[Title 42 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2006 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
42
Parts 414 to 429
Revised as of October 1, 2006
Public Health
________________________
Containing a codification of documents of general
applicability and future effect
As of October 1, 2006
With Ancillaries
Published by
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Administration
A Special Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
As of October 1, 2006
Title 42, Parts 400 to 429
Revised as of October 1, 2005
Is Replaced by
Title 42, Parts 400 to 413
and
Parts 413 to 429
[[Page v]]
Table of Contents
Page
Explanation................................................. v
Title 42:
Chapter IV--Centers for Medicare & Medicaid
Services, Department of Health and Human Services 3
Finding Aids:
Material Approved for Incorporation by Reference........ 525
Table of CFR Titles and Chapters........................ 527
Alphabetical List of Agencies Appearing in the CFR...... 545
List of CFR Sections Affected........................... 555
[[Page vi]]
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 42 CFR 414.1 refers
to title 42, part 414,
section 1.
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[[Page vii]]
EXPLANATION
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[[Page viii]]
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[[Page ix]]
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October 1, 2006.
[[Page xi]]
THIS TITLE
Title 42--Public Health is composed of four volumes. The parts in
these volumes are arranged in the following order: Parts 1-399, parts
400-413, parts 414-429, and part 430 to end. The first volume (parts 1-
399) contains current regulations issued under chapter I--Public Health
Service (HHS). The second and third volumes (parts 400-413 and parts
414-429) include regulations issued under chapter IV--Centers for
Medicare & Medicaid Services (HHS) and the fourth volume (part 430 to
end) contains the remaining regulations in chapter IV and the
regulations issued under chapter V by the Office of Inspector General-
Health Care (HHS). The contents of these volumes represent all current
regulations codified under this title of the CFR as of October 1, 2006.
The OMB control numbers for the Centers for Medicare & Medicaid
Services appear in Sec. 400.310 of chapter IV. For the convenience of
the user, subpart C consisting of Sec. Sec. 400.300-400.310 is
reprinted in the Finding Aids section of the third and fourth volumes.
For this volume, Robert J. Sheehan was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Frances D. McDonald, assisted by Kenneth R. Payne.
[[Page 1]]
TITLE 42--PUBLIC HEALTH
(This book contains parts 414 to 429)
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Part
chapter iv--Centers for Medicare & Medicaid Services,
Department of Health and Human Services................... 414
[[Page 3]]
CHAPTER IV--CENTERS FOR MEDICARE
& MEDICAID SERVICES,
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
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Editorial Note: Nomenclature changes to chapter IV appear at 62 FR
46037, Aug. 29, 1997; 66 FR 39452, July 31, 2001; and 67 FR 36540, May
24, 2002.
SUBCHAPTER A--GENERAL PROVISIONS
Part Page
414 Payment for Part B medical and other health
services................................ 5
415 Services furnished by physicians in
providers, supervising physicians in
teaching settings, and residents in
certain settings........................ 57
416 Ambulatory surgical services................ 74
417 Health maintenance organizations,
competitive medical plans, and health
care prepayment plans................... 85
418 Hospice care................................ 171
419 Prospective payment system for hospital
outpatient department services.......... 192
420 Program integrity: Medicare................. 205
421 Intermediaries and carriers................. 216
422 Medicare advantage program.................. 228
423 Voluntary medicare prescription drug benefit 346
424 Conditions for Medicare payment............. 452
426 Review of national coverage determinations
and local coverage determinations....... 495
[[Page 5]]
SUBCHAPTER A_GENERAL PROVISIONS
PART 414_PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES--Table of Contents
Subpart A_General Provisions
Sec.
414.1 Basis and scope.
414.2 Definitions.
414.4 Fee schedule areas.
Subpart B_Physicians and Other Practitioners
414.20 Formula for computing fee schedule amounts.
414.21 Medicare payment basis.
414.22 Relative value units (RVUs).
414.24 Review, revision, and addition of RVUs for physician services.
414.26 Determining the GAF.
414.28 Conversion factors.
414.30 Conversion factor update.
414.32 Determining payments for certain physicians' services furnished
in facility settings.
414.34 Payment for services and supplies incident to a physician's
service.
414.36 Payment for drugs incident to a physician's service.
414.39 Special rules for payment of care plan oversight.
414.40 Coding and ancillary policies.
414.42 Adjustment for first 4 years of practice.
414.44 Transition rules.
414.46 Additional rules for payment of anesthesia services.
414.48 Limits on actual charges of nonparticipating suppliers.
414.50 Physician billing for purchased diagnostic tests.
414.52 Payment for physician assistants' services.
414.54 Payment for certified nurse-midwives' services.
414.56 Payment for nurse practitioners' and clinical nurse specialists'
services.
414.58 Payment of charges for physician services to patients in
providers.
414.60 Payment for the services of CRNAs.
414.62 Fee schedule for clinical psychologist services.
414.63 Payment for outpatient diabetes self-management training.
414.64 Payment for medical nutrition therapy.
414.65 Payment for telehealth services.
414.66 Incentive payments for physician scarcity areas.
414.67 Incentive payments for Health Professional Shortage Areas.
Subpart C_Fee Schedules for Parenteral and Enteral Nutrition (PEN)
Nutrients, Equipment and Supplies
414.100 Purpose.
414.102 General payment rules.
414.104 PEN Items and Services.
Subpart D_Payment for Durable Medical Equipment and Prosthetic and
Orthotic Devices
414.200 Purpose.
414.202 Definitions.
414.210 General payment rules.
414.220 Inexpensive or routinely purchased items.
414.222 Items requiring frequent and substantial servicing.
414.224 Customized items.
414.226 Oxygen and oxygen equipment.
414.228 Prosthetic and orthotic devices.
414.229 Other durable medical equipment--capped rental items.
414.230 Determining a period of continuous use.
414.232 Special payment rules for transcutaneous electrical nerve
stimulators (TENS).
Subpart E_Determination of Reasonable Charges Under the ESRD Program
414.300 Scope of subpart.
414.310 Determination of reasonable charges for physician services
furnished to renal dialysis patients.
414.313 Initial method of payment.
414.314 Monthly capitation payment method.
414.316 Payment for physician services to patients in training for self-
dialysis and home dialysis.
414.320 Determination of reasonable charges for physician renal
transplantation services.
414.330 Payment for home dialysis equipment, supplies, and support
services.
414.335 Payment for EPO furnished to a home dialysis patient for use in
the home.
Subpart F_Competitive Bidding for Certain Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies (DMEPOS)
414.400-414.404 [Reserved]
414.406 Implementation of programs.
414.408-414.426 [Reserved]
[[Page 6]]
Subpart G [Reserved]
Subpart H_Fee Schedule for Ambulance Services
414.601 Purpose.
414.605 Definitions.
414.610 Basis of payment.
414.615 Transition to the ambulance fee schedule.
414.617 Transition from regional to national ambulance fee schedule.
414.620 Publication of the ambulance fee schedule.
414.625 Limitation on review.
Subpart I_Payment for Drugs and Biologicals
414.701 Purpose.
414.704 Definitions.
414.707 Basis of payment.
Subpart J_Submission of Manufacturer's Average Sales Price Data
414.800 Purpose.
414.802 Definitions.
414.804 Basis of payment.
414.806 Penalties associated with the failure to submit timely and
accurate ASP data.
Subpart K_Payment for Drugs and Biologicals Under Part B
414.900 Basis and scope.
414.902 Definitions.
414.904 Average sales price as the basis for payment.
414.906 Competitive acquisition program as the basis for payment.
414.908 Competitive acquisition program.
414.910 Bidding process.
414.912 Conflicts of interest.
414.914 Terms of contract.
414.916 Dispute resolution for vendors and beneficiaries.
414.917 Dispute resolution and process for suspension or termination of
approved CAP contract.
414.918 Assignment.
414.920 Judicial review.
Subpart L_Supplying and Dispensing Fees
414.1000 Purpose.
414.1001 Basis of Payment.
Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social Security
Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).
Source: 55 FR 23441, June 8, 1990, unless otherwise noted.
Editorial Note: Nomenclature changes to part 414 appear at 60 FR
50442, Sept. 29, 1995, and 60 FR 53877, Oct. 18, 1995.
Subpart A_General Provisions
Sec. 414.1 Basis and scope.
This part implements the following provisions of the Act:
1802--Rules for private contracts by Medicare beneficiaries.
1833--Rules for payment for most Part B services.
1834(a) and (h)--Amounts and frequency of payments for durable
medical equipment and for prosthetic devices and orthotics and
prosthetics.
1834(l)--Establishment of a fee schedule for ambulance services.
1834(m)--Rules for Medicare reimbursement for telehealth services.
1842(o)--Rules for payment of certain drugs and biologicals.
1847(a) and (b)--Competitive bidding for certain durable medical
equipment, prosthetics, orthotics, and supplies (DMEPOS).
1848--Fee schedule for physician services.
1881(b)--Rules for payment for services to ESRD beneficiaries.
1887--Payment of charges for physician services to patients in
providers.
[67 FR 9132, Feb. 27, 2002, as amended at 69 FR 1116, Jan. 7, 2004; 71
FR 48409, Aug. 18, 2006]
Sec. 414.2 Definitions.
As used in this part, unless the context indicates otherwise--
AA stands for anesthesiologist assistant.
AHPB stands for adjusted historical payment basis.
CF stands for conversion factor.
CRNA stands for certified registered nurse anesthetist.
CY stands for calendar year.
FY stands for fiscal year.
GAF stands for geographic adjustment factor.
GPCI stands for geographic practice cost index.
HCPCS stands for CMS Common Procedure Coding System.
Physician services means the following services to the extent that
they are covered by Medicare:
(1) Professional services of doctors of medicine and osteopathy
(including osteopathic practitioners), doctors of optometry, doctors of
podiatry, doctors
[[Page 7]]
of dental surgery and dental medicine, and chiropractors.
(2) Supplies and services covered ``incident to'' physician services
(excluding drugs as specified in Sec. 414.36).
(3) Outpatient physical and occupational therapy services if
furnished by a person or an entity that is not a Medicare provider of
services as defined in Sec. 400.202 of this chapter.
(4) Diagnostic x-ray tests and other diagnostic tests (excluding
diagnostic laboratory tests paid under the fee schedule established
under section 1833(h) of the Act).
(5) X-ray, radium, and radioactive isotope therapy, including
materials and services of technicians.
(6) Antigens, as described in section 1861(s)(2)(G) of the Act.
(7) Bone mass measurement.
RVU stands for relative value unit.
(8) Screening mammography services.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992;
58 FR 63686, Dec. 2, 1993; 59 FR 63463, Dec. 8, 1994; 60 FR 63177, Dec.
8, 1995; 63 FR 34328, June 24, 1998; 66 FR 55322, Nov. 1, 2001]
Sec. 414.4 Fee schedule areas.
(a) General. CMS establishes physician fee schedule areas that
generally conform to the geographic localities in existence before
January 1, 1992.
(b) Changes. CMS announces proposed changes to fee schedule areas in
the Federal Register and provides an opportunity for public comment.
After considering public comments, CMS publishes the final changes in
the Federal Register.
[59 FR 63463, Dec. 8, 1994]
Subpart B_Physicians and Other Practitioners
Source: 56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992,
unless otherwise noted.
Sec. 414.20 Formula for computing fee schedule amounts.
(a) Participating supplier. The fee schedule amount for a
participating supplier for a physician service as defined in Sec. 414.2
is computed as the product of the following amounts:
(1) The RVUs for the service.
(2) The GAF for the fee schedule area.
(3) The CF.
(b) Nonparticipating supplier. The fee schedule amount for a
nonparticipating supplier for a physician service as defined in Sec.
414.2 is 95 percent of the fee schedule amount as calculated in
paragraph (a) of this section.
[62 FR 59101, Oct. 31, 1997]
Sec. 414.21 Medicare payment basis.
Medicare payment is based on the lesser of the actual charge or the
applicable fee schedule amount.
[62 FR 59101, Oct. 31, 1997]
Sec. 414.22 Relative value units (RVUs).
CMS establishes RVUs for physicians' work, practice expense, and
malpractice insurance.
(a) Physician work RVUs--(1) General rule. Physician work RVUs are
established using a relative value scale in which the value of physician
work for a particular service is rated relative to the value of work for
other physician services.
(2) Special RVUs for anesthesia and radiology services)--(i)
Anesthesia services. The rules for determining RVUs for anesthesia
services are set forth in Sec. 414.46.
(ii) Radiology services. CMS bases the RVUs for all radiology
services on the relative value scale developed under section
1834(b)(1)(A) of the Act, with appropriate modifications to ensure that
the RVUs established for radiology services that are similar or related
to other physician services are consistent with the RVUs established for
those similar or related services.
(b) Practice expense RVUs. (1) Practice expense RVUs are computed
for each service or class of service by applying average historical
practice cost percentages to the estimated average allowed charge during
the 1991 base period.
(2) The average practice expense percentage for a service or class
of services is computed as follows:
(i) Multiply the average practice expense percentage for each
specialty by the proportion of a particular service or class of service
performed by that specialty.
[[Page 8]]
(ii) Add the products for all specialties.
(3) For services furnished beginning calendar year (CY) 1994, for
which 1994 practice expense RVUs exceed 1994 work RVUs and that are
performed in office settings less than 75 percent of the time, the 1994,
1995, and 1996 practice expense RVUs are reduced by 25 percent of the
amount by which they exceed the number of 1994 work RVUs. Practice
expense RVUs are not reduced to less than 128 percent of 1994 work RVUs.
(4) For services furnished beginning January 1, 1998, practice
expense RVUs for certain services are reduced to 110 percent of the work
RVUs for those services. The following two categories of services are
excluded from this limitation:
(i) The service is provided more than 75 percent of the time in an
office setting; or
(ii) The service is one described in section 1848(c)(2)(G)(v) of the
Act, codified at 42 U.S.C. 1395w-4(c)(2)(G). Section 1848(c)(2)(G)(v) of
the Act refers to the 1998 proposed resource-based practice expense RVUs
(as specified in the June 18, 1997 physician fee schedule proposed rule
(62 FR 33158)) for the specific site, either in-office or out-of-office,
increased from its 1997 practice expense RVUs.)
(5) For services furnished beginning January 1, 1999, the practice
expense RVUs are based on 75 percent of the practice expense RVUs
applicable to services furnished in 1998 and 25 percent of the relative
practice expense resources involved in furnishing the service. For
services furnished in 2000, the practice expense RVUs are based on 50
percent of the practice expense RVUs applicable to services furnished in
1998 and 50 percent of the relative practice expense resources involved
in furnishing the service. For services furnished in 2001, the practice
expense RVUs are based on 25 percent of the practice expense RVUs
applicable to services furnished in 1998 and 75 percent of the relative
practice expense resources involved in furnishing the service. For
services furnished in 2002 and subsequent years, the practice expense
RVUs are based entirely on relative practice expense resources.
(i) Usually there are two levels of practice expense RVUs that
correspond to each code.
(A) Facility practice expense RVUs. The lower facility practice
expense RVUs apply to services furnished to patients in the hospital,
skilled nursing facility, community mental health center, or in an
ambulatory surgical center when the physician performs procedures on the
ASC approved procedures list. (The facility practice expense RVUs for a
particular code may not be greater than the non-facility RVUs for the
code.)
(B) Non-facility practice expense RVUs. The higher non-facility
practice expense RVUs apply to services performed in a physician's
office, a patient's home, an ASC if the physician is performing a
procedure not on the ASC approved procedures list, a nursing facility,
or a facility or institution other than a hospital or skilled nursing
facility, community mental health center, or ASC performing an ASC
approved procedure.
(C) Outpatient therapy services. Outpatient therapy services billed
under the physician fee schedule are paid using the non-facility
practice expense RVU component.
