminated the January 1, 2003 sunset 
date. We propose

[[Page 36707]]

to revise Sec.  410.150(h)(15) and add Sec.  410.150(b)(20) to allow 
PAs to receive direct Medicare payment for services provided by the 
RHC, as long as the RHC continues to meet the requirements of section 
1861(aa)(2) of the Act.
7. Screening Mammography
    In June 2000 we released Program Memorandum A-00-30, which stated 
that preventive physician and nonphysician services, such as screening 
mammography, were covered when performed in an RHC/FQHC to the same 
extent as other RHC/FQHC services. We propose to revise Sec.  405.2448 
by removing paragraph (d), which states that screening mammography is 
not considered a covered FQHC service.
8. Payment for High Cost Drugs
    RHCs are reimbursed based on an all-inclusive payment methodology, 
subject to an upper payment limit, which includes the cost of drugs 
provided incident to a patient visit. We are aware that many RHCs would 
like to provide services such as outpatient cancer treatments to their 
patients, and that the patients would benefit from this service by not 
having to travel greater distances to receive treatment elsewhere. 
However, because drugs are included in the all-inclusive rate per 
visit, it may not be financially viable for an RHC to provide 
treatments that require high cost drugs for their patients.
    We recognize the dilemma that RHCs may face in deciding whether to 
provide certain treatments in the RHC that would benefit their patients 
but may put their financial viability at risk. Therefore, we are 
soliciting comments on this situation and possible solutions that can 
be addressed through regulation or program guidance. Any possible 
solution would need to take into account our legislative authority, 
which does not generally allow reimbursement to RHCs for drugs, our 
policy on commingling, and the need for administrative accountability.

D. Health and Safety, and Quality

1. Quality Assessment and Performance Improvement Program (QAPI)
    Currently, each RHC is required to evaluate its total program 
annually. The evaluation must include reviewing the utilization of the 
clinic's services using a representative sample of both active and 
closed clinical records, as well as reviewing 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 if 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 (QAPI). Therefore, RHCs are 
required by statute to have a QAPI program and it is a requirement for 
certification as an RHC. Upon an initial or subsequent survey, an RHC 
would be required to develop a plan of correction where a viable QAPI 
program is not in effect.
    A QAPI program enables the organization to systematically review 
its operating systems and processes of care to identify and implement 
opportunities for improvement.
    Some RHCs have already incorporated a QAPI program into normal RHC 
operating activities. For those which are starting to develop an 
appropriate QAPI program, guidance and examples of QAPI-related 
activities are available from professional and governmental 
organizations, including some State offices of rural health.
    HHS previously has contracted with the National Association of RHCs 
(http://www.narhc.org) to develop technical assistance materials which 
provide guidance for RHCs in complying with QAPI requirements. These 
and other materials are available through HRSA's Office of Rural Health 
Policy (http://www.ruralhealth.hrsa.gov). Information is also available 
from the Rural Assistance Center (http://www.raconline.org), the 
National Rural Health Association (http://www.nrharural.org), and the 
Rural Policy Research Center (http://www.rupri.org). As it develops its 
QAPI program, an RHC may find additional guidance through the 
information contained in the Institute of Medicine report, ``Quality 
Through Collaboration: The Future of Rural Health Care'', as well as 
that contained at the database and Web site sponsored by the agency for 
Healthcare Research and Quality, the National Quality Measures 
Clearinghouse (http://www.qualitymeasures.ahrq.gov/). RHCs are 
encouraged to take advantage of the resources available.
    We would deem an RHC that chose to utilize a QAPI model program 
provided by the Department (or other on-line resources mentioned in 
this regulation) to have met the QAPI CfC, provided that the model 
program chosen was one that was in compliance with the substantive 
provisions of Sec.  491.11.
    We propose to revise Sec.  491.11 to set forth explicit 
requirements for a QAPI program. An RHC would set its own priorities 
for performance improvement based on the prevalence and severity of 
identified problems. The QAPI program would contain three standards 
that would address: (1) Program components; (2) program activities; and 
(3) program responsibilities.
    The first standard, Sec.  491.11(a), would require that an RHC use 
objective measures to evaluate organizational processes, functions and 
services and the use of clinic services, including at least the number 
of patients served and the volume of services.
    The second standard, Sec.  491.11(b), would require RHCs to adopt 
or develop performance measures that reflected processes of care and 
RHC operation and were shown to be predictive of desired patient 
outcomes or were the outcomes themselves. The RHC would have to use the 
measures to analyze and track its performance. The RHC would set 
priorities for performance improvement, considering high-volume, high-
risk services, the care of acute and chronic conditions, patient 
safety, coordination of care, convenience and timeliness of available 
services or grievances and complaints. Also, the RHC would have to 
conduct distinct improvement projects and maintain records on its QAPI 
program for each of the areas listed under the standard in Sec.  
491.11(a). Additionally, a project to develop and implement an 
information technology (IT) system explicitly designed to improve 
patient safety and quality of care would be considered as meeting the 
requirement for a QAPI project under this section. We are proposing 
this IT provision because we believe that it is critically important 
that RHCs identify opportunities to improve and expand the use of 
information technology to prevent medical errors and improve quality of 
care. This Administration is committed to working with other public and 
private stakeholders to develop means for improving and expanding the 
use of IT (such as computerized patient records). We encourage RHCs, as 
they assess their organizational processes, functions, and services, to 
identify opportunities and make use of information technologies. We 
believe that the effective use of IT systems could prove invaluable to 
improving the quality and safety of patient care over time. We would 
allow RHCs to receive QAPI recognition for undertaking programs of 
investment and development of IT systems that are

[[Page 36708]]

designed to result in improvements in patient safety and quality of 
care as an alternative to other performance improvement projects (see 
Sec.  491.11(b)(4)). In recognition of the time and resources required 
to implement these IT programs, we would not require associated 
activities to have a demonstrable benefit in the initial stages, but 
would expect that the quality improvement goals and the associated 
achievements would be incorporated in the plans for these programs.
    The third proposed standard, Sec.  491.11(c), would require that 
the RHCs professional staff, administrative officials, and governing 
body (if applicable) ensure that there is an effective QAPI plan that 
addresses identified priorities.
2. Infection Control
    While the physical plant and environment standard in Sec.  
491.6(a)(3) requires that RHCs and FQHCs keep the premises clean and 
orderly, there is no current Medicare standard addressing infection 
control in RHCs and FQHCs. We believe that RHCs and FQHCs should be 
required to have infection control guidelines and an implementation 
plan. The value of infection control measures in reducing infectious 
and communicable diseases long has been recognized, and we realize that 
a large number of clinics and centers may be implementing some aspects 
of an infection control program. However, because of the real and 
potential hazards which infectious and communicable diseases present, 
we believe that it would be prudent to add a formal standard requiring 
adherence to infection control guidelines that have been recognized by 
industry standards and regulatory bodies as being appropriate for 
facilities such as RHCs and FQHCs. The Association for Professionals in 
Infection Control and Epidemiology (APIC) and the Society for 
Healthcare Epidemiology of America (SHEA), in their October 1999 
Consensus Panel Report, stated that infection prevention and control 
issues are important throughout a continuum of care, including 
physicians' offices, clinics, ambulatory surgical centers, and in 
individuals' homes through home health agencies. Likewise, a Centers 
for Disease Control (CDC) article, entitled ``Health-Care Quality 
Promotion, through Infection Prevention: Beyond 2000''; Vol. 7, No. 2, 
March-April 2001, by Julie Louise Gerberding, reported that the urgent 
need for enhanced infection prevention programs in nonhospital settings 
has been acknowledged for more than a decade. However, programs 
designed to effectively address this need have been slow to evolve. One 
contributing factor offered in the article was a lack of regulatory and 
accreditation standards to ensure that truly effective program 
components are in place.
    We agree with the CDC's findings as well as with the intent of the 
article, and are proposing that the new infection control standard 
place accountability on RHCs and FQHCs to prevent and control 
infectious and communicable diseases, and to take actions that result 
in improvements to infection control practices.
    We are proposing to add, under Sec.  491.6, a new paragraph (d) 
that would require RHCs and FQHCs to have infection control guidelines 
and an implementation plan. Model guidelines are available from various 
professional organizations, and RHCs and FQHCs would have flexibility 
in determining how best to meet these objectives. For example, RHCs and 
FQHCs would determine how much staff training in infection control 
would be necessary, the method of oversight, and the appropriate level 
of documentation that would be required. However, we do expect that RHC 
and FQHC staff engaged in direct patient care would follow current 
accepted standards of infection control practice (for example, wearing 
gloves when handling blood or blood products, and following hand 
hygiene guidelines). We believe that if a clinic or center currently 
complies with the infection control standards of the industry for 
outpatient health care facilities, then they would most likely meet or 
exceed this proposed standard. The infection control activities should 
be an integral part of the RHCs or FQHCs overall QAPI program and the 
FQHCs quality improvement program as also required by section 
330(k)(3)(C) of the PHS Act, and should be addressed in these programs 
on an ongoing basis.
3. Hours of Operation
a. Posting of Hours
    RHCs and FQHCs have varying hours and days of operation based on 
staff and anticipated patient load. Beneficiaries in rural areas often 
travel long distances to obtain services. Therefore, we are proposing 
to require under Sec.  491.6(e) that an RHC or FQHC must post at or 
near the entrance to the facility a sign that states the days of the 
week and hours when RHC or FQHC services are furnished. This 
information would have to be displayed in a manner so that it can be 
viewed easily by persons who have vision problems and who are in 
wheelchairs.
b. Use of the RHC Facility
    Section 491.8(a)(6) states that a RHC must have a physician, NP, 
PA, CNM, CSW, or CP available to furnish patient care services at all 
times the RHC operates, and that an NP, PA, or CNM must be available to 
furnish patient care services at least 50 percent of the time the RHC 
operates.
    To provide RHCs with flexibility to allow access patients to enter 
the RHC for purposes other than patient care while complying with the 
requirements of Sec.  491.8(a)(6), we are clarifying that RHCs may 
allow patients to enter the waiting room or other areas not utilized 
for patient care when the premises are opened solely to address 
administrative matters, or to allow patients entry into the building to 
get out of inclement weather. The RHC would not be considered ``in 
operation'' as an RHC during these periods. No health care services 
would be provided until a physician, NP, PA, CNM, CSW, or CP was 
present to provide such services. RHCs that choose to exercise this 
flexibility should post the hours they offer administrative services 
only versus the hours they offer RHC health care services. The signage 
which would be required by Sec.  491.6(e) should clearly delineate the 
times the NP, PA, CNM, CSW, CP, or physician was present and the RHC 
would be in operation and providing health care services. If State law 
does not allow access to the RHC premises when the RHC is not in 
operation as an RHC, the facility must adhere to State law.
4. Emergency Services and Training
    We propose to revise Sec.  491.9(c)(3) to reflect current industry 
standards and procedures for first responses to common life-threatening 
injuries and acute illnesses. We would expect that clinical personnel 
responding to emergencies would assess and stabilize sick or injured 
persons and administer emergency medical treatment while waiting for 
emergency transport to arrive or until such time that the patient could 
receive an advanced level of care.
    RHCs and FQHCs would continue to be required to provide medical 
emergency procedures as a first response to common life-threatening 
injuries and acute illness and to have available the drugs and 
biologicals commonly used in lifesaving procedures. Even though we are 
proposing to retain the language in the requirement regarding the 
availability of drugs and biologicals, we propose to eliminate the 
prescriptive list of those drugs and biologicals that is currently 
required. In addition to the drugs and