(ii) Only one practice expense RVU per code can be applied for each
of the following services: services that have only technical component
practice expense RVUs or only professional component practice expense
RVUs; evaluation and management services, such as hospital or nursing
facility visits, that are furnished exclusively in one setting; and
major surgical services.
(6)(i) CMS establishes criteria for supplemental surveys regarding
specialty practice expenses submitted to CMS that may be used in
determining practice expense RVUs.
(ii) Any CMS-designated specialty group may submit a supplemental
survey.
(iii) CMS will consider for use in determining practice expense RVUs
for the physician fee schedule survey data and related materials
submitted to CMS by March 1, 2004 to determine CY 2005 practice expense
RVUs and by March 1, 2005 to determine CY 2006 practice expense RVUs.
[[Page 9]]
(c) Malpractice insurance RVUs. (1) Malpractice insurance RVUs are
computed for each service or class of services by applying average
malpractice insurance historical practice cost percentages to the
estimated average allowed charge during the 1991 base period.
(2) The average historical malpractice insurance percentage for a
service or class of services is computed as follows:
(i) Multiply the average malpractice insurance percentage for each
specialty by the proportion of a particular service or class of services
performed by that specialty.
(ii) Add all the products for all the specialties.
(3) For services furnished in the year 2000 and subsequent years,
the malpractice RVUs are based on the relative malpractice insurance
resources.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42493, Sept. 15, 1992;
58 FR 63687, Dec. 2, 1993; 62 FR 59102, Oct. 31, 1997; 63 FR 58910, Nov.
2, 1998; 64 FR 59441, Nov. 2, 1999; 65 FR 25668, May 3, 2000; 65 FR
65440, Nov. 1, 2000; 67 43558, June 28, 2002; 68 FR 63261, Nov. 7, 2003]
Sec. 414.24 Review, revision, and addition of RVUs for physician services.
(a) Interim values for new and revised HCPCS level 1 and level 2
codes. (1) CMS establishes interim RVUs for new services and for codes
for which definitions have changed.
(2) CMS publishes a notice in the Federal Register to announce
interim RVUs and seek public comment on them. The RVUs are effective
prospectively for services furnished beginning on the effective date
specified in the notice.
(3) After considering public comments, CMS revises, if necessary,
the interim RVUs and announces those revisions in a final notice
published in the Federal Register. Any revisions in the RVUs are
effective prospectively for services furnished beginning on the
effective date specified in the final notice.
(b) Revision of RVUs for established HCPCS level 1 and level 2
codes. (1) CMS publishes a proposed notice in the Federal Register to
announce changes in RVUs for established codes and provides an
opportunity for public comment no less often than every 5 years.
(2) After considering public comments, CMS publishes a final notice
in the Federal Register to announce revisions to RVUs.
(3) The RVU revisions are effective prospectively for services
furnished beginning on the effective date specified in the final notice.
(c) Values for local codes (HCPCS Level 3). (1) Carriers establish
relative values for local codes for services not included in HCPCS
levels 1 or 2.
(2) Carriers must obtain prior approval from CMS to establish local
codes for services that meet the definition of ``physician services'' in
Sec. 414.2.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992]
Sec. 414.26 Determining the GAF.
CMS establishes a GAF for each service in each fee schedule area.
(a) Geographic indices. CMS uses the following indices to establish
the GAF:
(1) An index that reflects one-fourth of the difference between the
relative value of physicians' work effort in each of the different fee
schedule areas as determined under Sec. 414.22(a) and the national
average of that work effort.
(2) An index that reflects the relative costs of the mix of goods
and services comprising practice expenses (other than malpractice
expenses) in each of the different fee schedule areas as determined
under Sec. 414.22(b) compared to the national average of those costs.
(3) An index that reflects the relative costs of malpractice
expenses in each of the different fee schedule areas as determined under
Sec. 414.22(c) compared to the national average of those costs.
(b) Class-specific practice cost indices. If the application of a
single index to different classes of services would be substantially
inequitable because of differences in the mix of goods and services
comprising practice expenses for the different classes of services, more
than one index may be established under paragraph (a)(2) of this
section.
(c) Computation of GAF. The GAF for each fee schedule area is the
sum of the physicians' work adjustment factor,
[[Page 10]]
the practice expense adjustment factor, and the malpractice cost
adjustment factor, as defined in this section:
(1) The geographic physicians' work adjustment factor for a service
is the product of the proportion of the total relative value for the
service that reflects the RVUs for the work component and the geographic
physicians' work index value established under paragraph (a)(1) of this
section.
(2) The geographic practice expense adjustment factor for a service
is the product of the proportion of the total relative value for the
service that reflects the RVUs for the practice expense component,
multiplied by the geographic practice cost index (GPCI) value
established under paragraph (a)(2) of this section.
(3) The geographic malpractice adjustment factor for a service is
the product of the proportion of the total relative value for the
service that reflects the RVUs for the malpractice component, multiplied
by the GPCI value established under paragraph (a)(3) of this section.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992]
Sec. 414.28 Conversion factors.
CMS establishes CFs in accordance with section 1848(d) of the Act.
(a) Base-year CFs. CMS established the CF for 1992 so that had
section 1848 of the Act applied during 1991, it would have resulted in
the same aggregate amount of payments for physician services as the
estimated aggregate amount of these payments in 1991, adjusted by the
update for 1992 computed as specified in Sec. 414.30.
(b) Subsequent CFs. For calendar years 1993 through 1995, the CF for
each year is equal to the CF for the previous year, adjusted in
accordance with Sec. 414.30. Beginning January 1, 1996, the CF for each
calendar year may be further adjusted so that adjustments to the fee
schedule in accordance with section 1848(c)(2)(B)(ii) of the Act do not
cause total expenditures under the fee schedule to differ by more than
$20 million from the amount that would have been spent if these
adjustments had not been made.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992;
60 FR 53877, Oct. 18, 1995; 60 FR 63177, Dec. 8, 1995]
Sec. 414.30 Conversion factor update.
Unless Congress acts in accordance with section 1848(d)(3) of the
Act--
(a) General rule. The CF update for a CY equals the Medicare
Economic Index increased or decreased by the number of percentage points
by which the percentage increase in expenditures for physician services
(or for a particular category of physician services, such as surgical
services) in the second preceding FY over the third preceding FY exceeds
the performance standard rate of increase established for the second
preceding FY.
(b) Downward adjustment. The downward adjustment may not exceed the
following:
(1) For CYs 1992 and 1993, 2 percentage points.
(2) For CY 1994, 2.5 percentage points.
(3) For CYs 1995 and thereafter, 5 percentage points.
[55 FR 23441, June 8, 1990, as amended at 60 FR 63177, Dec. 8, 1995; 61
FR 42385, Aug. 15, 1996]
Sec. 414.32 Determining payments for certain physicians' services furnished in facility settings.
(a) Definition. As used in this section, facility settings include
the following facilities:
(1) Hospital outpatient departments, including clinics and emergency
rooms.
(2) Hospital inpatient departments.
(3) Comprehensive outpatient rehabilitation facilities.
(4) Comprehensive inpatient rehabilitation facilities.
(5) Inpatient psychiatric facilities.
(6) Skilled nursing facilities.
(b) General rule. If physicians' services of the type routinely
furnished in physicians' offices are furnished in facility settings
before January 1, 1999, the physician fee schedule amount for those
services is determined by reducing the practice expense RVUs for the
services by 50 percent. For services furnished on or after January 1,
1999, the practice expense RVUs are determined in accordance with Sec.
414.22(b)(5).
[[Page 11]]
(c) Services covered by the reduction. CMS establishes a list of
services routinely furnished in physicians' offices nationally. Services
furnished at least 50 percent of the time in physicians' offices are
subject to this reduction.
(d) Services excluded from the reduction. The reduction established
under this section does not apply to the following:
(1) Rural health clinic services.
(2) Surgical services not on the ambulatory surgical center covered
list of procedures published under Sec. 416.65(c) of this chapter when
furnished in an ambulatory surgical center.
(3) Anesthesiology services and diagnostic and therapeutic radiology
services.
[58 FR 63687, Dec. 2, 1993, as amended at 60 FR 63177, Dec. 8, 1995; 62
FR 59102, Oct. 31, 1997; 63 FR 58911, Nov. 2, 1998; 64 FR 25457, May 12,
1999]
Sec. 414.34 Payment for services and supplies incident to a physician's service.
(a) Medical supplies. (1) Except as otherwise specified in this
paragraph, office medical supplies are considered to be part of a
physician's practice expense, and payment for them is included in the
practice expense portion of the payment to the physician for the medical
or surgical service to which they are incidental.
(2) If physician services of the type routinely furnished in
provider settings are furnished in a physician's office, separate
payment may be made for certain supplies furnished incident to that
physician service if the following requirements are met:
(i) It is a procedure that can safely be furnished in the office
setting in appropriate circumstances.
(ii) It requires specialized supplies that are not routinely
available in physicians' offices and that are generally disposable.
(iii) It is furnished before January 1, 1999.
(3) For the purpose of paragraph (a)(2) of this section, provider
settings include only the following settings:
(i) Hospital inpatient and outpatient departments.
(ii) Ambulatory surgical centers.
(4) For the purpose of paragraph (a)(2) of this section, ``routinely
furnished in provider settings'' means furnished in inpatient or
outpatient hospital settings or ambulatory surgical centers more than 50
percent of the time.
(5) CMS establishes a list of services for which a separate supply
payment may be made under this section.
(6) The fee schedule amount for supplies billed separately is not
subject to a GPCI adjustment.
(b) Services of nonphysicians that are incident to a physician's
service. Services of nonphysicians that are covered as incident to a
physician's service are paid as if the physician had personally
furnished the service.
[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at
63 FR 58911, Nov. 2, 1998]
Sec. 414.36 Payment for drugs incident to a physician's service.
Payment for drugs incident to a physician's service is made in
accordance with Sec. 405.517 of this chapter.
Sec. 414.39 Special rules for payment of care plan oversight.
(a) General. Except as specified in paragraphs (b) and (c) of this
section, payment for care plan oversight is included in the payment for
visits and other services under the physician fee schedule. For purposes
of this section a nonphysician practitioner (NPP) is a nurse
practitioner, clinical nurse specialist or physician assistant.
(b) Exception. Separate payment is made under the following
conditions for physician care plan oversight services furnished to
beneficiaries who receive HHA and hospice services that are covered by
Medicare:
(1) The care plan oversight services require recurrent physician
supervision of therapy involving 30 or more minutes of the physician's
time per month.
(2) Payment is made to only one physician per patient for services
furnished during a calendar month period. The physician must have
furnished a service requiring a face-to-face encounter with the patient
at least once during the 6-month period before the month for which care
plan oversight payment is first billed. The physician may not
[[Page 12]]
have a significant ownership interest in, or financial or contractual
relationship with, the HHA in accordance with Sec. 424.22(d) of this
chapter. The physician may not be the medical director or employee of
the hospice and may not furnish services under an arrangement with the
hospice.
(3) If a physician furnishes care plan oversight services during a
postoperative period, payment for care plan oversight services is made
if the services are documented in the patient's medical record as
unrelated to the surgery.
(c) Special rules for payment of care plan oversight provided by
nonphysician practitioners for beneficiaries who receive HHA services
covered by Medicare. (1) An NPP can furnish physician care plan
oversight (but may not certify a patient as needing home health
services) only if the physician who signs the plan of care provides
regular ongoing care under the same plan of care as does the NPP billing
for care plan oversight and either--
(i) The physician and NPP are part of the same group practice; or
(ii) If the NPP is a nurse practitioner or clinical nurse
specialist, the physician signing the plan of care also has a
collaborative agreement with the NPP; or
(iii) If the NPP is a physician assistant, the physician signing the
plan of care is also the physician who provides general supervision of
physician assistant services for the practice.
(2) Payment may be made for care plan oversight services furnished
by an NPP when:
(i) The NPP providing the care plan oversight has seen and examined
the patient;
(ii) The NPP providing care plan oversight is not functioning as a
consultant whose participation is limited to a single medical condition
rather than multi-disciplinary coordination of care; and
(iii) The NPP providing care plan oversight integrates his or her
care with that of the physician who signed the plan of care.
[59 FR 63463, Dec. 8, 1994; 60 FR 49, Jan. 3, 1995; 60 FR 36733, July
18, 1995 as amended at 69 FR 66423, Nov. 15, 2004; 70 FR 16722, Apr. 1,
2005]
Sec. 414.40 Coding and ancillary policies.
(a) General rule. CMS establishes uniform national definitions of
services, codes to represent services, and payment modifiers to the
codes.
(b) Specific types of policies. CMS establishes uniform national
ancillary policies necessary to implement the fee schedule for physician
services. These include, but are not limited to, the following policies:
(1) Global surgery policy (for example, post- and pre-operative
periods and services, and intra-operative services).
(2) Professional and technical components (for example, payment for
services, such as an EEG, which typically comprise a technical component
(the taking of the test) and a professional component (the
interpretation)).
(3) Payment modifiers (for example, assistant-at-surgery, multiple
surgery, bilateral surgery, split surgical global services, team
surgery, and unusual services).
Sec. 414.42 Adjustment for first 4 years of practice.
(a) General rule. For services furnished during CYs 1992 and 1993,
except as specified in paragraph (b) of this section, the fee schedule
payment amount or prevailing charge must be phased in as specified in
paragraph (d) of this section for physicians, physical therapists (PTs),
occupational therapists (OTs), and all other health care practitioners
who are in their first through fourth years of practice.
(b) Exception. The reduction required in paragraph (d) of this
section does not apply to primary care services or to services furnished
in a rural area as defined in section 1886(d)(2)(D) of the Act that is
designated under section 332(a)(1)(A) of the Public Health Service Act
as a Health Professional Shortage Area.
(c) Definition of years of practice. (1) The ``first year of
practice`` is the first full CY during the first 6 months of which the
physician, PT, OT, or other health care practitioner furnishes
professional services for which payment may be made under Medicare Part
B, plus any portion of the prior CY if that prior year does not meet the
first 6 months test.
[[Page 13]]
(2) The ``second, third, and fourth years of practice`` are the
first, second, and third CYs following the first year of practice,
respectively.
(d) Amounts of adjustment. The fee schedule payment for the service
of a new physician, PT, OT, or other health care practitioner is limited
to the following percentages for each of the indicated years:
(1) First year--80 percent
(2) Second year--85 percent
(3) Third year--90 percent
(4) Fourth year--95 percent
[57 FR 42493, Sept. 15, 1992, as amended at 58 FR 63687, Dec. 2, 1993]
Sec. 414.44 Transition rules.
(a) Adjusted historical payment basis--(1) All services other than
radiology and nuclear medicine services. For all physician services
other than radiology services, furnished in a fee schedule area, the
adjusted historical payment basis (AHPB) is the estimated weighted
average prevailing charge applied in the fee schedule area for the
service in CY 1991, as determined by CMS without regard to physician
specialty and as adjusted to reflect payments for services below the
prevailing charge, adjusted by the update established for CY 1992.
(2) Radiology services. For radiology services, the AHPB is the
amount paid for the service in the fee schedule area in CY 1991 under
the fee schedule established under section 1834(b), adjusted by the
update established for CY 1992.
(3) Nuclear medicine services. For nuclear medicine services, the
AHPB is the amount paid for the service in the fee schedule area in CY
1991 under the fee schedule established under section 6105(b) of Public
Law 101-239 and section 4102(g) of Public Law 101-508, adjusted by the
update established for CY 1992.
(4) Transition adjustment. CMS adjusts the AHPB for all services by
5.5 percent to produce budget-neutral payments for 1992.
(b) Adjustment of 1992 payments for physician services other than
radiology services. For physician services furnished during CY 1992 the
following rules apply:
(1) If the AHPB determined under paragraph (a) of this section is
from 85 percent to 115 percent of the fee schedule amount for the area
for services furnished in 1992, payment is at the fee schedule amount.