[[Page 36709]]

biologicals that currently are required, we propose that a clinic or 
center also have available commonly used equipment and supplies for 
emergency first response procedures that are appropriate for its 
patient population. Since the proposed conditions are outcome-oriented, 
we do not believe that we need to specify all the equipment and 
supplies that a facility should have to accommodate the emergency 
medical needs of a clinic or center's patients. However, we would 
expect a clinic or center to have the emergency equipment and supplies 
that are commonly found in a physician's office or a clinic. 
Appropriate drugs, biologicals, equipment, and supplies that one would 
expect to find in a clinic providing emergency first response 
procedures might include those items that are normally found in an 
emergency medical crash cart. We believe that most, if not all, clinics 
and centers would already have these types of supplies in order to 
provide the emergency services required under the current regulations.
    Although we are not specifically proposing to require 
defibrillators at this time, studies have shown that the appropriate 
use of defibrillators can save lives. In particular, automated external 
defibrillators (AEDs) have been shown to save lives in a variety of 
settings. The key to saving a life is getting the defibrillator on the 
patient as soon as possible. According to the American College of 
Emergency Physicians article entitled ``Automatic External 
Defibrillators,'' June 2003 (http://www.acep.org/12891.0.html), when a 
person suffers a sudden cardiac arrest, the chance of survival 
decreases by 7 to 10 percent for each minute that passes without 
defibrillation. The potential for saved lives supports the financial 
investment in an AED. Currently, the cost of an AED is approximately 
$2,000 to $3,000. We are soliciting comments on whether AEDs should be 
made a regulatory requirement in the future, since RHCs and FQHCs can 
be located in remote and frontier areas where advanced emergency care 
might not be available in time to prevent cardiac complications or 
death.
    We also are proposing that staff receive training in the provision 
of the RHCs or FQHCs emergency procedures. The current requirement does 
not address this issue. Primary care providers such as physicians, 
nurse practitioners, physician assistants, nurses, and other allied 
health personnel often do not frequently receive opportunities to 
participate in a wide range of emergency care procedures, and, 
therefore, can benefit from training. At a minimum, we would expect 
that these professionals are trained in basic life support (BLS). The 
American Heart Association's (AHA's) guidelines for health care 
provider courses state that its BLS course teaches the skills of 
cardiopulmonary resuscitation (CPR) (including ventilation with a 
barrier device, a bag-mask device, and oxygen) for victims of all ages, 
and the use of an AED. The course is designed for health care providers 
that care for patients in a wide variety of settings, both in and out 
of a hospital.
    This basic training may also be augmented by the clinic or center 
through a variety of means. For example, a facility may elect to 
provide its own in-service training in emergency procedures or it may 
choose to use outside resources such as basic trauma life support 
(BTLS), advanced cardiac life support (ACLS), and pediatric advanced 
life support (PALS) courses. We encourage clinics and centers to take 
advantage of these and other existing resources as they determine 
training needs of personnel providing care to patients.
    Additionally, as proposed in Sec.  491.9(c)(3)(iii), a clinic or 
center would be required to provide training for staff. Because a 
midlevel practitioner is required to be available to furnish patient 
care at all times the RHC or FQHC operates, we do not expect the 
nonprofessional staff to be responsible for providing first response 
emergency care. However, these individuals would need to be trained in 
accordance with the facility's policies and procedures related to their 
roles during the provision of emergency medical services by 
professional staff. We would expect facilities to determine the best 
way to train these personnel according to the facilities' individual 
needs. Facilities may elect to use outside resources such as the AHA's 
Heartsaver First Aid course, which combines first aid, adult CPR, and 
AED training, in-service training through the clinic or center's 
professional staff, or a combination of both. Each facility would be 
expected to develop its own emergency strategies which are consistent 
with commonly accepted practice and to document such plans in its 
written policies.
5. Patient Health Records
    RHCs and FQHCs are required to maintain a medical record for each 
patient receiving health care services. To update patient health record 
requirements to reflect technological advances in how physicians or 
other health care professionals sign and authenticate their signatures, 
we are proposing to update the medical records requirement at Sec.  
491.10(a)(3) for RHCs and FQHCs to reflect our requirements and 
guidelines for other participating providers regarding electronic 
medical records and electronic signatures.
    We propose at Sec.  491.10(a)(3)(v) that all entries (electronic or 
manual) in the medical record must be legible, complete, dated, timed, 
and authenticated promptly in written or electronic form by the person 
responsible for ordering, providing, or evaluating the service 
furnished. We are also proposing that any entry in the patient health 
record must be identified and authenticated promptly by the person 
making the entry. In addition, we are proposing that all entries in the 
patient health record must be authenticated within 48 hours unless 
there is a State law that designates a specific timeframe for the 
authentication of entries.
    The identification may include signatures, written initials, or 
computer entry. If rubber stamp signatures are authorized, the 
individual whose signature the stamp represents must place in the 
administrative offices of the RHC or FQHC a signed statement to the 
effect that he or she is the only individual authorized to use the 
stamp and may not delegate the stamp to another individual. A list of 
computer or other codes and written signatures must be readily 
available and maintained under adequate safeguards. When rubber stamps 
or electronic authorizations are used for identification, the RHC must 
have policies and procedures in place to ensure that stamps or 
authorizations are used only by the individuals whose signature they 
represent.
    Inherent in these proposed requirements is the idea that there be a 
specific action by the author to indicate that entries are verified and 
accurate. Examples of such authentication of entries include: a 
computerized system that requires the physician to review the document 
on-line and indicate that it has been approved by entering a computer 
code; a system in which the physician signs off against a list of 
entries that must be verified in the individual record; or a mail 
system in which transcripts are sent to the physician for review, after 
which he or she signs and returns a postcard identifying the record and 
verifying its accuracy.
    A system of auto-authentication in which a physician or other 
practitioner authenticates a report before transcription is not 
consistent with these proposed requirements. There

[[Page 36710]]

must be a method of determining that the practitioner in fact did 
authenticate the document after it was transcribed.