(2) If the AHPB determined under paragraph (a) of this section is
less than 85 percent of the fee schedule amount for the area for
services furnished in 1992, an amount equal to the AHPB plus 15 percent
of the fee schedule amount is substituted for the fee schedule amount.
(3) If the AHPB determined under paragraph (a) of this section is
greater than 115 percent of the fee schedule amount for the area for
services furnished in 1992, an amount equal to the AHPB minus 15 percent
of the fee schedule amount is substituted for the fee schedule amount.
(c) Adjustment of 1992 payments for radiology services. For
radiology services furnished during CY 1992 the following rules apply:
(1) If the AHPB determined under paragraph (a) of this section is
from 85 percent to 109 percent of the fee schedule amount for the area
for services furnished in 1992, payment is at the fee schedule amount.
(2) If the AHPB determined under paragraph (a) of this section is
less than 85 percent of the fee schedule amount for the area for
services furnished in 1992, an amount equal to the AHPB plus 15 percent
of the fee schedule amount is substituted for the fee schedule amount.
(3) If the AHPB determined under paragraph (a) of this section is
greater than 109 percent of the fee schedule amount for the area for
services furnished in 1992, an amount equal to the AHPB minus 9 percent
of the fee schedule amount is substituted for the fee schedule amount.
(d) Computation of payments for CY 1993. For physician services
subject to the transition rules in CY 1992 and furnished during CY 1993,
the fee schedule is equal to 75 percent of the amount that would have
been paid in the fee schedule area under the 1992 transition rules,
adjusted by the amount of the 1993 update, plus 25 percent of the 1993
fee schedule amount.
(e) Computation of payments for CY 1994. For physician services
subject to the transition rules in CY 1993, and furnished during CY
1994, the fee schedule
[[Page 14]]
is equal to 67 percent of the amount that would have been paid in the
fee schedule area under the 1993 transition rules, adjusted by the
amount of the 1994 update, plus 33 percent of the 1994 fee schedule
amount.
(f) Computation of payments for CY 1995. For physician services
subject to the transition rules in CY 1994 and furnished during CY 1995,
the fee schedule is equal to 50 percent of the amount that would have
been paid in the fee schedule area under the 1994 transition rules,
adjusted by the amount of the 1995 update, plus 50 percent of the 1995
fee schedule amount.
Sec. 414.46 Additional rules for payment of anesthesia services.
(a) Definitions. For purposes of this section, the following
definitions apply:
(1) Base unit means the value for each anesthesia code that reflects
all activities other than anesthesia time. These activities include
usual preoperative and postoperative visits, the administration of
fluids and blood incident to anesthesia care, and monitoring services.
(2) Anesthesia practitioner, for the purpose of anesthesia time,
means a physician who performs the anesthesia service alone, a CRNA who
is not medically directed who performs the anesthesia service alone, or
a medically directed CRNA.
(3) Anesthesia time means the time during which an anesthesia
practitioner is present with the patient. It starts when the anesthesia
practitioner begins to prepare the patient for anesthesia services and
ends when the anesthesia practitioner is no longer furnishing anesthesia
services to the beneficiary, that is, when the beneficiary may be placed
safely under postoperative care. Anesthesia time is a continuous time
period from the start of anesthesia to the end of an anesthesia service.
In counting anesthesia time, the anesthesia practitioner can add blocks
of anesthesia time around an interruption in anesthesia time as long as
the anesthesia practitioner is furnishing continuous anesthesia care
within the time periods around the interruption.
(b) Determinations of payment amount--Basic rule. For anesthesia
services performed, medically directed, or medically supervised by a
physician, CMS pays the lesser of the actual charge or the anesthesia
fee schedule amount.
(1) The carrier bases the fee schedule amount for an anesthesia
service on the product of the sum of allowable base and time units and
an anesthesia-specific CF. The carrier calculates the time units from
the anesthesia time reported by the anesthesia practitioner for the
anesthesia procedure. The physician who fulfills the conditions for
medical direction in Sec. 415.110 (Conditions for payment:
Anesthesiology services) reports the same anesthesia time as the
medically-directed CRNA.
(2) CMS furnishes the carrier with the base units for each
anesthesia procedure code. The base units are derived from the 1988
American Society of Anesthesiologists' Relative Value Guide except that
the number of base units recognized for anesthesia services furnished
during cataract or iridectomy surgery is four units.
(3) Modifier units are not allowed. Modifier units include
additional units charged by a physician or a CRNA for patient health
status, risk, age, or unusual circumstances.
(c) Physician personally performs the anesthesia procedure. (1) CMS
considers an anesthesia service to be personally performed under any of
the following circumstances:
(i) The physician performs the entire anesthesia service alone.
(ii) The physician establishes an attending physician relationship
in one or two concurrent cases involving an intern or resident and the
service was furnished before January 1, 1994.
(iii) The physician establishes an attending physician relationship
in one case involving an intern or resident and the service was
furnished on or after January 1, 1994 but prior to January 1, 1996. For
services on or after January 1, 1996, the physician must be the teaching
physician as defined in Sec. Sec. 415.170 through 415.184 of this
chapter.
(iv) The physician and the CRNA or AA are involved in a single case
and
[[Page 15]]
the services of each are found to be medically necessary.
(v) The physician is continuously involved in a single case
involving a student nurse anesthetist.
(vi) The physician is continuously involved in a single case
involving a CRNA or AA and the service was furnished prior to January 1,
1998.
(2) CMS determines the fee schedule amount for an anesthesia service
personally performed by a physician on the basis of an anesthesia-
specific fee schedule CF and unreduced base units and anesthesia time
units. One anesthesia time unit is equivalent to 15 minutes of
anesthesia time, and fractions of a 15-minute period are recognized as
fractions of an anesthesia time unit.
(d) Anesthesia services medically directed by a physician. (1) CMS
considers an anesthesia service to be medically directed by a physician
if:
(i) The physician performs the activities described in Sec. 415.110
of this chapter.
(ii) The physician directs qualified individuals involved in two,
three, or four concurrent cases.
(iii) Medical direction can occur for a single case furnished on or
after January 1, 1998 if the physician performs the activities described
in Sec. 415.110 of this chapter and medically directs a single CRNA or
AA.
(2) The rules for medical direction differ for certain time periods
depending on the nature of the qualified individual who is directed by
the physician. If more than two procedures are directed on or after
January 1, 1994, the qualified individuals could be AAs, CRNAs, interns,
or residents. The medical direction rules apply to student nurse
anesthetists only if the physician directs two concurrent cases, each of
which involves a student nurse anesthetist or the physician directs one
case involving a student nurse anesthetist and the other involving a
CRNA, AA, intern, or resident.
(3) Payment for medical direction is based on a specific percentage
of the payment allowance recognized for the anesthesia service
personally performed by a physician alone. The following percentages
apply for the years specified:
(i) CY 1994--60 percent of the payment allowance for personally
performed procedures.
(ii) CY 1995--57.5 percent of the payment allowance for personally
performed services.
(iii) CY 1996--55 percent of the payment allowance for personally
performed services.
(iv) CY 1997--52.5 percent of the payment allowance for personally
performed services.
(v) CY 1998 and thereafter--50 percent of the payment allowance for
personally performed services.
(e) Physicians involved with two concurrent cases with residents.
The physician can bill base units and time units based on the amount of
time the physician is actually present with the resident during each of
two concurrent cases furnished on or after January 1, 2004.
(1) To bill the base units, the physician must be present with the
resident during the pre- and post-anesthesia care included in the base
units.
(2) If the physician is not present with the resident during pre-
and post-anesthesia care, then the physician may bill the case as a
medically directed case in accordance with paragraph (d) of this
section.
(f) Physician medically supervises anesthesia services. If the
physician medically supervises more than four concurrent anesthesia
services, CMS bases the fee schedule amount on an anesthesia-specific CF
and three base units. This represents payment for the physician's
involvement in the pre-surgical anesthesia services.
(g) Payment for medical or surgical services furnished by a
physician while furnishing anesthesia services. (1) CMS allows separate
payment under the fee schedule for certain reasonable and medically
necessary medical or surgical services furnished by a physician while
furnishing anesthesia services to the patient. CMS makes payment for
these services in accordance with the general physician fee schedule
rules in Sec. 414.20. These services are described in program operating
instructions.
(2) CMS makes no separate payment for other medical or surgical
services, such as the pre-anesthetic examination of the patient, pre- or
post-operative
[[Page 16]]
visits, or usual monitoring functions, that are ordinarily included in
the anesthesia service.
(h) Physician involved in multiple anesthesia services. If the
physician is involved in multiple anesthesia services for the same
patient during the same operative session, the carrier makes payment
according to the base unit associated with the anesthesia service having
the highest base unit value and anesthesia time that encompasses the
multiple services. The carrier makes payment for add-on anesthesia codes
according to program operating instructions.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992;
58 FR 63687, Dec. 2, 1993; 60 FR 63177, Dec. 8, 1995; 64 FR 59441, Nov.
2, 1999; 67 FR 80041, Dec. 31, 2002; 68 FR 63261, Nov. 7, 2003]
Sec. 414.48 Limits on actual charges of nonparticipating suppliers.
(a) General rule. A supplier, as defined in Sec. 400.202 of this
chapter, who is nonparticipating and does not accept assignment may
charge a beneficiary an amount up to the limiting charge described in
paragraph (b) of this section.
(b) Specific limits. For items or services paid under the physician
fee schedule, the limiting charge is 115 percent of the fee schedule
amount for nonparticipating suppliers. For items or services CMS
excludes from payment under the physician fee schedule (in accordance
with section 1848 (j)(3) of the Act), the limiting charge is 115 percent
of 95 percent of the payment basis applicable to participating suppliers
as calculated in Sec. 414.20(b).
[58 FR 63687, Dec. 2, 1993, as amended at 62 FR 59102, Oct. 31, 1997]
Sec. 414.50 Physician billing for purchased diagnostic tests.
(a) General rule. For services covered under section 1861(s)(3) of
the Act and paid for under this part 414 subpart A, if a physician bills
for a diagnostic test performed by an outside supplier, the payment to
the physician less the applicable deductibles and coinsurance may not
exceed the lowest of the following amounts:
(1) The supplier's net charge to the physician.
(2) The physician's actual charge.
(3) The fee schedule amount for the test that would be allowed if
the supplier billed directly.
(b) Restriction on payment. The physician must identify the supplier
and indicate the supplier's net charge for the test. If the physician
fails to provide this information, CMS makes no payment to the physician
and the physician may not bill the beneficiary.
(1) Physicians who accept Medicare assignment may bill beneficiaries
for only the applicable deductibles and coinsurance.
(2) Physicians who do not accept Medicare assignment may not bill
the beneficiary more than the payment amount described in paragraph (a)
of this section.
[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at
63 FR 34328, June 24, 1998]
Sec. 414.52 Payment for physician assistants' services.
Allowed amounts for the services of a physician assistant furnished
beginning January 1, 1992 and ending December 31, 1997, may not exceed
the limits specified in paragraphs (a) through (c) of this section.
Allowed amounts for the services of a physician assistant furnished
beginning January 1, 1998, may not exceed the limits specified in
paragraph (d) of this section.
(a) For assistant-at-surgery services, 65 percent of the amount that
would be allowed under the physician fee schedule if the assistant-at-
surgery service was furnished by a physician.
(b) For services (other than assistant-at-surgery services)
furnished in a hospital, 75 percent of the physician fee schedule amount
for the service.
(c) For all other services, 85 percent of the physician fee schedule
amount for the service.
(d) For services (other than assistant-at-surgery services)
furnished beginning January 1, 1998, 85 percent of the physician fee
schedule amount for the service. For assistant-at-surgery services, 85
percent of the physician fee schedule amount that would be allowed under
the physician fee schedule if the
[[Page 17]]
assistant-at-surgery service were furnished by a physician.
[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at
63 FR 58911, Nov. 2, 1998]
Sec. 414.54 Payment for certified nurse-midwives' services.
For services furnished after December 31, 1991, allowed amounts
under the fee schedule established under section 1833(a)(1)(K) of the
Act for the payment of certified nurse-midwife services may not exceed
65 percent of the physician fee schedule amount for the service.
Sec. 414.56 Payment for nurse practitioners' and clinical nurse specialists' services.
(a) Rural areas. For services furnished beginning January 1, 1992
and ending December 31, 1997, allowed amounts for the services of a
nurse practitioner or a clinical nurse specialist in a rural area (as
described in section 1861(s)(2)(K)(iii) of the Act) may not exceed the
following limits:
(1) For services furnished in a hospital (including assistant-at-
surgery services), 75 percent of the physician fee schedule amount for
the service.
(2) For all other services, 85 percent of the physician fee schedule
amount for the service.
(b) Non-rural areas. For services furnished beginning January 1,
1992 and ending December 31, 1997, allowed amounts for the services of a
nurse practitioner or a clinical nurse specialist in a nursing facility
may not exceed 85 percent of the physician fee schedule amount for the
service.
(c) Beginning January 1, 1998. For services (other than assistant-
at-surgery services) furnished beginning January 1, 1998, allowed
amounts for the services of a nurse practitioner or clinical nurse
specialist may not exceed 85 percent of the physician fee schedule
amount for the service. For assistant-at-surgery services, allowed
amounts for the services of a nurse practitioner or clinical nurse
specialist may not exceed 85 percent of the physician fee schedule
amount that would be allowed under the physician fee schedule if the
assistant-at-surgery service were furnished by a physician.
[63 FR 58911, Nov. 2, 1998]
Sec. 414.58 Payment of charges for physician services to patients in providers.
(a) Payment under the physician fee schedule. In addition to the
special conditions for payment in Sec. Sec. 415.100 through 415.130,
and Sec. 415.190 of this chapter, CMS establishes payment for physician
services to patients in providers under the physician fee schedule in
accordance with Sec. Sec. 414.1 through 414.48.
(b) Teaching hospitals. Services furnished by physicians in teaching
hospitals may be made on a reasonable cost basis set forth in Sec.
415.162 of this chapter if the hospital exercises the election described
in Sec. 415.160 of this chapter.
[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992;
60 FR 63189, Dec. 8, 1995]
Sec. 414.60 Payment for the services of CRNAs.
(a) Basis for payment. The allowance for the anesthesia service
furnished by a CRNA, medically directed or not medically directed, is
based on allowable base and time units as defined in Sec. 414.46(a).
Beginning with CY 1994--
(1) The allowance for an anesthesia service furnished by a medically
directed CRNA is based on a fixed percentage of the allowance recognized
for the anesthesia service personally performed by the physician alone,
as specified in Sec. 414.46(d)(3); and
(2) The CF for an anesthesia service furnished by a CRNA not
directed by a physician may not exceed the CF for a service personally
performed by a physician.
(b) To whom payment may be made. Payment for an anesthesia service
furnished by a CRNA may be made to the CRNA or to any individual or
entity (such as a hospital, critical access hospital, physician, group
practice, or ambulatory surgical center) with which the CRNA has an
employment or contract relationship that provides for payment to be made
to the individual or entity.
(c) Condition for payment. Payment for the services of a CRNA may be
made only on an assignment related basis, and any assignment accepted by
a CRNA is binding on any other person
[[Page 18]]
presenting a claim or request for payment for the service.
[60 FR 63178, Dec. 8, 1995, as amended at 62 FR 46037, Aug. 29, 1997; 64
FR 59441, Nov. 2, 1999]
Sec. 414.62 Fee schedule for clinical psychologist services.
The fee schedule for clinical psychologist services is set at 100
percent of the amount determined for corresponding services under the
physician fee schedule.
[62 FR 59102, Oct. 31, 1997]
Sec. 414.63 Payment for outpatient diabetes self-management training.
(a) Payment under the physician fee schedule. Except as provided in
paragraph (d) of this section, payment for outpatient diabetes self-
management training is made under the physician fee schedule in
accordance with Sec. Sec. 414.1 through 414.48.
(b) To whom payment may be made. Payment may be made to an entity
approved by CMS to furnish outpatient diabetes self-management training
in accordance with part 410, subpart H of this chapter.
(c) Limitation on payment. Payment may be made for training sessions
actually attended by the beneficiary and documented on attendance
sheets.
(d) Payments made to those not paid under the physician fee
schedule. Payments may be made to other entities not routinely paid
under the physician fee schedule, such as hospital outpatient
departments, ESRD facilities, and DME suppliers. The payment equals the
amounts paid under the physician fee schedule.
(e) Other conditions for fee-for-service payment. The beneficiary
must meet the following conditions:
(1) Has not previously received initial training for which Medicare
payment was made under this benefit.
(2) Is not receiving services as an inpatient in a hospital, SNF,
hospice, or nursing home.
(3) Is not receiving services as an outpatient in an RHC or FQHC.
[65 FR 83153, Dec. 29, 2000]
Sec. 414.64 Payment for medical nutrition therapy.
(a) Payment under the physician fee schedule. Medicare payment for
medical nutrition therapy is made under the physician fee schedule in
accordance with subpart B of this part. Payment to non-physician
professionals, as specified in paragraph (b) of this section, is the
lesser of the actual charges or 80 percent of 85 percent of the
physician fee schedule amount.
(b) To whom payment may be made. Payment may be made to a registered
dietician or nutrition professional qualified to furnish medical
nutrition therapy in accordance with part 410, subpart G of this
chapter.
(c) Effective date of payment. Medicare pays suppliers of medical
nutrition therapy on or after the effective date of enrollment of the
supplier at the carrier.
(d) Limitation on payment. Payment is made only for documented
nutritional therapy sessions actually attended by the beneficiary.
(e) Other conditions for fee-for-service payment. Payment is made
only if the beneficiary:
(1) Is not an inpatient of a hospital, SNF, nursing home, or
hospice.
(2) Is not receiving services in an RHC, FQHC or ESRD dialysis
facility.
[66 FR 55332, Nov. 1, 2001]
Sec. 414.65 Payment for telehealth services.
(a) Professional service. Medicare payment for the professional
service via an interactive telecommunications system is made according
to the following limitations:
(1) The Medicare payment amount for office or other outpatient
visits, consultation, individual psychotherapy, psychiatric diagnostic
interview examination, pharmacologic management, end stage renal disease
related services included in the monthly capitation payment (except for
one visit per month to examine the access site), and individual medical
nutrition therapy furnished via an interactive telecommunications system
is equal to the current fee schedule amount applicable for the service
of the physician or practitioner.
[[Page 19]]
(2) Only the physician or practitioner at the distant site may bill
and receive payment for the professional service via an interactive
telecommunications system.
(3) Payments made to the physician or practitioner at the distant
site, including deductible and coinsurance, for the professional service
may not be shared with the referring practitioner or telepresenter.
(b) Originating site facility fee. For telehealth services furnished
on or after October 1, 2001:
(1) For services furnished on or after October 1, 2001 through
December 31, 2002, the payment amount to the originating site is the
lesser of the actual charge or the originating site facility fee of $20.
For services furnished on or after January 1 of each subsequent year,
the facility fee for the originating site will be updated by the
Medicare Economic Index (MEI) as defined in section 1842(i)(3) of the
Act.
(2) Only the originating site may bill for the originating site
facility fee and only on an assignment-related basis. The distant site
physician or practitioner may not bill for or receive payment for
facility fees associated with the professional service furnished via an
interactive telecommunications system.
(c) Deductible and coinsurance apply. The payment for the
professional service and originating site facility fee is subject to the
coinsurance and deductible requirements of sections 1833(a)(1) and (b)
of the Act.
(d) Assignment required for physicians, practitioners, and
originating sites. Payment to physicians, practitioners, and originating
sites is made only on an assignment-related basis.
(e) Sanctions. A distant site practitioner or originating site
facility may be subject to the applicable sanctions provided for in
chapter IV, part 402 and chapter V, parts 1001, 1002, and 1003 of this
title if he or she does any of the following:
(1) Knowingly and willfully bills or collects for services in
violation of the limitation of this section.
(2) Fails to timely correct excess charges by reducing the actual
charge billed for the service in an amount that does not exceed the
limiting charge for the service or fails to timely refund excess
collections.
(3) Fails to submit a claim on a standard form for services provided
for which payment is made on a fee schedule basis.
(4) Imposes a charge for completing and submitting the standard
claims form.
[66 FR 55332, Nov. 1, 2001, as amended at 67 FR 80041, Dec. 31, 2003; 69
FR 66424, Nov. 15, 2004; 70 FR 70332, Nov. 21, 2005]
Sec. 414.66 Incentive payments for physician scarcity areas.
(a) Definition. As used in this section, the following definitions
apply.
Physician scarcity area is defined as an area with a shortage of
primary care physicians or specialty physicians to the Medicare
population in that area.
Primary care physician is defined as a general practitioner, family
practice practitioner, general internist, obstetrician or gynecologist.
(b) Physicians' services furnished to a beneficiary in a Physician
Scarcity Area (PSA) for primary or specialist care are eligible for a 5
percent incentive payment.
(c) Primary care physicians furnishing services in primary care PSAs
are entitled to an additional 5 percent incentive payment above the
amount paid under the physician fee schedule for their professional
services furnished on or after January 1, 2005 and before January 1,
2008.
(d) Physicians, as defined in section 1861(r)(1) of the Act,
furnishing services in specialist care PSAs are entitled to an
additional 5 percent payment above the amount paid under the physician
fee schedule for their professional services furnished on or after
January 1, 2005 and before January 1, 2008.
[69 FR 66424, Nov. 15, 2004]
Sec. 414.67 Incentive payments for Health Professional Shortage Areas.
(a) Physicians' services furnished to a beneficiary in a geographic-
based Health Professional Shortage Area (HPSA) are eligible for a 10
percent incentive payment above the amount paid for their professional
services under the physician fee schedule.
[[Page 20]]
(b) Physicians furnishing services in a geographic-based primary
medical care HPSA are entitled to a 10 percent incentive payment above
the amount paid for their professional services under the physician fee
schedule.
(c) Psychiatrists furnishing services in a mental health HPSA are
entitled to a 10 percent incentive payment above the amount paid for
their professional services under the physician fee schedule. (The only
physicians eligible to receive the 10 percent incentive payment in
mental health HPSAs that do not overlap with primary care HPSAs are
psychiatrists.)
[69 FR 66424, Nov. 15, 2004]
Subpart C_Fee Schedules for Parenteral and Enteral Nutrition (PEN)
Nutrients, Equipment and Supplies
Source: 66 FR 45176, Aug. 28, 2001, unless otherwise noted.
Sec. 414.100 Purpose.
This subpart implements fee schedules for PEN items and services as
authorized by section 1842(s) of the Act.
Sec. 414.102 General payment rules.
(a) General rule. For items and services furnished on or after
January 1, 2002, Medicare pays for the items and services as described
in paragraph (b) of this section on the basis of 80 percent of the
lesser of--
(1) The actual charge for the item or service; or
(2) The fee schedule amount for the item or service, as determined
in accordance with Sec. Sec. 414.104.
(b) Payment classification. (1) CMS or the carrier determines fee
schedules for Parenteral and enteral nutrition (PEN) nutrients,
equipment, and supplies, as specified in Sec. 414.104.
(2) CMS designates the specific items and services in each category
through program instructions.
(c) Updating the fee schedule amounts. For each year subsequent to
2002, the fee schedule amounts of the preceding year are updated by the
percentage increase in the CPI-U for the 12-month period ending with
June of the preceding year.
Sec. 414.104 PEN Items and Services.
(a) Payment Rules. Payment for PEN items and services is made in a
lump sum for nutrients and supplies that are purchased and on a monthly
basis for equipment that is rented.
(b) Fee schedule amount. The fee schedule amount for payment for an
item or service furnished in 2002 is the lesser of--
(i) The reasonable charge from 1995; or
(ii) The reasonable charge that would have been used in determining
payment for 2002.
Subpart D_Payment for Durable Medical Equipment and Prosthetic and
Orthotic Devices
Sec. 414.200 Purpose.
This subpart implements sections 1834 (a) and (h) of the Act by
specifying how payments are made for the purchase or rental of new and
used durable medical equipment and prosthetic and orthotic devices for
Medicare beneficiaries.
[57 FR 57689, Dec. 7, 1992]
Sec. 414.202 Definitions.
For purposes of this subpart, the following definitions apply:
Covered item update means the percentage increase in the consumer
price index for all urban consumers (U.S. city average) (CPI-U) for the
12-month period ending with June of the previous year.
Durable medical equipment means equipment, furnished by a supplier
or a home health agency that--
(1) Can withstand repeated use;
(2) Is primarily and customarily used to serve a medical purpose;
(3) Generally is not useful to an individual in the absence of an
illness or injury; and
(4) Is appropriate for use in the home. (See Sec. 410.38 of this
chapter for a description of when an institution qualifies as a home.)
Prosthetic and orthotic devices means--
(1) Devices that replace all or part of an internal body organ,
including ostomy bags and supplies directly related to ostomy care, and
replacement of such devices and supplies;
[[Page 21]]
(2) One pair of conventional eyeglasses or contact lenses furnished
subsequent to each cataract surgery with insertion of an intraocular
lens; and
(3) Leg, arm, back, and neck braces, and artificial legs, arms, and
eyes, including replacements if required because of a change in the
beneficiary's physical condition.
The following are neither prosthetic nor orthotic devices--
(1) Parenteral and enteral nutrients, supplies, and equipment;
(2) Intraocular lenses;
(3) Medical supplies such as catheters, catheter supplies, ostomy
bags, and supplies related to ostomy care that are furnished by an HHA
as part of home health services under Sec. 409.40(e) of this chapter;
(4) Dental prostheses.
Region means those carrier service areas administered by CMS
regional offices.
[57 FR 57689, Dec. 7, 1992]
Sec. 414.210 General payment rules.
(a) General rule. For items furnished on or after January 1, 1989,
except as provided in paragraphs (c) and (d) of this section, Medicare
pays for durable medical equipment, prosthetics and orthotics, including
a separate payment for maintenance and servicing of the items as
described in paragraph (e) of this section, on the basis of 80 percent
of the lesser of--
(1) The actual charge for the item;
(2) The fee schedule amount for the item, as determined in
accordance with the provisions of Sec. Sec. 414.220 through 414.232.
(b) Payment classification. (1) The carrier determines fee schedules
for the following classes of equipment and devices:
(i) Inexpensive or routinely purchased items, as specified in Sec.
414.220.
(ii) Items requiring frequent and substantial servicing, as
specified in Sec. 414.222.
(iii) Certain customized items, as specified in Sec. 414.224.
(iv) Oxygen and oxygen equipment, as specified in Sec. 414.226.
(v) Prosthetic and orthotic devices, as specified in Sec. 414.228.
(vi) Other durable medical equipment (capped rental items), as
specified in Sec. 414.229.
(vii) Transcutaneous electrical nerve stimulators (TENS), as
specified in Sec. 414.232.
(2) CMS designates the items in each class of equipment or device
through its program instructions.
(c) Exception for certain HHAs. Public HHAs and HHAs that furnish
services or items free-of-charge or at nominal prices to a significant
number of low-income patients, as defined in Sec. 413.13(a) of this
chapter, are paid on the basis of 80 percent of the fee schedule amount
determined in accordance with the provision of Sec. Sec. 414.220
through 414.230.
(d) Prohibition on special limits. For items furnished on or after
January 1, 1989 and before January 1, 1991, neither CMS nor a carrier
may establish a special reasonable charge for items covered under this
subpart on the basis of inherent reasonableness as described in Sec.
405.502(g) of this chapter.
(e) Maintenance and servicing--(1) General rule. Except as provided
in paragraph (e)(2) of this section, the carrier pays the reasonable and
necessary charges for maintenance and servicing of purchased equipment.
Reasonable and necessary charges are those made for parts and labor not
otherwise covered under a manufacturer's or supplier's warranty. Payment
is made, as needed, in a lump sum based on the carrier's consideration
of the item. Payment is not made for maintenance and servicing of a
rented item other than the maintenance and servicing fee for other
durable medical equipment, as described in Sec. 414.229(e).
(2) Exception. For items purchased on or after June 1, 1989, no
payment is made under the provisions of paragraph (e)(1) of this section
for the maintenance and servicing of:
(i) Items requiring frequent and substantial servicing, as defined
in Sec. 414.222(a);
(ii) Capped rental items, as defined in Sec. 414.229(a), that are
not purchased in accordance with Sec. 414.229(d); and
(iii) Oxygen equipment, as defined in Sec. 414.226.
(f) Replacement of equipment. Except as provided in Sec.
414.229(g), if a purchased item of DME or a prosthetic or
[[Page 22]]
orthotic device paid for under this subpart has been in continuous use
by the patient for the equipment's reasonable useful lifetime or if the
carrier determines that the item is lost or irreparably damaged, the
patient may elect to obtain a new piece of equipment.
(1) The reasonable useful lifetime of DME or prosthetic and orthotic
devices is determined through program instructions. In the absence of
program instructions, carriers may determine the reasonable useful
lifetime of equipment but in no case can it be less than 5 years.
Computation is based on when the equipment is delivered to the
beneficiary, not the age of the equipment.
(2) If the beneficiary elects to obtain replacement equipment,
payment is made on a purchase basis.
[57 FR 57689, Dec. 7, 1992]
Sec. 414.220 Inexpensive or routinely purchased items.
(a) Definitions. (1) Inexpensive equipment means equipment the
average purchase price of which did not exceed $150 during the period
July 1986 through June 1987.
(2) Routinely purchased equipment means equipment that was acquired
by purchase on a national basis at least 75 percent of the time during
the period July 1986 through June 1987.
(3) Accessories. Effective January 1, 1994, accessories used in
conjunction with a nebulizer, aspirator, or ventilator excluded from
Sec. 414.222 meet the definitions of ``inexpensive equipment'' and
``routinely purchased equipment'' in paragraphs (a)(1) and (a)(2) of
this section, respectively.
(b) Payment rules. (1) Subject to the limitation in paragraph (b)(3)
of this section, payment for inexpensive and routinely purchased items
is made on a rental basis or in a lump sum amount for purchase of the
item based on the applicable fee schedule amount.
(2) Effective January 1, 1994, payment for ostomy supplies,
tracheostomy supplies, urologicals, and surgical dressings not furnished
as incident to a physician's professional service or furnished by an HHA
is made using the methodology for the inexpensive and routinely
purchased class.
(3) The total amount of payments made for an item may not exceed the
fee schedule amount recognized for the purchase of that item.
(c) Fee schedule amount for 1989 and 1990. The fee schedule amount
for payment of purchase or rental of inexpensive or routinely purchased
items furnished in 1989 and 1990 is the local payment amount determined
as follows:
(1) The carrier determines the average reasonable charge for
inexpensive or routinely purchased items that were furnished during the
period July 1, 1986 through June 30, 1987 based on the mean of the
carrier's allowed charges for the item. A separate determination of an
average reasonable charge is made for rental equipment, new purchased
equipment, and used purchased equipment.
(2) The carrier adjusts the amount determined under paragraph (c)(1)
of this section by the change in the level of the CPI-U for the 6-month
period ending December 1987.
(d) Updating the local payment amounts for years after 1990. For
each year subsequent to 1990, the local payment amounts of the preceding
year are increased or decreased by the covered item update. For 1991 and
1992, the covered item update is reduced by 1 percentage point.
(e) Calculating the fee schedule amounts for years after 1990. For
years after 1990, the fee schedule amounts are equal to the national
limited payment amount.