E. Other Proposed Changes

1. General
    In addition to the regulatory changes previously described, we 
propose the following:
     Adding the definition of ``nurse practitioner (NP)'' and 
``physician assistant (PA)'' to Sec.  405.2401(b) and removing the 
definitions from Sec.  491.2 so that RHC/FQHC-related provider 
definitions are located in the same regulatory section (with the 
exception of clinical psychologist, which continues to be defined in 
Sec.  405.2450.)
     Adding the word ``certified'' to the definition of 
``nurse-midwife'' in Sec.  405.2401(b) and Sec.  405.2414 to conform to 
statutory language in sections 1861(aa) and (gg)(2) of the Act.
     Adding the definition of ``clinical social worker'' (CSW) 
to Sec.  405.2401(b). The definition of ``covered RHC services'' was 
extended to include the services of a CSW but the definition of a CSW 
has not been added to the regulations.
     Revising the definition of ``Federally qualified health 
center'' (FQHC) in Sec.  405.2401(b) to conform the regulations to 
current statutory requirements.
     Revising the definition of ``rural health clinic'' to 
Sec.  405.2401(b) and removing the definition from Sec.  491.2 so that 
it conforms with statutory language in section 1861(aa)(2) of the Act.
     Revising references to the ``Secretary'' in Sec.  405.2404 
and Sec.  491.2 to incorporate gender-neutral language.
     Adding the phrase ``CNM, CP, CSW services and supplies'' 
to Sec.  405.2411 and Sec.  405.2415 to conform to statutory changes in 
section 1861(aa)(1)(B) and section 1861(aa)(2)(J) of the Act.
     Making additional revisions to Sec.  491.3 to implement 
proposed certification procedures, in conjunction with the proposed 
changes to the designation process previously described.
     Revising the heading and introductory text of Sec.  491.4 
to make it consistent with the comparable CoP provisions for hospitals 
and most other providers and to emphasize that the requirements of 
primary concern are State licensure laws.
2. FQHCs
    Section 5114 of the DRA makes a technical correction to section 
1861(aa)(4)(A) of the Act by striking the phrase ``(other than 
subsection (h))'' from that clause. This section of the statute 
identifies the types of health centers receiving funding under section 
330 of the PHS Act that are eligible for Medicare FQHC status. Section 
330(h) of the PHS Act, to which the clause refers, addresses Healthcare 
for the Homeless Health Centers. We are conforming our regulations at 
Sec.  405.2401 to recognize Healthcare for the Homeless Health Centers 
as Medicare FQHCs. We also are taking this opportunity to delete 
obsolete references to sections 329 and 340 of the PHS Act.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment when a collection of information requirement is submitted to 
the OMB for review and approval. In order to evaluate fairly whether 
OMB should approve an information collection, section 3506(c)(2)(A) of 
the PRA 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 affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirements (ICRs) discussed below.

A. ICRs Regarding Location of Clinic (Sec.  491.5)

    Proposed Sec.  491.5(b) states that an RHC may be granted an 
exception to the location requirement specified in Sec.  491.5(a)(1) if 
the clinic meets the requirements listed in Sec.  491.5(b)(1) through 
(3). Section 491.5(b)(3) states that an RHC may be granted an exception 
to the location requirements if it meets the essential provider 
criteria that are outlined in Sec.  491.5(c). As stated in Sec.  
491.5(c), CMS grants essential provider status for a period of 3-years. 
However, a clinic may reapply for essential provider status if it still 
needed the exception. An RHC must furnish documentation to demonstrate 
its compliance with one of the conditions listed in Sec.  491.5(c)(1) 
through (4).
    The burden associated with these proposed requirements is the time 
and effort necessary for an RHC to submit an application to CMS for an 
exception to the location requirement. As part of the application, the 
RHC must collect and submit to CMS the necessary information to support 
its claim that it meets one of the essential provider criteria listed 
in Sec.  491.5(c)(1) through (4). We estimate that it would take each 
RHC 10 hours to collect and submit the necessary information to CMS. 
The total estimated annual burden associated with this requirement is 
5000 hours.
    Section 491.5(e)(7) states that at the conclusion of the 3-year 
exception period, an RHC may renew its essential provider status. The 
RHC must submit written assurances to the appropriate CMS regional 
office that it continues to meet the conditions specified in Sec.  
491.5. The burden associated with this proposed requirement would be 
the time and effort necessary to submit written assurances to the 
appropriate CMS regional office.
    We estimate that a total of 500 RHCs would be subject to the 
requirements contained in Sec.  491.5(e)(7). We estimate that it would 
take each of the 500 RHCs 1 hour to submit the necessary information to 
CMS. The estimated annual burden is 500 hours.

B. ICRs Regarding Physical Plant and Environment (Sec.  491.6)

    Proposed Sec.  491.6(d) states that RHCs and FQHCs must protect 
their patients and staff members by maintaining and documenting an 
infection control process. The burden associated with this proposed 
requirement is the time and effort necessary to establish, maintain, 
and document the infection control process that meets the requirements 
listed in Sec.  491.6(d)(1) and (2). While these requirements are 
subject to the PRA, the associated burden is exempt as stated in 5 CFR 
1320.3(b)(2). Establishing, maintaining and documenting an infection 
control program and processes are usual and customary business 
practices. In addition, maintenance of a documented infection control 
program is required as part of quality assessment and performance 
improvement (QAPI) program. The total burden associated with QAPI 
program requirements is discussed later in Section III.E of the 
collection of information section of this regulation.
    Section 491.6(e) would require clinics or centers to post signs 
that are noticeable and can be viewed by those with vision problems and 
those in wheelchairs. The signs must be located at or near the front of 
the facility. The purpose of the signs is to advise the public of the 
hours of operation for the center or clinic. The burden associated

[[Page 36711]]

with this reporting requirement is the time and effort necessary to 
create signs and post the signs for the public. While this requirement 
is subject to the PRA, we believe that the associated burden is exempt 
as stated in 5 CFR 1320.3(b)(2); posting the signs containing the hours 
of operation is a usual and customary business practice.

C. ICRs Regarding Staffing and Staff Responsibilities (Sec.  491.8)

    Proposed Sec.  491.8(d) states that a qualified RHC can request a 
temporary staffing waiver. If the request is approved, the waiver is in 
effect for a 1-year period. As stated in Sec.  491.8(d)(1), to request 
a waiver the RHC must demonstrate that it has been unable, despite 
reasonable efforts in the previous 90-day period, to hire a certified 
nurse-midwife, nurse practitioner, or physician assistant to furnish 
services at least 50 percent of the time the RHC provides clinical 
services. The burden associated with this proposed requirement is the 
time and effort necessary for an RHC to demonstrate to CMS it has been 
unable to meet the RHC staffing requirements. We estimate that 100 RHCs 
would apply for waivers on an annual basis. We believe that it would 
take 3 hours for each RHC to draft its waiver request and demonstrate 
its inability to meet the staffing requirements. We estimate the total 
annual burden to be 300 hours.
    Proposed Sec.  491.8(d)(3) states that an RHC may submit a request 
for an additional waiver of staffing requirements no earlier than 6 
months after the expiration of the previous waiver. The burden 
associated with this proposed requirement is the time and effort 
necessary to submit an additional waiver request. The burden associated 
with this requirement is explained in our discussion of proposed Sec.  
491.8(d)(1).

D. ICRs Regarding Patient Health Records (Sec.  491.10)

    Proposed Sec.  491.10 states that an RHC or an FQHC must maintain a 
record for each patient receiving health care services. The record must 
include legible entries that are completed, dated, timed, and 
authenticated promptly in written or electronic form by the person 
responsible for ordering, providing, or evaluating the service. All 
entries in the patient health record must be authenticated within 48 
hours unless there is a State law that designates a specific timeframe 
for the authentication of entries.
    The burden associated with these proposed requirements is the time 
and effort necessary to maintain a patient record. This burden includes 
the time necessary to record complete, legible entries and to 
authenticate the record. While these requirements are subject to the 
PRA, the associated burden is exempt under 5 CFR 1320.3(b)(2). 
Maintaining and authenticating patient health records is part of usual 
and customary business practices. As stated in 5 CFR 1320.3(b)(2), the 
time, effort, and financial resources necessary to comply with a 
collection of information that would be incurred by persons in the 
normal course of their activities is exempt from the PRA.

E. ICRs Regarding Quality Assessment and Performance Improvement (Sec.  
491.11)

    Section 491.11 would require an RHC to develop, implement, 
evaluate, and maintain an effective, ongoing, data-driven quality 
assessment and performance improvement (QAPI) program. As part of the 
QAPI program, Sec.  491.11(b)(1)(i) requires an RHC to adopt or develop 
performance measures that reflect processes of care and RHC operations. 
Section 491.11(b)(1)(ii) further requires that the RHC use the measures 
to analyze and track its performance.
    Proposed Sec.  491.11(b)(3) states that an RHC must conduct 
distinct improvement projects. The number and frequency of the distinct 
improvement projects must reflect the scope and complexity of the 
clinic's services and available resources. In addition, Sec.  
491.11(b)(5) states that an RHC must maintain records on its QAPI 
program and quality improvement projects.
    The burden associated with this proposed requirement would be the 
time and effort necessary for the RHC to maintain records on its QAPI 
and quality projects. We estimate that it will take each clinic 1 hour 
per year to meet this requirement. Since there are an estimated 3,700 
facilities, the total burden associated with this requirement would be 
3,700 annual hours. The burden associated with this requirement is 
currently approved under OMB 0938-0334.
    The burden associated with all of the proposed requirements in 
Sec.  491.11 is the time and effort necessary for an RHC to develop, 
implement, evaluate, and maintain a QAPI program. We estimate that it 
would take each of the 3,700 facilities 40 hours to comply with the 
requirements in Sec.  491.11. We estimate a one-time annual burden of 
148,000 to develop a QAPI program.

                          Table 1.--Estimated Annual Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                                                                   Total annual
         Regulation section(s)             OMB control number       Respondents      Responses        burden
                                                                                                      (hours)
----------------------------------------------------------------------------------------------------------------
Sec.   491.5(c).......................  0938-New................           * 500             500           5,000
Sec.   491.5(e)(7)....................  0938-New................            *500             500             500
Sec.   491.8(d).......................  0938-New................             100             100             300
Sec.   491.11.........................  0938-0334...............           3,700           3,700      ** 148,000
                                                                 -----------------------------------------------
    Total.............................  ........................           4,300           4,300        153,800
----------------------------------------------------------------------------------------------------------------
* The same 500 respondents are subject to the requirements in both Sec.   491.5(c) and Sec.   491.5(e)(7). They
  are only counted once in our burden estimate.
** Estimated one-time annual burden.

    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following: Centers for 
Medicare & Medicaid Services, Office of Strategic Operations and 
Regulatory Affairs, Regulations Development Group, Attn.: William N. 
Parham, III (Attn: CMS-1910-P2) Room C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850; and Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 10235, New Executive 
Office Building, Washington, DC 20503, Attn: Carolyn Lovett, CMS Desk 
Officer, CMS-1910-P2, Carolyn_Lovett@omb.eop.gov. Fax (202) 395-6947.

[[Page 36712]]

IV. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4) (UMRA), Executive Order 13132 on Federalism, and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) 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). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any one 
year).
    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 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 to $29 million or less annually (see 65 FR 69432). For purposes of 
the RFA, all RHCs and FQHCs 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 Core-Based 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act, because we have determined 
that this proposed rule would not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) (UMRA) requires that agencies assess anticipated costs and 
benefits before issuing any rule that may result in an expenditure in 
any one year of $120 million in the aggregate by State, local, or 
tribal government, or by the private sector. This proposed rule would 
not mandate any new requirements for State, local or tribal 
governments, and private sector costs are expected to be less than the 
$120 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 a substantial effect on 
State and local governments.
    Although we view the anticipated results of these regulations as 
beneficial to the Medicare and Medicaid programs as well as to Medicare 
beneficiaries and Medicaid recipients, 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 be 
anticipated definitely, especially in view of the 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 meaningfully quantify a projection of the future effect 
of all of these provisions on RHCs' and FQHCs' operating costs or on 
the frequency of substantial noncompliance and termination procedures.
    We believe that this regulation would not have a significant 
financial impact on a substantial number of small entities, such as 
RHCs and FQHCs. This analysis, in combination with the rest of the 
preamble, is consistent with the standards for analysis set forth by 
the RFA.

B. Anticipated Effects

1. Effects of the Location Requirements on Rural Health Clinics
    There are approximately 3,705 participating RHCs. Of these, 
approximately 500 no longer meet the location requirements for either 
because they are not in an area designated by the U.S. Census Bureau as 
nonurban, or they are not designated by the Health Resources and 
Services Administration as an eligible shortage area. Participating 
RHCs that no longer are located in rural, underserved areas could lose 
RHC status and related cost-based reimbursement, potentially causing 
them to reduce services or discontinue serving Medicare beneficiaries. 
The estimated Medicare savings associated with the decertification of 
certain RHCs from the Medicare program are not considered significant.
    To minimize the impact of this provision on rural health care, 
however, the Congress has authorized us to grant, if needed, an 
exception to clinics determined to be essential to the delivery of 
primary care in these affected areas. Section 491.5 proposes criteria 
to determine if an RHC qualifies for an exception to the location 
requirements. An RHC that is no longer in a valid shortage or is in an 
urban area may apply for exception from RHC location requirements. 
Most, but not all, RHCs that apply for an exception are expected to 
qualify, and would not be decertified based on the location 
requirements.
    Section 4205 of the BBA amended section 1833(f) of the Act to 
require that provider-based RHCs are subject to the same payment 
methodology as independent RHCs. Before the BBA, payment to provider-
based RHCs was made without considering the number of patient visits 
provided by the RHC and without a limit on the payment per visit. This 
already has been implemented through manual instructions and has helped 
to establish payment equity and consistency within the RHC program. We 
have codified the statutory requirement to pay all RHCs under an all-
inclusive rate per visit, which avoids allocation of excessive 
administration costs to RHCs, and allow exceptions to the per-visit 
payment limit for qualifying RHCs.
    We believe the fiscal impact of limiting the provider-based RHC 
payment to the independent RHC rate per visit has resulted in program 
savings. Provider-based RHCs that have costs above the all-inclusive 
cost-per-visit limit required by the law may have experienced some 
decrease in current reasonable cost basis payments. To reduce 
detrimental impacts of this decrease, section 4205 of the BBA permits 
an exception to the upper payment limit for RHCs based in small 
hospitals of less than 50 beds. The number of beds is determined 
according to the definitions established in Sec.  412.105(b), or an 
alternative definition established in a Program Memorandum issued 
September 30, 1998, and updated on December 6, 2001. The alternative 
bed definition states that a hospital-based RHC can receive an 
exception to the per visit payment limit if its hospital has fewer than 
50 beds as determined by the hospital's average daily census count, is 
a sole community hospital

[[Page 36713]]

located in a level 9-12 UIC, and has an average daily census that does 
not exceed 40.
    There are currently 909 provider-based RHCs whose parent hospital 
has fewer than 50 beds. Of these, 354 are in UICs 9-12 and are 
therefore eligible for the exception to the per visit payment limit. By 
changing to the more accurate RUCAs, approximately 100 of these RHCs 
would no longer be eligible for the exception to the per-visit payment 
limit, but 251 previously ineligible RHCs would be eligible. This would 
result in a net total of 505 RHCs eligible for the exception to the per 
visit payment limit, a gain of 151. We expect that the RHCs that would 
gain eligibility to the payment limit exception would be in more rural 
areas that have greater financial challenges. Therefore, the fiscal 
impact of this change is expected to be minimal.
    The QAPI requirement may increase burden in the short term because 
resources currently used for the required evaluation of the clinic's 
programs would need to be directed to the development of a QAPI program 
that covers the complexity and scope of the particular clinic. Although 
the requirements may result in some immediate costs to an individual 
clinic, we believe that the QAPI program would result in real, but 
difficult to estimate, long-term economic benefits to the clinic (for 
example, cost-effective performance practices or higher patient 
satisfaction that may lead to increased patient visits for the clinic).
    Further, the QAPI and utilization review requirements replace the 
current annual evaluation requirement. Resources that the clinics 
currently are using for the annual evaluation could be devoted to the 
QAPI program. Therefore, we believe that there would be no long-term 
increased burden on the clinics. Currently, a number of RHCs, primarily 
provider-based, have some type of quality improvement program in place. 
To the extent that a clinic is familiar with collecting data on its 
operations and measuring quality, the new requirement should not impose 
significant additional burden.
2. Impact of the QAPI Provisions
    We estimate that the additional one-time impact for the initial 
development of the QAPI provisions would be as Shown in Table 2.