(f) Calculating the national limited payment amount. The national
limited payment amount is computed as follows:
(1) The 1991 national limited payment amount is equal to:
(i) 100 percent of the local payment amount if the local payment
amount is neither greater than the weighted average nor less than 85
percent of the weighted average of all local payment amounts;
(ii) The sum of 67 percent of the local payment amount plus 33
percent of the weighted average of all local payment amounts if the
local payment amount exceeds the weighted average of all local payment
amounts; or
(iii) The sum of 67 percent of the local payment amount plus 33
percent of 85 percent of the weighted average of all local payment
amounts if the local payment amount is less than 85 percent
[[Page 23]]
of the weighted average of all local payment amounts.
(2) The 1992 national limited payment amount is equal to:
(i) 100 percent of the local payment amount if the local payment
amount is neither greater than the weighted average nor less than 85
percent of the weighted average of all local payment amounts;
(ii) The sum of 33 percent of the local payment amount plus 67
percent of the weighted average of all local payment amounts if the
local payment amount exceeds the weighted average; or
(iii) The sum of 33 percent of the local payment amount plus 67
percent of 85 percent of the weighted average of all local payment
amounts if the local payment amount is less than 85 percent of the
weighted average.
(3) For 1993, the national limited payment amount is equal to one of
the following:
(i) 100 percent of the local payment amount if the local payment
amount is neither greater than the weighted average nor less than 85
percent of the weighted average of all local payment amounts.
(ii) 100 percent of the weighted average of all local payment
amounts if the local payment amount exceeds the weighted average of all
local payment amounts.
(iii) 85 percent of the weighted average of all local payment
amounts if the local payment amount is less than 85 percent of the
weighted average of all local payment amounts.
(4) For 1994 and subsequent years, the national limited payment
amount is equal to one of the following:
(i) If the local payment amount is not in excess of the median, nor
less than 85 percent of the median, of all local payment amounts--100
percent of the local payment amount.
(ii) If the local payment amount exceeds the median--100 percent of
the median of all local payment amounts.
(iii) If the local payment amount is less than 85 percent of the
median--85 percent of the median of all local payment amounts.
(g) Payment for surgical dressings. For surgical dressings furnished
after December 31, 1993, the national limited payment amount is computed
based on local payment amounts using average reasonable charges for the
12-month period ending December 31, 1992, increased by the covered item
updates for 1993 and 1994.
[57 FR 57689, Dec. 7, 1992, as amended at 60 FR 35497, July 10, 1995]
Sec. 414.222 Items requiring frequent and substantial servicing.
(a) Definition. Items requiring frequent and substantial servicing
in order to avoid risk to the beneficiary's health are the following:
(1) Ventilators (except those that are either continuous airway
pressure devices or respiratory assist devices with bi-level pressure
capability with or without a backup rate, previously referred to as
``intermittent assist devices with continuous airway pressure
devices'').
(2) Continuous and intermittent positive pressure breathing
machines.
(3) Continuous passive motion machines.
(4) Other items specified in CMS program instructions.
(5) Other items identified by the carrier.
(b) Payment rule. Rental payments for items requiring frequent and
substantial servicing are made on a monthly basis, and continue until
medical necessity ends.
(c) Fee schedule amount for 1989 and 1990. The fee schedule amount
for items requiring frequent and substantial servicing is the local
payment amount determined as follows:
(1) The carrier determines the average reasonable charge for rental
of items requiring frequent and substantial servicing that were
furnished during the period July 1, 1986 through June 30, 1987 based on
the mean of the carrier's allowed charges for the item.
(2) The carrier adjusts the amounts determined under paragraph
(c)(1) of this section by the change in the level of the CPI-U for the
6-month period ending December 1987.
(d) Updating the fee schedule amounts for years after 1990. For
years after 1990, the fee schedules are determined using the methodology
contained in paragraphs (d), (e), and (f) of Sec. 414.220.
(e) Transition to other payment classes. For purposes of calculating
the 15-
[[Page 24]]
month rental period, beginning January 1, 1994, if an item has been paid
for under the frequent and substantial servicing class and is
subsequently paid for under another payment class, the rental period
begins with the first month of continuous rental, even if that period
began before January 1, 1994. For example, if the rental period began on
July 1, 1993, the carrier must use this date as beginning the first
month of rental. Likewise, for purposes of calculating the 10-month
purchase option, the rental period begins with the first month of
continuous rental without regard to when that period started. For
example, if the rental period began in August 1993, the 10-month
purchase option must be offered to the beneficiary in May 1994, the
tenth month of continuous rental.
[57 FR 57690, Dec. 7, 1992, as amended at 60 FR 35497, July 10, 1995; 71
FR 4525, Jan. 27, 2006]
Sec. 414.224 Customized items.
(a) Criteria for a customized item. To be considered a customized
item for payment purposes under paragraph (b) of this section, a covered
item (including a wheelchair) must be uniquely constructed or
substantially modified for a specific beneficiary according to the
description and orders of a physician and be so different from another
item used for the same purpose that the two items cannot be grouped
together for pricing purposes.
(b) Payment rule. Payment is made on a lump sum basis for the
purchase of a customized item based on the carrier's individual
consideration and judgment of a reasonable payment amount for each
customized item. The carrier's individual consideration takes into
account written documentation on the costs of the item including at
least the cost of labor and materials used in customizing an item.
[56 FR 65998, Dec. 20, 1991, as amended at 58 FR 34919, June 30, 1993]
Sec. 414.226 Oxygen and oxygen equipment.
(a) Payment rules. (1) Payment for rental of oxygen equipment and
purchase of oxygen contents is made based on a monthly fee schedule
amount.
(2) Monthly fee schedule payments continue until medical necessity
ends.
(b) Monthly fee schedule amount. (1) Monthly fee schedule amounts
are separately calculated for the following items:
(i) Stationary oxygen equipment and oxygen contents (stationary and
portable oxygen contents).
(ii) Portable oxygen equipment only.
(iii) Stationary and portable oxygen contents only.
(iv) Portable oxygen contents only.
(2) For 1989 and 1990, the monthly fee schedule amounts are the
local payment amounts determined as follows:
(i) The carrier determines the base local average monthly payment
rate equal to the total reasonable charges for the item for the 12-month
period ending December 1986 divided by the total number of months for
all beneficiaries receiving the item for the same period. In determining
the local average monthly payment rate, the following limitations apply:
(A) Purchase charges for oxygen systems are not included as items
classified under paragraph (b)(1)(i) of this section.
(B) Purchase charges for portable equipment are not included as
items classified under paragraph (b)(1)(ii) of this section.
(ii) The carrier determines the local monthly payment amount equal
to 0.95 times the base local average monthly payment amount adjusted by
the change in the CPI-U for the six-month period ending December 1987.
(3) For years after 1990, the fee schedule amounts are determined
using the methodology contained in Sec. 414.220 (d), (e), and (f).
(c) Application of monthly fee schedule amounts. (1) The fee
schedule amount for items described in paragraph (b)(1)(i) of this
section is paid when the beneficiary rents a stationary oxygen system.
(2) Subject to the limitation set forth in paragraph (d)(2) of this
section, the fee schedule amount for items described in paragraph
(b)(1)(ii) of this section is paid when the beneficiary rents a portable
oxygen system.
(3) The fee schedule amount for items described in paragraph
(b)(1)(iii) of this section is paid when the beneficiary
[[Page 25]]
owns a stationary gaseous or liquid oxygen system.
(4) The fee schedule amount for items described in paragraph
(b)(1)(iv) of this section is paid when the beneficiary owns or rents a
portable gaseous or portable liquid oxygen system and uses either a
stationary oxygen concentrator or no stationary oxygen system.
(d) Volume adjustments: (1) The fee schedule amount for an item
described in paragraph (b)(1)(i) of this section is adjusted as follows:
(i) If the attending physician prescribes an oxygen flow rate
exceeding four liters per minute, the fee schedule amount is increased
by 50 percent, subject to the limit in paragraph (d)(2) of this section.
(ii) If the attending physician prescribes an oxygen flow rate of
less than one liter per minute, the fee schedule amount is decreased by
50 percent.
(2) If portable oxygen equipment is used and the prescribed oxygen
flow rate exceeds four liters per minute, the total fee schedule amount
recognized for payment is limited to the higher of--
(i) The sum of the monthly fee schedule amount for the items
described in paragraphs (b)(1)(i) and (ii) of this section; or
(ii) The adjusted fee schedule amount described in paragraph
(d)(1)(i) of this section.
(3) In establishing the volume adjustment for those beneficiaries
whose physicians prescribe varying flow rates, the following rules
apply:
(i) If the prescribed flow rate is different for stationary oxygen
equipment than for portable oxygen equipment, the flow rate for the
stationary equipment is used.
(ii) If the prescribed flow rate is different for the patient at
rest than for the patient at exercise, the flow rate for the patient at
rest is used.
(iii) If the prescribed flow rate is different for nighttime use and
daytime use, the average of the two flow rates is used.
[57 FR 57690, Dec. 7, 1992]
Sec. 414.228 Prosthetic and orthotic devices.
(a) Payment rule. Payment is made on a lump-sum basis for prosthetic
and orthotic devices subject to this subpart.
(b) Fee schedule amounts. The fee schedule amount for prosthetic and
orthotic devices is determined as follows:
(1) The carrier determines a base local purchase price equal to the
average reasonable charge for items purchased during the period July 1,
1986 through June 30, 1987 based on the mean of the carrier's allowed
charges for the item.
(2) The carrier determines a local purchase price equal to the
following:
(i) For 1989 and 1990, the base local purchase price is adjusted by
the change in the level of the CPI-U for the 6-month period ending
December 1987.
(ii) For 1991 through 1993, the local purchase price for the
preceding year is adjusted by the applicable percentage increase for the
year. The applicable percentage increase is equal to 0 percent for 1991.
For 1992 and 1993, the applicable percentage increase is equal to the
percentage increase in the CPI-U for the 12-month period ending with
June of the previous year.
(iii) For 1994 and 1995, the applicable percentage increase is 0
percent.
(iv) For all subsequent years the applicable percentage increase is
equal to the percentage increase in the CPI-U for the 12-month period
ending with June of the previous year.
(3) CMS determines the regional purchase price equal to the
following:
(i) For 1992, the average (weighted by the relative volume of all
claims among carriers) of the local purchase prices for the carriers in
the region.
(ii) For 1993 and subsequent years, the regional purchase price for
the preceding year adjusted by the applicable percentage increase for
the year.
(4) CMS determines a purchase price equal to the following:
(i) For 1989, 1990 and 1991, 100 percent of the local purchase
price.
(ii) For 1992, 75 percent of the local purchase price plus 25
percent of the regional purchase price.
(iii) For 1993, 50 percent of the local purchase price plus 50
percent of the regional purchase price.
(iv) For 1994 and subsequent years, 100 percent of the regional
purchase price.
[[Page 26]]
(5) For 1992 and subsequent years, CMS determines a national average
purchase price equal to the unweighted average of the purchase prices
determined under paragraph (b)(4) of this section for all carriers.
(6) CMS determines the fee schedule amount equal to 100 percent of
the purchase price determined under paragraph (b)(4) of this section,
subject to the following limitations:
(i) For 1992, the amount cannot be greater than 125 percent nor less
than 85 percent of the national average purchase price determined under
paragraph (b)(5) of this section.
(ii) For 1993 and subsequent years, the amount cannot be greater
than 120 percent of the national average nor less than 90 percent of the
national average purchase price determined under paragraph (b)(5) of
this section.
[57 FR 57691, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]
Sec. 414.229 Other durable medical equipment--capped rental items.
(a) General payment rule. Subject to the limitation set forth in
paragraph (b) of this section, payment is made on a rental or purchase
option basis for other durable medical equipment that is not subject to
the payment provisions set forth in Sec. Sec. 414.220 through 414.228.
(b) Fee schedule amounts for rental. (1) For 1989 and 1990, the
monthly fee schedule amount for rental of other covered durable medical
equipment equals 10 percent of the purchase price recognized as
determined under paragraph (c) of this section subject to the following
limitation: For 1989 and 1990, the fee schedule amount cannot be greater
than 115 percent nor less than 85 percent of the prevailing charge, as
determined under Sec. 405.504 of this chapter, established for rental
of the item in January 1987, as adjusted by the change in the level of
the CPI-U for the 6-month period ending December 1987.
(2) For 1991 and subsequent years, the monthly fee schedule amount
for rental of other covered durable medical equipment equals 10 percent
of the purchase price recognized as determined under paragraph (c) of
this section for each of the first 3 months and 7.5 percent of the
purchase price for each of the remaining months.
(c) Determination of purchase price. The purchase price of other
covered durable medical equipment is determined as follows:
(1) For 1989 and 1990. (i) The carrier determines a base local
purchase price amount equal to the average of the purchase prices
submitted on an assignment-related basis of new items supplied during
the 6-month period ending December 1986.
(ii) The purchase price is equal to the base local purchase price
adjusted by the change in the level of the CPI-U for the 6-month period
ending December 1987.
(2) For 1991. (i) The local payment amount is the purchase price for
the preceding year adjusted by the covered item update for 1991 and
decreased by the percentage by which the average of the reasonable
charges for claims paid for all other items described in Sec. 414.229,
is lower than the average of the purchase prices submitted for such
items during the final 9 months of 1988.
(ii) The purchase price for 1991 is the national limited payment
amount as determined using the methodology contained in Sec.
414.220(f).
(3) For years after 1991. The purchase price is determined using the
methodology contained in paragraphs (d) through (f) of Sec. 414.220.
(d) Purchase option. Suppliers must offer a purchase option to
beneficiaries during the 10th continuous rental month and, for power-
driven wheelchairs, the purchase option must also be made available at
the time the equipment is initially furnished.
(1) Suppliers must offer beneficiaries the option of purchasing
power-driven wheelchairs at the time the supplier first furnishes the
item. Payment must be on a lump-sum fee schedule purchase basis if the
beneficiary chooses the purchase option. The purchase fee is the amount
established in Sec. 414.229(c).
(2) Suppliers must offer beneficiaries the option of converting
capped rental items (including power-driven wheelchairs not purchased
when initially furnished) to purchased equipment during their 10th
continuous rental month. Beneficiaries have one month
[[Page 27]]
from the date the supplier makes the offer to accept the purchase
option.
(i) If the beneficiary does not accept the purchase option, payment
continues on a rental basis not to exceed a period of continuous use of
longer than 15 months. After 15 months of rental payments have been
paid, the supplier must continue to provide the item without charge,
other than a charge for maintenance and servicing fees, until medical
necessity ends or Medicare coverage ceases. A period of continuous use
is determined under the provisions in Sec. 414.230.
(ii) If the beneficiary accepts the purchase option, payment
continues on a rental basis not to exceed a period of continuous use of
longer than 13 months. On the first day after 13 continuous rental
months during which payment is made, the supplier must transfer title to
the equipment to the beneficiary.
(e) Payment for maintenance and servicing. (1) The carrier
establishes a reasonable fee for maintenance and servicing for each
rented item of other durable medical equipment. The fee may not exceed
10 percent of the purchase price recognized as determined under
paragraph (c) of this section.
(2) Payment of the fee for maintenance and servicing of other
durable medical equipment that is rented is made only for equipment that
continues to be used after 15 months of rental payments have been made
and is limited to the following:
(i) For the first 6-month period, no payments are to be made.
(ii) For each succeeding 6-month period, payment may be made during
the first month of that period.
(3) Payment for maintenance and servicing DME purchased in
accordance with paragraphs (d)(1) and (d)(2)(ii) of this section, is
made on the basis of reasonable and necessary charges.
(f) Transition to the fee schedules. For purposes of computing the
10-month or 15-month period of continuous use for other durable medical
equipment, as described in Sec. 414.230, the carrier counts the first
month that the beneficiary continuously rented the equipment without
regard to whether that month occurred before January 1, 1989 or after.
If a beneficiary's 15-month rental period ends prior to January 1, 1989,
no further purchase or rental payments are to be made except for
maintenance and servicing of equipment as described in paragraph (e) of
this section.