                                 Table 2
------------------------------------------------------------------------
  Hours/estimated salary/number of RHCs    One-time Cost    Annual cost
------------------------------------------------------------------------
1 physician/administrator at $58/hr x 3         $574,200  ..............
 hrs x 3,300 clinics for medical
 direction and overview of QAPI program.
1 Mid-level practitioner (physician            2,956,800  ..............
 assistant, nurse practitioner) at $28/
 hr x 32 hrs x 3,300 clinics for program
 development............................
1 clerical staff at $6/hr x 5 hrs x               99,000  ..............
 3,300 clinics..........................
1 mid-level practitioner at $28/hr x 4    ..............         369,600
 hrs x 3,300 clinics for data collection
 and analysis...........................
1 mid-level practitioner--3 hrs training  ..............         277,200
                                         -------------------------------
    Totals..............................       3,630,000         646,800
------------------------------------------------------------------------

    To develop our estimates, we used information on the salaries and 
wage estimation obtained from the American Medical Association.
    OBRA '89 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 overall staffing needs.
3. Effects on Other Providers
    We are aware of situations in which an RHC and a physician's 
private practice occupy the same space and bill Medicare for services 
either as an RHC or as a physician, depending upon which payment method 
produces the greater payment. Our 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, private physicians or other practitioners who have used this 
approach under the Medicare program may experience some change in the 
operation of their practices from an administrative standpoint.
4. Effects on the Medicare and Medicaid Programs
    As a result of this proposed rule, some existing RHCs would be at 
risk of losing their RHC status. We believe that any aggregate changes 
to overall spending would be negligible. This proposed rule would also 
result in some RHCs losing their exception to the per visit payment 
limit, while other RHCs would become eligible for the exception to the 
per visit payment limit. We cannot estimate accurately the payment 
differential since the clinics vary in terms of size and patient 
visits.
    However, we believe that since total expenditures for this program 
represent a small fraction of the Medicare and Medicaid total budget 
and less than 20 percent of all RHCs would experience changes to 
payment rates, any aggregate savings would be insignificant. We also 
believe an insignificant amount of Medicare and Medicaid program 
savings would result from the provision that would terminate RHC status 
for certain providers. An RHC that loses its eligibility to participate 
in the RHC program likely would choose to participate in the Medicare 
and Medicaid programs in a non-RHC capacity such as a physician-
directed clinic or a group of individual practitioners who would then 
bill Medicare using the Part B fee-for-service system.

C. Alternatives Considered

    Section 4205 of the BBA imposes new requirements that the RHC 
program must meet. We considered some of the following alternatives to 
implement these provisions:
1. ``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 in comparison 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, an applicant would have to demonstrate that its 
utilization rates exceed the threshold.
    Although this test would be administratively feasible, we 
concluded, based on our analysis of available Medicare and Medicaid RHC 
data, that it would not determine accurately

[[Page 36714]]

``essential'' clinics at the community level because of the wide 
variability in 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 major community 
provider test. We also considered the option of establishing less 
generous tests for identifying RHCs as essential clinics to the 
delivery of primary care. That is, we considered the establishment of 
tests narrowly focused on a few extreme cases, such as an exception 
test for only sole community providers. We rejected this option because 
of concern that the decertification of a clinic from the RHC program 
could decrease access to primary care for the entire community. We 
believe several options should be available to reflect the variability 
of communities in providing access to care for rural areas.
2. 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 of the February 28, 2000, proposed rule, we described 
alternative ways of satisfying the ``minimum level requirement'' for 
the QAPI program and requested public comment. We considered the 
following alternatives:
     Require RHCs to engage in an improvement project in three 
specified domains annually.
     Require a minimum number of improvement projects in any 
combination of the specified 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 State Survey Agency what projects 
they are doing and what progress is being achieved.
    After considering the public comments, which were not conclusive, 
we decided not to establish a minimum requirement. As we noted in the 
December 24, 2003, final rule, we did consider alternatives for the 
rule. One alternative was to take a more rigid approach, whereby the 
final rule would be more prescriptive in the process that RHCs must 
follow to develop the QAPI program, to include setting forth specific 
performance measures to be used, the frequency and number of QAPI 
``interventions'' that must be done, and the type and frequency of data 
to be collected. While a more rigid approach would increase RHC burden, 
we realize there would be no assurance that it would result in better 
or more predictable outcomes.
    We decided to promote a more flexible and less prescriptive 
approach to the QAPI condition. We are more concerned with an RHC 
identifying its own best practices and the outcomes of an RHC's 
individualized QAPI program than in specific steps the RHC takes to 
achieve the improvement. A more moderate QAPI requirement would allow 
an RHC the flexibility to use staff and other resources in ways that 
more directly support its needs. An RHC can design a program to analyze 
its own organizational processes, functions, and services, while still 
being held accountable for results. This decision would allow each RHC 
the flexibility to fulfill this requirement based on its resources.

D. Conclusion

    We do not expect a significant change in the operations of RHCs or 
FQHCs generally, nor do we believe a substantial number of small 
entities in the community, including RHCs, FQHCs, and a substantial 
number of small rural hospitals, would be affected adversely by these 
changes.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the OMB.

List of Subjects

42 CFR Part 405

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

42 CFR Part 410

    Health facilities, health professions, Kidney diseases, 
Laboratories, 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, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV 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 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. Section 405.2401(b) is amended by--
    A. Adding the definitions of ``clinical social worker'' and 
``employee'' in alphabetical order.
    B. Republishing the introductory text of the definition of 
``Federally qualified health center'' and revising paragraph (1) of 
that definition.
    C. Adding the word ``Certified'' before ``Nurse-midwife'' in the 
definition of ``Nurse-midwife,'' changing the ``N'' of ``Nurse-
midwife'' to lower case, and putting the definition in alphabetical 
order.
    D. Removing the definition of ``nurse practitioner and physician 
assistant''.
    E. Adding the definitions of ``nurse practitioner'' and ``physician 
assistant'' in alphabetical order.
    F. Revising the definition of ``rural health clinic.''
    The revisions and additions read as follows:


Sec.  405.2401  Scope and definitions.

* * * * *
    (b) * * *
    Clinical social worker (CSW) means an individual who has the 
following qualifications:
    (1) Possesses a doctoral or master's degree in social work.
    (2) After obtaining a doctoral or master's degree in social work, 
has performed at least 2 years of supervised clinical social work.
    (3) Either is licensed or certified as a CSW by the State in which 
the individual practices or, in the case of an individual in a State 
that does not provide for licensure or certification, has completed at 
least 2 years or 3,000 hours of post-master's degree clinical social 
work practice under the supervision of a qualified master's degree 
social worker in an appropriate setting such as a hospital, clinic, or 
SNF.
    (4) Is employed by or under contract with the RHC or FQHC to 
furnish diagnostic and therapeutic mental health services.
* * * * *
    Employee means any individual who, under the common law rules that 
apply

[[Page 36715]]

in determining the employer-employee relationship (as applied for 
purposes of section 3121(d)(2) of the Internal Revenue Code of 1986), 
is considered to be employed by, or an employee of, an entity. 
(Application of these common law rules is discussed in 20 CFR 404.1007 
and 26 CFR 31.3121(d)-1(c).)
    Federally qualified health center (FQHC) means an entity that has 
entered into an agreement with CMS to meet Medicare program 
requirements under Sec.  405.2434 and--
    (1) Is receiving a grant under section 330 of the Public Health 
Service (PHS) Act, or is receiving funding from such a grant under a 
contract with a recipient of such a grant and meets the requirements to 
receive a grant under section 330 of the PHS Act;
* * * * *
    Nurse practitioner (NP) means a registered professional nurse who 
is currently licensed to practice in the State, who meets the State's 
requirements governing the qualifications of nurse practitioners, and 
who meets one of the following conditions:
    (1) Is currently certified as a primary care nurse practitioner by 
the American Nurses' Association or by the National Board of Pediatric 
Nurse Practitioners and Associates.
    (2) Has satisfactorily completed a formal academic 1-year 
educational program that--
    (i) Prepares registered nurses to perform an expanded role in the 
delivery of primary care;
    (ii) Includes at least 4 months (in the aggregate) of classroom 
instruction and a component of supervised clinical practice; and
    (iii) Awards a degree, diploma, or certificate to persons who 
successfully complete the program.
    (3) Has successfully completed a formal educational program (for 
preparing registered nurses to perform an expanded role in the delivery 
of primary care) that does not meet the requirements of paragraph (2) 
of this definition, and has been performing an expanded role in the 
delivery of primary care for a total of 12 months during the 18-month 
period immediately preceding the effective date of this subpart.
* * * * *
    Physician assistant means a person who meets the applicable State 
requirements governing the qualifications for assistants to primary 
care physicians, and who meets at least one of the following 
conditions:
    (1) Is currently certified by the National Commission on 
Certification of Physician Assistants to assist primary care 
physicians.
    (2) Has satisfactorily completed a program for preparing physician 
assistants that meets all of the following requirements:
    (i) Was at least 1 academic year in length.
    (ii) Consisted of supervised clinical practice and at least 4 
months (in the aggregate) of classroom instruction directed toward 
preparing students to deliver health care.
    (iii) Was accredited by the American Medical Association's 
Committee on Allied Health Education and Accreditation.
    (3) Has satisfactorily completed a formal educational program (for 
preparing physician assistants) that does not meet the requirements of 
paragraph (2) of this definition and assisted primary care physicians 
for a total of 12 months during the 18-month period that ended on 
December 31, 1986.
* * * * *
    Rural health clinic (RHC) means an entity that meets the following 
requirements:
    (1) The requirements specified in section 1861(aa)(2) of the Act 
and part 491 of this chapter concerning RHC services and conditions for 
approval.
    (2) Has filed an agreement with CMS that meets the basic 
requirements described in Sec.  405.2402 to provide RHC services under 
Medicare.
* * * * *


Sec.  405.2402  [Amended]

    3. Amend Sec.  405.2402(d) by removing ``he'' and adding ``the 
Secretary'' in its place.


Sec.  405.2404  [Amended]

    4. Amend Sec.  405.2404(a)(2)(ii) by removing ``he'' and adding 
``the Secretary'' in its place.
    5. Revise Sec.  405.2410 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 Medicare Part B deductible as follows:
    (i) If the deductible is fully met by the beneficiary before the 
RHC visit, Medicare pays 80 percent of the all-inclusive rate.
    (ii) If the deductible is not 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. The beneficiary is responsible for 
the coinsurance amount.
    (1) For any one service provided by an RHC--
    (i) If the deductible has already been met, beneficiary coinsurance 
liability must not exceed 20 percent of the clinic's reasonable 
customary charge for the covered service;
    (ii) If the deductible has not already been met, the beneficiary 
coinsurance liability must not exceed 20 percent of any remainder 
amount after deducting the unmet deductible from the clinic's 
reasonable customary charge for the covered service.
    (2) The beneficiary's deductible and coinsurance liability for any 
one service furnished by the RHC may not exceed 20 percent of the 
reasonable amount customarily charged by the RHC for that particular 
service.
    (3) Except for services provided under Medicare Advantage plans to 
FQHCs in accordance with section 1833(a)(3)(B) of the Act, the 
coinsurance liability may not exceed 20 percent of the reasonable 
amount customarily charged by the FQHC for the particular service.
    6. Section 405.2411 is amended by--
    A. Revising paragraph (a) introductory text.
    B. Amending paragraphs (a)(1) through (a)(3) by removing the ``;'' 
at the end of each paragraph and adding a ``.'' in its place.
    C. Amending paragraph (a)(4) by removing the ``; and'' at the end 
of the paragraph and adding ``.'' in its place.
    D. Adding new paragraphs (a)(6) through (a)(8).
    E. Revising paragraph (b).
    F. Adding a new paragraph (c).
    The revisions and additions read as follows:


Sec.  405.2411  Scope of benefits.

    (a) Rural health clinic services reimbursable under this part are 
as follows:
* * * * *
    (6) Certified nurse-midwife (CNM) services.
    (7) Clinical psychologists (CP) and clinical social worker (CSW) 
services specified in Sec.  405.2450 of this subpart.
    (8) Service and supplies furnished as an incident to CP or CSW 
services, as specified in Sec.  405.2452 of this subpart.
    (b) RHC services are covered when furnished in an RHC setting or 
other

[[Page 36716]]

outpatient setting, including a patient's place of residence or a 
skilled nursing facility.
    (c) RHC services are not covered in a hospital, as defined in 
section 1861(e)(1) of the Act, or a critical access hospital.
    7. Section 405.2414 is amended by--
    A. Revising the section heading.
    B. Revising paragraph (a)(1).
    C. Adding the word ``certified'' before ``nurse-midwife'' in 
paragraph (a)(4).
    D. Adding the word ``certified'' before ``nurse-midwives'' in 
paragraph (c).
    The revisions read as follows:


Sec.  405.2414  Nurse practitioner (NP), physician assistant (PA), and 
certified nurse-midwife (CNM) services.

    (a) * * *
    (1) Furnished by a nurse practitioner, physician assistant or 
certified nurse-midwife, who is employed by, or receives compensation 
from, the rural health clinic;
* * * * *
    8. Amend Sec.  405.2415 by--
    A. Revising the section heading.
    B. Revising the introductory text of paragraph (a).
    C. Revising paragraph (a)(4).
    D. Revising paragraph (b).
    The revisions read as follows:


Sec.  405.2415  Services and supplies incident to a clinical 
psychologist (CP), clinical social worker (CSW), nurse practitioner 
(NP), physician assistant (PA), or certified nurse mid-wife (CNM) 
services.

    (a) Services and supplies incident to a clinical psychologist's or 
clinical social worker's, nurse practitioner's, physician assistant's, 
or certified nurse-midwife's services are reimbursable under this 
subpart if the service or supply is--
* * * * *
    (4) Furnished under the direct, personal supervision of a nurse 
practitioner, physician assistant, certified nurse-midwife, clinical 
psychologist, clinical social worker, or physician; and
* * * * *
    (b) The direct personal supervision requirement is met in the case 
of a nurse practitioner, physician assistant, certified nurse-midwife, 
nurse practitioner, clinical psychologist, or clinical social worker 
only if the person is permitted to supervise those services under the 
written policies governing the RHC.
* * * * *


Sec.  405.2448  [Amended]

    9. Amend Sec.  405.2448 by removing and reserving paragraph (d).
    10. Section 405.2462 is revised to read as follows:


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

    (a) General rules. (1) RHCs and FQHCs are paid on the basis of an 
all-inclusive rate per visit, subject to a payment limit.
    (2) The Medicare Administrative Contractor or fiscal intermediary 
determines the all-inclusive rate in accordance with this subpart and 
instructions issued by CMS.
    (b) Rules for RHCs. RHCs must meet the following requirements:
    (1) Does not share space, staff, supplies, records, and other 
resources during RHC hours of operation with a private Medicare or 
Medicaid approved or certified practice owned, controlled or operated 
by the same physicians and nonphysician practitioners that staff the 
RHC as employees or contractors; and
    (2) If sharing a multipurpose clinic with other types of health 
providers or suppliers, appropriately allocates and excludes from the 
RHC cost report the net non-RHC costs associated with the sharing of 
common space, medical support staff, or other physical resources.
    (3) If an RHC is an integral and subordinate part of a hospital, it 
can receive an exception to the per visit payment limit if the hospital 
has fewer than 50 beds as determined by using one of the following 
methods:
    (i) The determination of the number of beds 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 or essential access community hospital as determined 
in accordance with Sec.  412.109(a) of this chapter.
    (B) It is located in a level 9 or 10 Rural-Urban Commuting Area 
(RUCA).
    (C) It has an average daily patient census that does not exceed 40.
    (c) Payment procedures. To receive payment, an RHC or FQHC must 
follow the payment procedures specified in Sec.  410.165(a) of this 
chapter.
    (d) 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 of this chapter.
    11. In Sec.  405.2466 paragraph (b)(1)(iii) is revised to read as 
follows:


Sec.  405.2466  Annual reconciliation.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Medicare payment to the RHC or FQHC is equal to its 
reasonable costs less aggregate coinsurance and deductible amounts 
billable, but in no case may total Medicare payment exceed 80 percent 
of reasonable costs.
* * * * *


Sec.  405.2468  [Amended]

    12. In Sec.  405.2468 paragraph (b)(1) is revised by removing the 
parenthetical statement ``(RHCs are not paid for services furnished by 
contracted individuals other than physicians.)''

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

    13. The authority citation for part 410 continues to read as 
follows:

    Authority: Secs. 1102, 1834, 1871, and 1893 of the Social 
Security Act (42 U.S.C. 1302, 1395m, 1395hh, and 1395ddd).

    14. Section 410.150 is amended by--
    A. Revising the first sentence of paragraph (b)(15).
    B. Adding a new paragraph (b)(20).
    The revision and addition read as follows:


Sec.  410.150  To whom payment is made.

* * * * *
    (b) * * *
    (15) Except for certain physician assistant services provided in a 
rural health clinic owned by a physician assistant, as specified in 
paragraph (b)(20) of this section, to the qualified employer of a 
physician assistant for professional services furnished by the 
physician assistant and for services and supplies furnished incident to 
his or her services. * * *
* * * * *
    (20) To a physician assistant who was the owner of a rural health 
clinic as described Sec.  405.2401(b) of this subchapter. Payment is 
made to such physician assistant for services and supplies furnished 
incident to his or her services only if--
    (i) No facility, other provider charges, or other amount has been 
paid for services furnished by such physician assistant; and
    (ii) The physician assistant owned the rural health clinic for a 
continuous period beginning on or before August 4, 1997 and ending on 
the date that the Secretary determines that the clinic no longer meets 
the requirements of section 1861(aa)(2) of the Act.