(g) Replacement of equipment. If the item of equipment has been in
continuous use by the patient on either a rental or purchase basis for
the equipment's useful lifetime, or if the carrier determines that the
item is lost or irreparably damaged, the patient may elect to obtain a
new piece of equipment.
(1) The reasonable useful lifetime of DME or prosthetic and orthotic
devices is determined through program instructions. In the absence of
program instructions, carriers may determine the reasonable useful
lifetime of equipment but in no case can it be less than 5 years.
Computation is based on when the equipment is delivered to the
beneficiary, not the age of the equipment.
(2) If the beneficiary elects to obtain replacement equipment,
payment is made on a rental or purchase basis in accordance with
paragraph (a) of this section or on a lump-sum purchase basis if a
purchase agreement had been entered into in accordance with paragraph
(d) of this section.
[57 FR 57691, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]
Sec. 414.230 Determining a period of continuous use.
(a) Scope. This section sets forth the rules that apply in
determining a period of continuous use for rental of durable medical
equipment.
(b) Continuous use. A period of continuous use begins with the first
month of medical need and lasts until a beneficiary's medical need for a
particular item of durable medical equipment ends.
(c) Temporary interruption. (1) A period of continuous use allows
for temporary interruptions in the use of equipment.
(2) An interruption of not longer than 60 consecutive days plus the
days remaining in the rental month in which use ceases is temporary,
regardless of the reason for the interruption.
[[Page 28]]
(3) Unless there is a break in medical necessity that lasts lnnger
than 60 consecutive days plus the days remaining in the rental month in
which use ceases, medical necessity is presumed to continue.
(d) Criteria for a new rental period. If an interruption in the use
of equipment continues for more than 60 consecutive days plus the days
remaining in the rental month in which use ceases, a new rental period
begins if the supplier submits all of the following information--
(1) A new prescription.
(2) New medical necessity documentation.
(3) A statement describing the reason for the interruption and
demonstrating that medical necessity in the prior episode ended.
(e) Beneficiary moves. A permanent or temporary move made by a
beneficiary does not constitute an interruption in the period of
continuous use.
(f) New equipment. If a beneficiary changes equipment or requires
additional equipment based on a physician's prescription, and the new or
additional equipment is found to be necessary, a new period of
continuous use begins for the new or additional equipment. A new period
of continuous use does not begin for base equipment that is modified by
an addition.
(g) New supplier. If a beneficiary changes suppliers, a new period
of continuous use does not begin.
[56 FR 50823, Oct. 9, 1991, as amended at 57 FR 57111, Dec. 3, 1992]
Sec. 414.232 Special payment rules for transcutaneous electrical nerve stimulators (TENS).
(a) General payment rule. Except as provided in paragraph (b) of
this section, payment for TENS is made on a purchase basis with the
purchase price determined using the methodology for purchase of
inexpensive or routinely purchased items as described in Sec. 414.220.
The payment amount for TENS computed under Sec. 414.220(c)(2) is
reduced according to the following formula:
(1) Effective April 1, 1990--the original payment amount is reduced
by 15 percent.
(2) Effective January 1, 1991--the reduced payment amount in
paragraph (a)(1) is reduced by 15 percent.
(3) Effective January 1, 1994--the reduced payment amount in
paragraph (a)(1) is reduced by 45 percent.
(b) Exception. In order to permit an attending physician time to
determine whether the purchase of the TENS is medically appropriate for
a particular patient, two months of rental payments may be made in
addition to the purchase price. The rental payments are equal to 10
percent of the purchase price.
[57 FR 57692, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]
Subpart E_Determination of Reasonable Charges Under the ESRD Program
Sec. 414.300 Scope of subpart.
This subpart sets forth criteria and procedures for payment of the
following services furnished to ESRD patients:
(a) Physician services related to renal dialysis.
(b) Physician services related to renal transplantation.
(c) Home dialysis equipment, supplies, and support services.
(d) Epoetin (EPO) furnished by a supplier of home dialysis equipment
and supplies to a home dialysis patient for use in the home.
[55 FR 23441, June 8, 1990, as amended at 56 FR 43710, Sept. 4, 1991; 59
FR 1285, Jan. 10, 1994]
Sec. 414.310 Determination of reasonable charges for physician services furnished to renal dialysis patients.
(a) Principle. Physician services furnished to renal dialysis
patients are subject to payment if the services are otherwise covered by
the Medicare program and if they are considered reasonable and medically
necessary in accordance with section 1862(a)(1)(A) of the Act.
(b) Scope and applicability--(1) Scope. This section pertains to
physician services furnished to the following patients:
(i) Outpatient maintenance dialysis patients who dialyze--
[[Page 29]]
(A) In an independent or hospital-based ESRD facility, or
(B) At home.
(ii) Hospital inpatients for which the physician elects to continue
payment under the monthly capitation payment (MCP) method described in
Sec. 414.314.
(2) Applicability. These provisions apply to routine professional
services of physicians. They do not apply to administrative services
performed by physicians, which are paid for as part of a prospective
payment for dialysis services made to the facility under Sec. 413.170
of this chapter.
(c) Definitions. For purposes of this section, the following
definitions apply:
Administrative services are physician services that are
differentiated from routine professional services and other physician
services because they are supervision, as described in the definition of
``supervision of staff'' of this section, or are not related directly to
the care of an individual patient, but are supportive of the facility as
a whole and of benefit to patients in general. Examples of
administrative services include supervision of staff, staff training,
participation in staff conferences and in the management of the
facility, and advising staff on the procurement of supplies.
Dialysis session is the period of time that begins when the patient
arrives at the facility and ends when the patient departs from the
facility. In the case of home dialysis, the period begins when the
patient prepares for dialysis and generally ends when the patient is
disconnected from the machine. In this context, a dialysis facility
includes only those parts of the building used as a facility. It does
not include any areas used as a physician's office.
Medical direction, in contrast to supervision of staff, is a routine
professional service that entails substantial direct involvement and the
physical presence of the physician in the delivery of services directly
to the patient.
Routine professional services include all physicians' services
furnished during a dialysis session and all services listed in paragraph
(d) of this section that meet the following requirements:
(1) They are personally furnished by a physician to an individual
patient.
(2) They contribute directly to the diagnosis or treatment of an
individual patient.
(3) They ordinarily must be performed by a physician.
Supervision of staff, in contrast to medical direction, is an
administrative service that does not necessarily require the physician
to be present at the dialysis session. It is a general activity
primarily concerned with monitoring performance of and giving guidance
to other health care personnel (such as nurses and dialysis technicians)
who deliver services to patients.
(d) Types of routine professional services. Routine professional
services include at least all of the following services when medically
appropriate:
(1) Visits to the patient during dialysis, and review of laboratory
test results, nurses' notes and any other medical documentation, as a
basis for--
(i) Adjustment of the patient's medication or diet, or the dialysis
procedure;
(ii) Prescription of medical supplies; and
(iii) Evaluation of the patient's psychosocial status and the
appropriateness of the treatment modality.
(2) Medical direction of staff in delivering services to a patient
during a dialysis session.
(3) Pre-dialysis and post-dialysis examinations, or examinations
that could have been furnished on a pre-dialysis or post-dialysis basis.
(4) Insertion of catheters for patients who are on peritoneal
dialysis and do not have indwelling catheters.
(e) Payment for routine professional services. Beginning August 7,
1990, routine professional services furnished by physicians may be paid
under either the ``initial method'' of payment described in Sec.
414.313, (if all of the physicians at the facility elect the initial
method) or under the ``physician MCP method'' described in Sec.
414.314. Physician services furnished after July 31, 1983 and before
August 6, 1990, are payable only under the MCP method described in Sec.
414.314.
Sec. 414.313 Initial method of payment.
(a) Basic rule. Under this method, the intermediary pays the
facility for routine professional services furnished by
[[Page 30]]
physicians. Payment is in the form of an add-on to the facility's
composite rate payment, which is described in part 413, subpart H of
this subchapter.
(b) Services for which payment is not included in the add-on
payment. (1) Physician administrative services are considered to be
facility services and are paid for as part of the facility's composite
rate.
(2) The carrier pays the physician or the beneficiary (as
appropriate) under the reasonable charge criteria set forth in subpart E
of part 405 of this chapter for the following services:
(i) Physician services that must be furnished at a time other than
during the dialysis session (excluding pre-dialysis and post-dialysis
examinations and examinations that could have been furnished on a pre-
dialysis or post-dialysis basis), such as monthly and semi-annual
examinations to review health status and treatment.
(ii) Physician surgical services other than insertion of catheters
for patients who are on peritoneal dialysis and do not have indwelling
catheters.
(iii) Physician services furnished to hospital inpatients who were
not admitted solely to receive maintenance dialysis.
(iv) Administration of hepatitis B vaccine.
(c) Physician election of the initial method. (1) Each physician in
a facility must submit to the appropriate carrier and intermediary that
serve the facility a statement of election of the initial method of
payment for all the ESRD facility patients that he or she attends.
(2) The initial method of payment applies to dialysis services
furnished beginning with the second calendar month after the month in
which all physicians in the facility elect the initial method and
continues until the effective date of a termination of the election
described in paragraph (d) of this section.
(d) Termination of the initial method. (1) Physicians may terminate
the initial method of payment by written notice to the carrier(s) that
serves each physician and to the intermediary that serves the facility.
(2) If the notice terminating the initial method is received by the
carrier(s) and intermediary--
(i) On or before November 1, the effective date of the termination
is January 1 of the year following the calendar year in which the
termination notice is received by the carrier(s) and intermediary; or
(ii) After November 1, the effective date of the termination is
January 1 of the second year after the calendar year in which the notice
is received by the carrier(s) and intermediary.
(e) Determination of payment amount. The factors used in determining
the add-on amount are related to program experience. They are re-
evaluated periodically and may be adjusted, as determined necessary by
CMS, to maintain the payment at a level commensurate with the prevailing
charges of other physicians for comparable services.
(f) Publication of payment amount. Revisions to the add-on amounts
are published in the Federal Register in accordance with the
Department's established rulemaking procedures.
[55 FR 23441, June 8, 1990, as amended at 62 FR 43674, Aug. 15, 1997]
Sec. 414.314 Monthly capitation payment method.
(a) Basic rules. (1) Under the monthly capitation payment (MCP)
method, the carrier pays an MCP amount for each patient, to cover all
professional services furnished by the physician, except those listed in
paragraph (b) of this section.
(2) The carrier pays the MCP amount, subject to the deductible and
coinsurance provisions, either to the physician if the physician accepts
assignment or to the beneficiary if the physician does not accept
assignment.
(3) The MCP method recognizes the need of maintenance dialysis
patients for physician services furnished periodically over relatively
long periods of time, and the capitation amounts are consistent with
physicians' charging patterns in their localities.
(4) Payment of the capitation amount for any particular month is
contingent upon the physician furnishing to the patient all physician
services required by the patient during
[[Page 31]]
the month, except those listed in paragraph (b) of this section.
(5) Payment for physician administrative services (Sec. 414.310) is
made to the dialysis facility as part of the facility's composite rate
(part 413, subpart H of this subchapter) and not to the physician under
the MCP.
(b) Services not included in the MCP. (1) Services that are not
included in the MCP and which may be paid in accordance with the
reasonable charge rules set forth in subpart E of part 405 of this
chapter are limited to the following:
(i) Administration of hepatitis B vaccine.
(ii) Covered physician services furnished by another physician when
the patient is not available to receive, or the attending physician is
not available to furnish, the outpatient services as usual (see
paragraph (b)(3) of this section).
(iii) Covered physician services furnished to hospital inpatients,
including services related to inpatient dialysis, by a physician who
elects not to continue to receive the MCP during the period of inpatient
stay.
(iv) Surgical services, including declotting of shunts, other than
the insertion of catheters for patients on maintenance peritoneal
dialysis who do not have indwelling catheters.
(v) Needed physician services that are--
(A) Furnished by the physician furnishing renal care or by another
physician;
(B) Not related to the treatment of the patient's renal condition;
and
(C) Not furnished during a dialysis session or an office visit
required because of the patient's renal condition.
(2) For the services described in paragraph (b)(1)(v) of this
section, the following rules apply:
(i) The physician must provide documentation to show that the
services are not related to the treatment of the patient's renal
condition and that additional visits are required.
(ii) The carrier's medical staff, acting on the basis of the
documentation and appropriate medical consultation obtained by the
carrier, determines whether additional payment for the additional
services is warranted.
(3) The MCP is reduced in proportion to the number of days the
patient is--
(i) Hospitalized and the physician elects to bill separately for
services furnished during hospitalization; or
(ii) Not attended by the physician or his or her substitute for any
reason, including when the physician is not available to furnish patient
care or when the patient is not available to receive care.
(c) Determination of payment amount. The amount of payment for the
MCP is determined under the Medicare physician fee schedule described in
this part 414.
[55 FR 23441, June 8, 1990, as amended at 59 FR 63463, Dec. 8, 1994; 62
FR 43674, Aug. 15, 1997]
Sec. 414.316 Payment for physician services to patients in training for self-dialysis and home dialysis.
(a) For each patient, the carrier pays a flat amount that covers all
physician services required to create the capacity for self-dialysis and
home dialysis.
(b) CMS determines the amount on the basis of program experience and
reviews it periodically.
(c) The payment is made at the end of the training course, is
subject to the deductible and coinsurance provisions, and is in addition
to any amounts payable under the initial or MCP methods set forth in
Sec. Sec. 414.313 and 414.314, respectively.
(d) If the training is not completed, the payment amount is
proportionate to the time spent in training.
Sec. 414.320 Determination of reasonable charges for physician renal transplantation services.
(a) Comprehensive payment for services furnished during a 60-day
period. (1) The comprehensive payment is subject to the deductible and
coinsurance provisions and is for all surgeon services furnished during
a period of 60 days in connection with a renal transplantation,
including the usual preoperative and postoperative care, and for
immunosuppressant therapy if supervised by the transplant surgeon.
(2) Additional sums, in amounts established on the basis of program
experience, may be included in the comprehensive payment for other
surgery
[[Page 32]]
performed concurrently with the transplant operation.
(3) The amount of the comprehensive payment may not exceed the lower
of the following:
(i) The actual charges made for the services.
(ii) Overall national payment levels established under the ESRD
program and adjusted to give effect to variations in physician's charges
throughout the nation. (These adjusted amounts are the maximum
allowances in a carrier's service area for renal transplantation surgery
and related services by surgeons.)
(4) Maximum allowances computed under these instructions are revised
at the beginning of each calendar year to the extent permitted by the
lesser of the following:
(i) Changes in the economic index as described in Sec.
405.504(a)(3)(i) of this chapter.
(ii) Percentage changes in the weighted average of the carrier's
prevailing charges (before adjustment by the economic index) for--
(A) A unilateral nephrectomy; or
(B) Another medical or surgical service designated by CMS for this
purpose.
(b) Other payments. Payments for covered medical services furnished
to the transplant recipient by other specialists, as well as for
services by the transplant surgeon after the 60-day period covered by
the comprehensive payment, are made under the reasonable charge criteria
set forth in Sec. 405.502 (a) through (d) of this chapter. The payments
for physicians' services in connection with renal transplantations are
changed on the basis of program experience and the expected advances in
the medical art for this operation.
Sec. 414.330 Payment for home dialysis equipment, supplies, and support services.
(a) Equipment and supplies--(1) Basic rule. Except as provided in
paragraph (a)(2) of this section, Medicare pays for home dialysis
equipment and supplies only under the prospective payment rates
established at Sec. 413.170.
(2) Exception. If the conditions in subparagraphs (a)(2) (i) through
(iv) of this section are met, Medicare pays for home analysis equipment
and supplies on a reasonable charge basis in accordance with subpart E
(Criteria for Determination of Reasonable Charges; Reimbursement for
Services of Hospital Interns, Residents, and Supervising Physicians) of
part 405, but the amount of payment may not exceed the limit for
equipment and supplies in paragraph (c)(2) of this section.