PART 491--CERTIFICATION OF CERTAIN HEALTH FACILITIES

    15. 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).


[[Page 36717]]


    16. Section 491.2 is revised to read as follows:


Sec.  491.2  Definitions.

    As used in this subpart, unless the context indicates otherwise:
    Certified nurse-midwife (CNM), clinical social worker (CSW), nurse 
practitioner (NP), physician, and physician assistant (PA) mean an 
individual who has the qualifications for such practitioner set forth 
in Sec.  405.2401 of this chapter.
    Clinical psychologist (CP) means an individual who has 
qualifications as defined in Sec.  405.2450 of this chapter.
    Nonurban area means an area that is not delineated as an urbanized 
area by the U.S. Census Bureau.
    Rural area means an area that is not delineated as an urbanized 
area by the U.S. Census Bureau.
    Rural health clinic means a facility as defined in Sec.  
405.2401(b).
    Shortage area means a geographic area that meets one of the 
following criteria:
    (1) Designated by the Secretary as a geographic primary care health 
professional shortage area under section 332(a)(1)(A) of the Public 
Health Service Act (PHS Act);
    (2) Designated by the Secretary as a population group primary care 
HPSA under section 332(a)(1)(B) of the PHS Act;
    (3) Designated by the Secretary as a medically underserved area 
(but not as a medically underserved population group) under section 
330(b)(3) of the PHS Act; or
    (4) Designated by the chief executive officer of the State and 
certified by the Secretary as an area with a shortage of personal 
health services under section 6213(c) of the Omnibus Budget 
Reconciliation Act of 1989.
    17. Section 491.3 is revised to read as follows:


Sec.  491.3  General certification requirements.

    (a) General. (1) RHCs participate in Medicare in accordance with an 
agreement as specified in Sec.  405.2402 through Sec.  405.2404 of this 
chapter.
    (2) If CMS approves or disapproves the participation request of a 
prospective RHC, CMS notifies the appropriate State agency.
    (3) CMS deems an entity that is approved for Medicare participation 
as an RHC to meet the standards for certification under Medicaid.
    (b) Permanent and mobile units. An RHC and an FQHC may be located 
in a permanent or a mobile unit.
    (1) Permanent unit. The objects, equipment, and supplies necessary 
for the provision of services furnished directly by the clinic or 
center are housed in a permanent structure.
    (2) Mobile unit. The objects, equipment, and supplies necessary for 
the provision of services furnished directly by the clinic or center 
are housed in a mobile structure, which has fixed, scheduled locations.
    (3) Permanent unit in more than one location. If the RHC or FQHC 
services are furnished at permanent units in more than one location, 
each unit is independently considered for certification as an RHC or 
FQHC and must meet the location requirements based on the physical 
location of the clinic or center.
    18. Section 491.4 is revised to read as follows:


Sec.  491.4  Compliance with State licensure laws.

    The RHC or FQHC and its staff meet applicable Federal laws related 
to the health and safety of patients as well as State licensure 
requirements.
    19. Section 491.5 is amended by revising paragraphs (a) through (e) 
to read as follows:


Sec.  491.5  Location of clinic.

    (a) General location requirements.
    (1) An existing RHC or an applicant requesting entrance into the 
Medicare program as an RHC--
    (i) Is located in a rural area that is currently designated as a 
shortage area as defined in Sec.  491.2; and
    (ii) The designation of such shortage area has been made or updated 
during the past 3 years.
    (2) An FQHC is located in a rural or urban area that is designated 
as either a medically underserved area or includes a medically 
underserved population group.
    (b) Location exception requirements. An RHC may be considered for 
an exception to the location requirements specified in Sec.  
491.5(a)(1) if the clinic--
    (1)(i) Is in an area currently classified by the U.S. Census Bureau 
as an urbanized area; or
    (ii) Is in an area not currently designated as a shortage area.
    (2)(i) Is located in an area that has been classified as an 
Urbanized Area by the U.S. Census Bureau and is in a level 4 or higher 
RUCA; and
    (ii) Demonstrates that at least 51 percent of the clinic's patients 
reside in an adjacent nonurbanized area.
    (3) Meets the essential provider criteria specified in paragraph 
(c) of this section.
    (c) Essential provider criteria. CMS grants essential provider 
status is for a period of 3 years. At the end of the 3-year period, the 
clinic may reapply for continued essential provider status if an 
exception is still needed. To receive an exception to the location 
requirements, an RHC must provide documentation to support that it 
meets one of the following conditions:
    (1) Sole community provider. The RHC is the only participating 
primary care provider that meets either of the following criteria:
    (i) Is at least 25 miles from the nearest participating primary 
care provider.
    (ii) Is at least 15 miles but less than 25 miles from the nearest 
participating primary care provider and demonstrates that it is more 
than 30 minutes from the nearest primary care provider based on local 
topography, predictable weather conditions, or posted speed limits. For 
purposes of this exception, a participating primary care provider means 
another RHC, FQHC, or other primary care provider that actively is 
accepting and treating Medicare, Medicaid, low-income and uninsured 
patients (regardless of their ability to pay).
    (2) Major community provider. The RHC must meet the following 
conditions to be considered a major community provider:
    (i) Has a Medicare, Medicaid, low-income and uninsured patient 
utilization rate greater than or equal to 51 percent or a low-income 
patient utilization rate greater than or equal to 31 percent.
    (ii) Is actively accepting and treating a major share of the 
Medicare, Medicaid, low-income, and uninsured patients (regardless of 
their ability to pay) compared to other participating primary care 
providers that are within 25 miles of the RHC.
    (3) Specialty clinic: Obstetrics/gynecology (ob/gyn) or pediatrics. 
The RHC must meet all the following conditions to be considered a 
specialty clinic:
    (i) Exclusively provides ob/gyn or pediatric health services.
    (ii) Is the sole provider or major source of ob/gyn or pediatrics 
health services for Medicare (when applicable), Medicaid, low-income, 
and uninsured patients (regardless of their ability to pay) and that 
meets either of the following conditions:
    (A) Is at least 25 miles from the nearest participating primary 
care provider of ob/gyn or pediatric services; or
    (B) Is at least 15 miles but less than 25 miles from the nearest 
participating primary care provider of ob/gyn or pediatric services and 
can demonstrate that it is more than 30 minutes from the nearest 
primary care provider providing these services based on local

[[Page 36718]]