(i) The patient elects to obtain home dialysis equipment and
supplies from a supplier that is not a Medicare approved dialysis
facility.
(ii) The patient certifies to CMS that he or she has only one
supplier for all home dialysis equipment and supplies. This
certification is made on CMS Form 382 (the ``ESRD Beneficiary
Selection'' form).
(iii) In writing, the supplier--
(A) Agrees to receive Medicare payment for home dialysis supplies
and equipment only on an assignment-related basis; and
(B) Certifies to CMS that it has a written agreement with one
Medicare approved dialysis facility or, if the beneficiary is also
entitled to military or veteran's benefits, one military or Veterans
Administration hospital, for each patient. (See subpart U of part 405 of
this chapter for the requirements for a Medicare approved dialysis
facility.) Under the agreement, the facility or military or VA hospital
agrees to the following:
(1) To furnish all home dialysis support services for each patient
in accordance with subpart U (Conditions for Coverage of Suppliers of
ESRD Services) of this chapter. (Sec. 410.52 sets forth the scope and
conditions of Medicare Part B coverage of home dialysis services,
supplies, and equipment.)
(2) To furnish institutional dialysis services and supplies. (Sec.
410.50 sets forth the scope and conditions for Medicare Part B coverage
of institutional dialysis services and supplies.)
(3) To furnish dialysis-related emergency services.
(4) To arrange for a Medicare approved laboratory to perform
dialysis-related laboratory tests that are covered under the composite
rate established at Sec. 413.170 and to arrange for the laboratory to
seek payment from the facility. The facility then includes these
laboratory services in its claim
[[Page 33]]
for payment for home dialysis support services.
(5) To arrange for a Medicare approved laboratory to perform
dialysis-related laboratory tests that are not covered under the
composite rate established at Sec. 413.170 and for which the laboratory
files a Medicare claim directly.
(6) To furnish all other necessary dialysis services and supplies
(that is, those which are not home dialysis equipment and supplies).
(7) To satisfy all documentation, recordkeeping and reporting
requirements in subpart U (Conditions for Coverage of Suppliers of ESRD
Services) of this chapter. This includes maintaining a complete medical
record of ESRD related items and services furnished by other parties.
The facility must report, on the forms required by CMS or the ESRD
network, all data for each patient in accordance with subpart U.
(iv) The facility with which the agreement is made must be located
within a reasonable distance from the patient's home (that is, located
so that the facility can actually furnish the needed services in a
practical and timely manner, taking into account variables like the
terrain, whether the patient's home is located in an urban or rural
area, the availability of transportation, and the usual distances
traveled by patients in the area to obtain health care services).
(b) Support services--(1) Basic rule. Except as provided in
paragraph (b)(2) of this section, Medicare pays for support services
only under the prospective payment rates established in Sec. 413.170 of
this chapter.
(2) Exceptions. If the patient elects to obtain home dialysis
equipment and supplies from a supplier that is not an approved ESRD
facility, Medicare pays for support services, other than support
services furnished by military or VA hospitals referred to in paragraph
(a)(2)(iii)(B) of this section, under paragraphs (b)(2) (i) and (ii) of
this section but in no case may the amount of payment exceed the limit
for support services in paragraph (c)(1) of this section:
(i) For support services furnished by a hospital-based ESRD
facility, Medicare pays on a reasonable cost basis in accordance with
part 413 of this chapter.
(ii) For support services furnished by an independent ESRD facility,
Medicare pays on the basis of reasonable charges that are related to
costs and allowances that are reasonable when the services are furnished
in an effective and economical manner.
(c) Payment limits--(1) Support services. The amount of payment for
home dialysis support services is limited to the national average
Medicare-allowed charge per patient per month for home dialysis support
services, as determined by CMS, plus the median cost per treatment for
all dialysis facilities for laboratory tests included under the
composite rate, as determined by CMS, multiplied by the national average
number of treatments per month.
(2) Equipment and supplies. Payment for home dialysis equipment and
supplies is limited to an amount equal to the result obtained by
subtracting the support services payment limit in paragraph (c)(1) of
this section from the amount (or, in the case of continuous cycling
peritoneal dialysis, 130 percent) of the national median payment as
determined by CMS that would have been made under the prospective
payment rates established in Sec. 413.170 of this chapter for hospital-
based facilities.
(3) Notification of changes to the payment limits. Updated data are
incorporated into the payment limits when the prospective payment rates
established at Sec. 413.170 of this chapter are updated, and changes
are announced by notice in the Federal Register without a public comment
period. Revisions of the methodology for determining the limits are
published in the Federal Register in accordance with the Department's
established rulemaking procedures.
[57 FR 54187, Nov. 17, 1992]
Sec. 414.335 Payment for EPO furnished to a home dialysis patient for use in the home.
(a) Payment for EPO used at home by a home dialysis patient is made
only to either a Medicare approved ESRD facility or a supplier of home
dialysis equipment and supplies.
[[Page 34]]
(b) Payment is made in accordance with the rules set forth in Sec.
413.170 of this chapter.
[56 FR 43710, Sept. 4, 1991]
Subpart F_Competitive Bidding for Certain Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies (DMEPOS)
Sec. 414.400-Sec. 414.404 [Reserved]
Sec. 414.406 Implementation of programs.
(a) Implementation contractor. CMS designates one or more
implementation contractors for the purpose of implementing this subpart.
(b)-(d) [Reserved]
(e) Claims processing. The Durable Medical Equipment Medicare
Administrative Contractor designated to process DMEPOS claims for a
particular geographic region also processes claims for items furnished
under a competitive bidding program in the same geographic region.
[71 FR 48409, Aug. 18, 2006]
Sec. 414.408-Sec. 414.426 [Reserved]
Subpart G [Reserved]
Subpart H_Fee Schedule for Ambulance Services
Source: 67 FR 9132, Feb. 27, 2002, unless otherwise noted.
Sec. 414.601 Purpose.
This subpart implements section 1834(l) of the Act by establishing a
fee schedule for the payment of ambulance services. Section 1834(l) of
the Act requires that, except for services furnished by certain critical
access hospitals (see Sec. 413.70(b)(5) of this chapter), payment for
all ambulance services, otherwise previously payable on a reasonable
charge basis or retrospective reasonable cost basis, be made under a fee
schedule.
Sec. 414.605 Definitions.
As used in this subpart, the following definitions apply to both
land and water (hereafter collectively referred to as ``ground'')
ambulance services and to air ambulance services unless otherwise
specified:
Advanced life support (ALS) assessment is an assessment performed by
an ALS crew as part of an emergency response that was necessary because
the patient's reported condition at the time of dispatch was such that
only an ALS crew was qualified to perform the assessment. An ALS
assessment does not necessarily result in a determination that the
patient requires an ALS level of service.
Advanced life support (ALS) intervention means a procedure that is,
in accordance with State and local laws, required to be furnished by ALS
personnel.
Advanced life support, level 1 (ALS1) means transportation by ground
ambulance vehicle, medically necessary supplies and services and either
an ALS assessment by ALS personnel or the provision of at least one ALS
intervention.
Advanced life support, level 2 (ALS2) means either transportation by
ground ambulance vehicle, medically necessary supplies and services, and
the administration of at least three medications by intravenous push/
bolus or by continuous infusion, excluding crystalloid, hypotonic,
isotonic, and hypertonic solutions (Dextrose, Normal Saline, Ringer's
Lactate); or transportation, medically necessary supplies and services,
and the provision of at least one of the following ALS procedures:
(1) Manual defibrillation/cardioversion.
(2) Endotracheal intubation.
(3) Central venous line.
(4) Cardiac pacing.
(5) Chest decompression.
(6) Surgical airway.
(7) Intraosseous line.
Advanced life support (ALS) personnel means an individual trained to
the level of the emergency medical technician-intermediate (EMT-
Intermediate) or paramedic. The EMT-Intermediate is defined as an
individual who is qualified, in accordance with State and local laws, as
an EMT-Basic and who is also qualified in accordance with State and
local laws to perform essential advanced techniques and to administer a
[[Page 35]]
limited number of medications. The EMT-Paramedic is defined as
possessing the qualifications of the EMT-Intermediate and also, in
accordance with State and local laws, as having enhanced skills that
include being able to administer additional interventions and
medications.
Basic life support (BLS) means transportation by ground ambulance
vehicle and medically necessary supplies and services, plus the
provision of BLS ambulance services. The ambulance must be staffed by an
individual who is qualified in accordance with State and local laws as
an emergency medical technician-basic (EMT-Basic). These laws may vary
from State to State. For example, only in some States is an EMT-Basic
permitted to operate limited equipment on board the vehicle, assist more
qualified personnel in performing assessments and interventions, and
establish a peripheral intravenous (IV) line.
Conversion factor (CF) is the dollar amount established by CMS that
is multiplied by relative value units to produce ground ambulance
service base rates.
Emergency response means responding immediately at the BLS or ALS1
level of service to a 911 call or the equivalent in areas without a 911
call system. An immediate response is one in which the ambulance entity
begins as quickly as possible to take the steps necessary to respond to
the call.
Fixed wing air ambulance (FW) means transportation by a fixed wing
aircraft that is certified as a fixed wing air ambulance and such
services and supplies as may be medically necessary.
Geographic adjustment factor (GAF) means the practice expense (PE)
portion of the geographic practice cost index (GPCI) from the physician
fee schedule as applied to a percentage of the base rate. For ground
ambulance services, the PE portion of the GPCI is applied to 70 percent
of the base rate for each level of service. For air ambulance services,
the PE portion of the GPCI is applied to 50 percent of the applicable
base rate.
Goldsmith modification means the recognition of rural areas within
certain Standard Metropolitan Statistical Areas wherein a census tract
is deemed to be rural when located within a large metropolitan county of
at least 1,225 square miles, but is so isolated from the metropolitan
core of that county by distance or physical features as to be more rural
than urban in character.
Loaded mileage means the number of miles the Medicare beneficiary is
transported in the ambulance vehicle.
Paramedic ALS intercept (PI) means EMT-Paramedic services furnished
by an entity that does not furnish the ground ambulance transport,
provided the services meet the requirements specified in Sec. 410.40(c)
of this chapter.
Point of pick-up means the location of the beneficiary at the time
he or she is placed on board the ambulance.
Relative value units (RVUs) means a value assigned to a ground
ambulance service.
Rotary wing air ambulance (RW) means transportation by a helicopter
that is certified as an ambulance and such services and supplies as may
be medically necessary.
Rural adjustment factor (RAF) means an adjustment applied to the
base payment rate when the point of pick-up is located in a rural area.
Rural area means an area located outside a Metropolitan Statistical
Area (MSA), or, in New England, a New England County Metropolitan Area
(NECMA), or an area within an MSA or NECMA that is identified as rural
by the Goldsmith modification.
Specialty care transport (SCT) means interfacility transportation of
a critically injured or ill beneficiary by a ground ambulance vehicle,
including medically necessary supplies and services, at a level of
service beyond the scope of the EMT-Paramedic. SCT is necessary when a
beneficiary's condition requires ongoing care that must be furnished by
one or more health professionals in an appropriate specialty area, for
example, nursing, emergency medicine, respiratory care, cardiovascular
care, or a paramedic with additional training.
[67 FR 9132, Feb. 27, 2002, as amended at 68 FR 67693, Dec. 5, 2003]
Sec. 414.610 Basis of payment.
(a) Method of payment. Medicare payment for ambulance services is
based on the lesser of the actual charge or
[[Page 36]]
the applicable fee schedule amount. The fee schedule payment for
ambulance services equals a base rate for the level of service plus
payment for mileage and applicable adjustment factors. Except for
services furnished by certain critical access hospitals or entities
owned and operated by them, as described in Sec. 413.70(b) of this
chapter, all ambulance services are paid under the fee schedule
specified in this subpart (regardless of the vehicle furnishing the
service).
(b) Mandatory assignment. Effective with implementation of the
ambulance fee schedule described in Sec. 414.601 (that is, for services
furnished on or after April 1, 2002), all payments made for ambulance
services are made only on an assignment-related basis. Ambulance
suppliers must accept the Medicare allowed charge as payment in full and
may not bill or collect from the beneficiary any amount other than the
unmet Part B deductible and Part B coinsurance amounts. Violations of
this requirement may subject the provider or supplier to sanctions, as
provided by law (part 402 of this chapter).
(c) Formula for computation of payment amounts. The fee schedule
payment amount for ambulance services is computed according to the
following provisions:
(1) Ground ambulance service levels. The CF is multiplied by the
applicable RVUs for each level of service to produce a service-level
base rate. For services furnished during the period July 1, 2004 through
December 31, 2006, ambulance services originating in urban areas (both
base rate and mileage) are paid based on a rate that is one percent
higher than otherwise is applicable under this section, and ambulance
services originating in rural areas (both base rate and mileage) are
paid based on a rate that is two percent higher than otherwise is
applicable under this section. The service-level base rate is then
adjusted by the GAF. Compare this amount to the actual charge. The
lesser of the actual charge or the GAF adjusted base rate amount is
added to the lesser of the actual mileage charges or the payment rate
per mile, multiplied by the number of miles that the beneficiary was
transported. When applicable, the appropriate RAF is applied to the
ground mileage rate to determine the appropriate payment rates. The RVU
scale for the ambulance fee schedule is as follows:
------------------------------------------------------------------------
Relative
value
Service level units
(RVUs)
------------------------------------------------------------------------
BLS......................................................... 1.00
BLS-Emergency............................................... 1.60
ALS1........................................................ 1.20
ALS1-Emergency.............................................. 1.90
ALS2........................................................ 2.75
SCT......................................................... 3.25
PI.......................................................... 1.75
------------------------------------------------------------------------
(2) Air ambulance service levels. The base payment rate for the
applicable type of air ambulance service is adjusted by the GAF and,
when applicable, by the appropriate RAF to determine the amount of
payment. Air ambulance services have no CF or RVUs. This amount is
compared to the actual charge. The lesser of the charge or the adjusted
GAF rate amount is added to the payment rate per mile, multiplied by the
number of miles that the beneficiary was transported. When applicable,
the appropriate RAF is also applied to the air mileage rate.
(3) Loaded mileage. Payment is based on loaded miles. Payment for
air mileage is based on loaded miles flown as expressed in statute
miles. There are three mileage payment rates: a rate for FW services, a
rate for RW services, and a rate for all levels of ground
transportation.
(4) Geographic adjustment factor (GAF). For ground ambulance
services, the PE portion of the GPCI from the physician fee schedule is
applied to 70 percent of the base rate for ground ambulance services.
For air ambulance services, the PE portion of the physician fee schedule
GPCI is applied to 50 percent of the base rate for air ambulance
services.
(5) Rural adjustment factor (RAF). (i) For ground ambulance services
where the point of pickup is in a rural area, the mileage rate is
increased by 50 percent for each of the first 17 miles and by 25 percent
for miles 18 through 50. The standard mileage rate applies to every mile
over 50 miles. For air ambulance services where the point of pickup is
in a rural area, the total payment is increased by 50 percent; that is,
the
[[Page 37]]
rural adjustment factor applies to the sum of the base rate and the
mileage rate.
(ii) For services furnished during the period July 1, 2004 through
December 31, 2009, the payment amount for the ground ambulance base rate
is increased by 22.6 percent where the point of pickup is in a rural
area determined to be in the lowest 25 percent of rural population
arrayed by population density. The amount of this increase is based on
CMS's estimate of the ratio of the average cost per trip for the rural
areas in the lowest quartile of population compared to the average cost
per trip for the rural areas in the highest quartile of population. In
making this estimate, CMS may use data provided by the GAO.