topography, predictable weather conditions, or posted speed limits.
    (iii) Is actively accepting and treating Medicare (where 
applicable), Medicaid, low-income, and uninsured patients;
    (iv) Has a Medicare, Medicaid, low-income patient and uninsured 
patient utilization rate greater than or equal to 31 percent.
    (v) Provides ob/gyn or pediatric health services onsite to clinic 
patients.
    (4) Extremely rural community provider. The RHC must meet the 
following conditions to be considered an extremely rural community 
provider:
    (i) Is actively accepting and treating Medicare, Medicaid, low-
income, and uninsured patients (regardless of their ability to pay).
    (ii) Is located in a frontier county (6 or less persons per square 
mile) or in a Rural-Urban Commuting Area level 10 area.
    (d) Termination. (1) CMS decertifies a clinic from participation in 
the Medicare program as an RHC, effective 180 days after the date that 
the RHC no longer meets the location requirements, unless--
    (i) An application to update the shortage area designation has been 
received by the Health Resources and Services Administration (HRSA) not 
later than 3 years from the date of the last designation; or
    (ii) The RHC has submitted an application for an exception to the 
location requirement as specified in paragraph (e) of this section and 
meets the exception standards set forth in paragraphs (b) and (c) of 
this section.
    (2) CMS may terminate RHC status at any time if it determines that 
the RHC is not in compliance with any certification requirements.
    (e) Process for essential provider status.
    (1) If HRSA has not received an application to update a designation 
by the end of the 3 years from the date of the previous designation, an 
RHC in such area has 90 days from the end of the 3-year period to 
submit its request to CMS for an exception in order to continue to be 
considered to be an essential provider.
    (2) If HRSA has proposed for withdrawal or withdrawn a designation, 
the RHC in such area must submit its request to CMS for an exception in 
order to continue to be considered an essential provider 90 days from 
the date the designation was proposed for withdrawal or withdrawn.
    (3) If HRSA has disapproved an application to update a designation, 
the RHC in such area has 90 days from the date of the disapproval to 
submit a request for a location exception in order to be considered an 
essential provider.
    (4) An existing RHC may apply for an exception from decertification 
by submitting to the appropriate CMS regional office a written request 
with any necessary documentation demonstrating that it meets one of the 
essential provider criteria specified in paragraph (c) of this section.
    (5) CMS does not decertify an RHC that has submitted an application 
for an exception within 90 days from the date that the RHC no longer 
meets the location requirements while the application for an exception 
is under review, for a period not to exceed 180 days from the date the 
RHC no longer meets the location requirement, or the effective date of 
the final rule, whichever is later. In rare circumstances, the CMS RO 
may request an extension from the CMS Central Office if it has not been 
possible to process the location exception request before the RHC would 
be decertified.
    (6) The CMS regional office may grant a 3-year exception based on 
its review of an RHC request and other relevant information, if such 
CMS regional office determines that the RHC is essential to the 
delivery of primary care services that otherwise are not available in 
the geographic area served by the RHC, as specified in paragraph (b) of 
this section.
    (7) At the end of the 3-year exception period, a clinic may renew 
its essential provider status by submitting written assurances to the 
appropriate CMS regional office that it continues to meet the 
conditions specified in this section.
    (8) An RHC that is located in an area for which an application to 
update the designation has not been submitted to HRSA or has been found 
by HRSA to not qualify for an eligible designation, and has not 
submitted an application for an exception within 90 days of the date 
that the designation is more than 3 years old, may continue to operate 
as an RHC for 180 calendar days after the expiration of the applicable 
3-year period, effective the last day of the month.
    (9) A provider-based RHC that does not meet the location 
requirements and does not qualify for an exception and has submitted an 
application to CMS to be another type of Medicare provider that 
requires a State survey for certification, may receive an additional 
120 days extension of their status as an RHC while their application is 
being processed.
* * * * *
    20. Section 491.6 is amended by--
    A. Adding paragraph (d).
    B. Adding paragraph (e).
    The additions read as follows:


Sec.  491.6  Physical plant and environment.

* * * * *
    (d) Infection control. The RHC or FQHC must protect patients and 
staff by maintaining and documenting an infection control process 
that--
    (1) Follows accepted standards of practice, including the use of 
standard precautions, to prevent the transmission of infectious and 
communicable diseases; and
    (2) Is an integral part of the quality assessment and performance 
improvement (QAPI) programs.
    (e) Hours of operation. The clinic or center must post signs that 
are noticeable and can be viewed by those with vision problems and 
those in wheelchairs at or near the entrance to the facility to advise 
the public of the days of the week and hours when services are 
furnished.
    21. Section 491.8 is amended by--
    A. Revising paragraphs (a)(1), (a)(3), and (a)(6).
    B. Adding paragraph (d).
    The revisions and additions read as follows:


Sec.  491.8  Staffing and staff responsibilities.

    (a) * * *
    (1) (i) RHC or FQHC has a health care staff that includes one or 
more physicians.
    (ii) A RHC must employ one or more physician assistants or nurse 
practitioners.
* * * * *
    (3) The physician assistant, nurse practitioner, certified nurse-
midwife, clinical social worker, or clinical psychologist member of the 
staff may be the owner or an employee of the clinic or center, or may 
furnish services under contract to the clinic or center.
* * * * *
    (6) A physician, nurse practitioner, physician assistant, certified 
nurse-midwife, 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) CMS may grant a temporary waiver 
of the RHC staffing requirements in paragraphs (a)(1)(ii) 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,

[[Page 36719]]

despite reasonable efforts in the previous 90-day period, to hire a 
certified nurse-midwife, nurse practitioner, or physician assistant to 
furnish services at least 50 percent of the time the RHC provides 
clinical services, or to hire a PA or NP as a direct employee.
    (2) CMS terminates the RHC from participation in the Medicare 
program, if the RHC is not in compliance with the provisions waived 
under paragraphs (a)(1) and (a)(6) of this section at the expiration of 
the waiver.
    (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.
    22. Section 491.9 is amended by--
    A. Revising paragraph (c)(2).
    B. Revising paragraph (c)(3).
    The revisions and addition read as follows:


Sec.  491.9  Provision of services.

* * * * *
    (c) * * *
    (2) Laboratory. These requirements apply to RHCs but not to FQHCs. 
The clinic provides laboratory services in accordance with part 493 of 
this chapter, which implements the provisions of section 353 of the 
Public Health Service Act. The clinic provides basic laboratory 
services essential to the immediate diagnosis and treatment of the 
patient. See Sec.  405.2462 of this chapter for payment requirements 
for clinical laboratory services furnished within the RHC setting. 
These laboratory services include the following:
    (i) Chemical examinations of urine by stick or tablet method or 
both (including urine ketones).
    (ii) Hemoglobin or hematocrit.
    (iii) Blood glucose.
    (iv) Examination of stool specimens for occult blood.
    (v) Pregnancy tests.
    (vi) Primary culturing for transmittal to a certified laboratory.
    (3) Emergency. The clinic or center must--
    (i) Provide medical emergency procedures as a first response to 
common life-threatening injuries and acute illnesses;
    (ii) Have available the drugs, biologicals, equipment, and 
supplies, which are appropriate for the facility's patient population 
and which are commonly used in emergency first response procedures; and
    (iii) Provide training for staff in the provision of these 
emergency procedures according to the clinic's or center's policies 
that are consistent with commonly accepted practice as well as in 
accordance with applicable Federal, State, and local laws.
* * * * *
    23. Section 491.10 is amended by--
    A. Revising paragraph (a)(3) introductory text.
    B. Removing the ``;'' at the end of paragraphs (a)(3)(i) through 
(a)(3)(iv) and adding a ``.'' in its place.
    C. Adding a new paragraph (a)(3)(v).
    The revision and addition read as follows:


Sec.  491.10  Patient health records.

    (a) * * *
    (3) For each patient receiving RHC or FQHC services at such 
facility, the RHC or FQHC maintains a record that includes the 
following, as applicable:
* * * * *
    (v) Legible entries that are completed, dated, timed, and 
authenticated promptly in written or electronic form by the person 
responsible for ordering, providing, or evaluating the service. Any 
entry in the patient health record must be identified and authenticated 
promptly by the person making the entry. All entries in the patient 
health record must be authenticated within 48 hours unless there is a 
State law that designates a specific timeframe for the authentication 
of entries.
* * * * *
    24. Revise Sec.  491.11 to read as follows:


Sec.  491.11  Quality assessment and performance improvement for RHCs.

    The RHC must develop, implement, evaluate, and maintain an 
effective, ongoing, data-driven quality assessment and performance 
improvement (QAPI) program. The self-assessment and performance 
improvement program must be appropriate for the complexity of the RHCs 
organization and services and focus on maximizing outcomes by improving 
patient safety, quality of care, and patient satisfaction.
    (a) Standard: Components of a QAPI program. The RHC's QAPI program 
must include, but not be limited to, the use of objective measures to 
evaluate the following:
    (1) Organizational processes, functions, and services.
    (2) Utilization of clinic services, including at least the number 
of patients served and the volume of services.
    (b) Standard: Program activities. (1) For each of the areas listed 
in paragraph (a)(1) of this section, the RHC must do the following:
    (i) Adopt or develop performance measures that reflect processes of 
care and RHC operation and are shown to be predictive of desired 
patient outcomes or to be the outcomes themselves.
    (ii) Use the measures to analyze and track its performance.
    (2) The RHC must set priorities for performance improvement, 
considering either high-volume, high-risk services, the care of acute 
and chronic conditions, patient safety, coordination of care, 
convenience and timeliness of available services, or grievances and 
complaints.
    (3) The RHC must conduct distinct improvement projects. The number 
and frequency of distinct improvement projects conducted by the RHC 
must reflect the scope and complexity of the clinic's services and 
available resources.
    (4) An RHC that develops and implements an information technology 
system explicitly designed to improve patient safety and quality of 
care meets the requirement for a project under this section.
    (5) The RHC must maintain records on its QAPI program and quality 
improvement projects.
    (c) Standard: Program responsibilities. The RHC's professional 
staff, administrative officials, and governing body (if applicable) are 
responsible for the following:
    (1) Identifying or approving QAPI priorities.
    (2) Ensuring that QAPI activities that are developed to address 
identified priorities are implemented and evaluated.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: October 11, 2007.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: February 28, 2008.

Michael O. Leavitt,
Secretary.

    Editorial Note: This document was received at the Office of the 
Federal Register on June 9, 2008.

[FR Doc. E8-13280 Filed 6-26-08; 8:45 am]
BILLING CODE 4120-01-P