(6) Multiple patients. The allowable amount per beneficiary for a
single ambulance transport when more than one patient is transported
simultaneously is based on the total number of patients (both Medicare
and non-Medicare) on board. If two patients are transported
simultaneously, then the payment allowance for the beneficiary (or for
each of them if both patients are beneficiaries) is equal to 75 percent
of the service payment allowance applicable for the level of care
furnished to the beneficiary, plus 50 percent of the applicable mileage
payment allowance. If three or more patients are transported
simultaneously, the payment allowance for the beneficiary (or each of
them) is equal to 60 percent of the service payment allowance applicable
for the level of care furnished to the beneficiary, plus the applicable
mileage payment allowance divided by the number of patients on board.
(7) Payment rate for mileage greater than 50 miles. For services
furnished during the period July 1, 2004 through December 31, 2008, each
loaded ambulance mile greater than 50 (that is, miles 51 and greater)
for ambulance transports originating in either urban areas or in rural
areas are paid based on a rate that is 25 percent higher than otherwise
is applicable under this section.
(d) Payment. Payment, in accordance with this subpart, represents
payment in full (subject to applicable Medicare Part B deductible and
coinsurance requirements as described in subpart G of part 409 of this
chapter or in subpart I of part 410 of this chapter) for all services,
supplies, and other costs for an ambulance service furnished to a
Medicare beneficiary. No direct payment will be made under this subpart
if billing for the ambulance service is required to be consolidated with
billing for another benefit for which payment may be made under this
chapter.
(e) Point of pick-up. The zip code of the point of pick-up must be
reported on each claim for ambulance services so that the correct GAF
and RAF may be applied, as appropriate.
(f) Updates. The CF, the air ambulance base rates, and the mileage
rates are updated annually by an inflation factor established by law.
The inflation factor is based on the consumer price index for all urban
consumers (CPI-U) (U.S. city average) for the 12-month period ending
with June of the previous year.
(g) Adjustments. The Secretary will annually review rates and will
adjust the CF and air ambulance rates if actual experience under the fee
schedule is significantly different from the assumptions used to
determine the initial CF and air ambulance rates. The CF and air
ambulance rates will not be adjusted solely because of changes in the
total number of ambulance transports.
[67 FR 9132, Feb. 27, 2002, as amended at 68 FR 67693, Dec. 5, 2003; 69
FR 40292, July 1, 2004]
Sec. 414.615 Transition to the ambulance fee schedule.
The fee schedule for ambulance services will be phased in over 5
years beginning April 1, 2002. Subject to the first sentence in Sec.
414.610(a), payment for services furnished during the transition period
is made based on a combination of the fee schedule payment for ambulance
services and the amount the program would have paid absent the fee
schedule for ambulance services, as follows:
(a) 2002 Payment. For services furnished in 2002, the payment for
the service component, the mileage component and, if applicable, the
supply component is based on 80 percent of the
[[Page 38]]
reasonable charge for independent suppliers or on 80 percent of
reasonable cost for providers, plus 20 percent of the ambulance fee
schedule amount for the service and mileage components. The reasonable
charge or reasonable cost portion of payment in CY 2002 is equal to the
supplier's reasonable charge allowance or provider's reasonable cost
allowance for CY 2001, multiplied by the statutory inflation factor for
ambulance services.
(b) 2003 Payment. For services furnished in CY 2003, payment is
based on 60 percent of the reasonable charge or reasonable cost, as
applicable, plus 40 percent of the ambulance fee schedule amount. The
reasonable charge and reasonable cost portion in CY 2003 is equal to the
supplier's reasonable charge or provider's reasonable cost for CY 2002,
multiplied by the statutory inflation factor for ambulance services.
(c) 2004 Payment. For services furnished in CY 2004, payment is
based on 40 percent of the reasonable charge or reasonable cost, as
applicable, plus 60 percent of the ambulance fee schedule amount. The
reasonable charge and reasonable cost portion in CY 2004 is equal to the
supplier's reasonable charge or provider's reasonable cost for CY 2003,
multiplied by the statutory inflation factor for ambulance services.
(d) 2005 Payment. For services furnished in CY 2005, payment is
based on 20 percent of the reasonable charge or reasonable cost, as
applicable, plus 80 percent of the ambulance fee schedule amount. The
reasonable charge and reasonable cost portion in CY 2005 is equal to the
supplier's reasonable charge or provider's reasonable cost for CY 2004,
multiplied by the statutory inflation factor for ambulance services.
(e) 2006 and Beyond Payment. For services furnished in CY 2006 and
thereafter, the payment is based solely on the ambulance fee schedule
amount.
(f) Updates. The portion of the transition payment that is based on
the existing payment methodology (that is, the non-fee-schedule portion)
is updated annually for inflation by a factor equal to the percentage
increase in the CPI-U (U.S. city average) for the 12-month period ending
with June of the previous year. The CY 2002 inflation update factor used
to update the 2001 payment amounts is applied to the annualized
(average) payment amounts for CY 2001. For the period January 1, 2001
through June 30, 2001, the inflation update factor is 2.7 percent. For
the period July 1, 2001 through December 31, 2001, the inflation update
factor is 4.7 percent. The average for the year is 3.7 percent. Thus,
the annualized (average) CY 2001 payment amounts used to derive the CY
2002 payment amounts are equivalent to the CY 2001 payment amounts that
would have been determined had the inflation update factor for the
entire CY 2001 been 3.7 percent. Both portions of the transition payment
(that is, the portion that is based on reasonable charge or reasonable
cost and the portion that is based on the ambulance fee schedule) are
updated annually for inflation by the inflation factor described in
Sec. 414.610(f).
(g) Exception. There will be no blended payment allowance as
described in paragraphs (a), (b), (c), and (d) of this section for
ground mileage in those States where the Medicare carrier paid
separately for all out-of-county ground ambulance mileage, but did not,
before the implementation of the Medicare ambulance fee schedule, make a
separate payment for any ground ambulance mileage within the county in
which the beneficiary was transported. Payment for ground ambulance
mileage in that State will be made based on the full ambulance fee
schedule amount for ground mileage. This exception applies only to
carrier-processed claims and only in those States in which the carrier
paid separately for out-of-county ambulance mileage, but did not make
separate payment for any in-county mileage throughout the entire State.
Sec. 414.617 Transition from regional to national ambulance fee schedule.
For services furnished during the period July 1, 2004 through
December 31, 2009, the amount for the ground ambulance base rate is
subject to a floor amount determined by establishing nine fee schedules
based on each of the nine census divisions using the same methodology as
used to establish the national fee schedule. If the regional fee
schedule methodology for a given census division results in an amount
[[Page 39]]
that is less than or equal to the national ground base rate, then it is
not used, and the national FS amount applies. If the regional fee
schedule methodology for a given census division results in an amount
that is greater than the national ground base rate, then the FS portion
of the base rate for that census division is equal to a blend of the
national rate and the regional rate in accordance with the following
schedule:
------------------------------------------------------------------------
Regional National
Time period percent percent
------------------------------------------------------------------------
7/1/04-12/31/04................................... 80 20
CY 2005........................................... 60 40
CY 2006........................................... 40 60
CY 2007-CY 2009................................... 20 80
CY 2010 and thereafter............................ 0 100
------------------------------------------------------------------------
[69 FR 40292, July 1, 2004]
Sec. 414.620 Publication of the ambulance fee schedule.
Changes in payment rates resulting from incorporation of the annual
inflation factor described in Sec. 414.610(f) will be announced by
notice in the Federal Register without opportunity for prior comment.
CMS will follow applicable rulemaking procedures in publishing revisions
to the fee schedule for ambulance services that result from any factors
other than the inflation factor.
Sec. 414.625 Limitation on review.
There will be no administrative or judicial review under section
1869 of the Act or otherwise of the amounts established under the fee
schedule for ambulance services, including the following:
(a) Establishing mechanisms to control increases in expenditures for
ambulance services.
(b) Establishing definitions for ambulance services that link
payments to the type of services provided.
(c) Considering appropriate regional and operational differences.
(d) Considering adjustments to payment rates to account for
inflation and other relevant factors.
(e) Phasing in the application of the payment rates under the fee
schedule in an efficient and fair manner.
Subpart I_Payment for Drugs and Biologicals
Source: 69 FR 1116, Jan. 7, 2004, unless otherwise noted.
Sec. 414.701 Purpose.
This subpart implements section 1842(o) of the Social Security Act
by specifying the methodology for determining the payment allowance
limit for drugs and biologicals covered under Part B of Title XVIII of
the Act (hereafter in this subpart referred to as the ``program'') that
are not paid on a cost or prospective payment system basis. Examples of
drugs that are subject to the rules contained in this subpart are: drugs
furnished incident to a physician's service; durable medical equipment
(DME) drugs; separately billable drugs at independent dialysis
facilities not under the ESRD composite rate; statutorily covered drugs,
for example, influenza, pneumococcal and hepatitis vaccines, antigens,
hemophilia blood clotting factor, immunosuppressive drugs and certain
oral anti-cancer drugs.
Sec. 414.704 Definitions.
As used in this subpart, the following definition applies. Drug
refers to both drugs and biologicals.
Sec. 414.707 Basis of payment.
(a) Method of payment. (1) Payment for a drug in calendar year 2004
is based on the lesser of--
(i) The actual charge on the claim for program benefits; or
(ii) 85 percent of the average wholesale price determined as of
April 1, 2003, subject to the exceptions as specified in paragraphs
(a)(2) through (a)(8) of this section.
(2) The payment limits for the following drugs are calculated using
95 percent of the average wholesale price:
(i) Blood clotting factors.
(ii) A drug or biological furnished during 2004 that was not
available for Medicare payment as of April 1, 2003.
(iii) Pneumococcal and influenza vaccines as well as hepatitis B
vaccine that is furnished to individuals at high or intermediate risk of
contracting
[[Page 40]]
hepatitis B (as determined by the Secretary).
(iv) A drug or biological furnished during 2004 in connection with
the furnishing of renal dialysis services if separately billed by renal
dialysis facilities.
(3) The payment limits for infusion drugs furnished through a
covered item of durable medical equipment are calculated using 95
percent of the average wholesale price in effect on October 1, 2003.
(4) The payments limits for drugs contained in the following table
are calculated based on the percentages of the average wholesale price
determined as of April 1, 2003 that are specified in the table.
------------------------------------------------------------------------
Percentage
used to
calculate
Drug 2004
payment
limit
------------------------------------------------------------------------
EPOETIN ALFA............................................... 87
LEUPROLIDE ACETATE......................................... 81
GOSERELIN ACETATE.......................................... 80
RITUXIMAB.................................................. 81
PACLITAXEL................................................. 81
DOCETAXEL.................................................. 80
CARBOPLATIN................................................ 81
IRINOTECAN................................................. 80
GEMCITABINE HCL............................................ 80
PAMIDRONATE DISODIUM....................................... 85
DOLASETRON MESYLATE........................................ 80
FILGRASTIM................................................. 81
HYLAN G-F 20............................................... 82
MYCOPHENOLATE MOFETIL...................................... 86
GRANISETRON HCL............................................ 80
ONDANSETRON................................................ 87
VINORELBINE TARTATE........................................ 81
SARGRAMOSTIM............................................... 80
TOPOTECAN.................................................. 84
IPRATROPIUM BROMIDE........................................ 80
ALBUTEROL SULFATE.......................................... 80
IMMUNE GLOBULIN............................................ 80
LEUCOVORIN CALCIUM......................................... 80
DOXORUBICIN HCL............................................ 80
DEXAMETHOSONE SODIUM PHOSPHATE............................. 86
HEPARIN SODIUM LOCK-FLUSH.................................. 80
CROMOLYN SODIUM............................................ 80
ACETYLCYSTEINE............................................. 80
------------------------------------------------------------------------
(5) The payment limits for imiglucerase and alglucerase are
calculated using 94 percent of the average wholesale price determined as
of April 1, 2003.
(6) Exception. The payment limit for a drug otherwise subject to
paragraph (a)(1)(ii) or paragraph (a)(4) of this section may be
calculated using the percentage of the average wholesale price as the
Secretary deems appropriate based on data and information submitted by
the drug manufacturer.
(i) The manufacturer must submit data after October 15, 2003 and
before January 1, 2004.
(ii) The percentage only applies for drugs furnished on or after
April 1, 2004.
(7) In the case of blood and blood products (other than blood
clotting factors), the payment limits shall be determined in the same
manner as such payment limit was determined on October 1, 2003.
(b) Mandatory assignment. Effective with services furnished on or
after February 1, 2001, payment for any drug covered under Part B of
Medicare may be made on an assignment-related basis only. All billers
must accept the program allowed charge as payment in full and may not
bill nor collect from the beneficiary any amount other than the unmet
Part B deductible and Part B coinsurance amounts, if applicable.
Violations of this requirement may subject the supplier to sanctions, as
provided by the statute (See Sec. 402 of this chapter).
Subpart J_Submission of Manufacturer's Average Sales Price Data
Source: 69 FR 17938, Apr. 6, 2004, unless otherwise noted.
Sec. 414.800 Purpose.
This subpart implements section 1847A of the Act by specifying the
requirements for submission of a manufacturer's average sales price data
for certain drugs and biologicals covered under Part B of Title XVIII of
the Act that are paid under sections 1842(o)(1)(D), 1847A, and
1881(b)(13)(A)(ii) of the Act.
Sec. 414.802 Definitions.
As used in this subpart, unless the context indicates otherwise--
Drug means both drugs and biologicals.
Manufacturer means any entity that is engaged in the following (This
term
[[Page 41]]
does not include a wholesale distributor of drugs or a retail pharmacy
licensed under State law):
(1) Production, preparation, propagation, compounding, conversion or
processing of prescription drug products, either directly or indirectly
by extraction from substances of natural origin, or independently by
means of chemical synthesis, or by a combination of extraction and
chemical synthesis.
(2) The packaging, repackaging, labeling, relabeling, or
distribution of prescription drug products.
Unit means the product represented by the 11-digit National Drug
Code. During the first 3 years of the CAP (as defined in Sec. 414.902),
the method of counting units excludes units of CAP drugs (as defined in
Sec. 414.902) sold to an approved CAP vendor (as defined in Sec.
414.902) for use under the CAP (as defined in Sec. 414.902).
[70 FR 69 FR 17938, Apr. 6, 2004, as amended at 71 FR 48143, Aug. 18,
2006]
Sec. 414.804 Basis of payment.
(a) Calculation of manufacturer's average sales price. (1) The
manufacturer's average sales price for a quarter for a drug or
biological represented by a particular 11-digit National Drug Code must
be calculated as the manufacturer's sales to all purchasers in the
United States for that particular 11-digit National Drug Code (after
deducting the types of items and transactions listed in paragraph (a)(2)
of this section and excluding sales referenced in paragraph (a)(4) of
this section) divided by the total number of units sold by the
manufacturer in that quarter (after excluding units associated with
sales referenced in paragraph (a)(4) of this section).
(2) In calculating the manufacturer's average sales price, a
manufacturer must deduct the following types of transactions and items:
(i) Volume discounts.
(ii) Prompt pay discounts.
(iii) Cash discounts.
(iv) Free goods that are contingent on any purchase requirement.
(v) Chargebacks and rebates (other than rebates under the Medicaid
drug rebate program).
(3) To the extent that data on price concessions, as described in
paragraph (a)(2) of this section, are available on a lagged basis, the
manufacturer must estimate this amount in accordance with the
methodology described in paragraphs (a)(3)(i) through (a)(3)(iv) of this
section.
(i) For each such National Drug Code, the manufacturer calculates a
percentage equal to the sum of the price concessions for the most recent
12-month period available associated with sales subject to the average
sales price reporting requirement divided by the total in dollars for
the sales subject to the average sales price reporting requirement for
the same 12-month period.
(ii) The manufacturer then multiplies the percentage described in
paragraph (a)(3)(i) of this section by the total in dollars for the
sales subject to the average sales price reporting requirement for the
quarter being submitted. (The manufacturer must carry a sufficient
number of decimal places in the calculation of the price concessions
percentage in order to round accurately the net total sales amount for
the quarter to the nearest whole dollar.) The result of this
multiplication is then subtracted from the total in dollars for the
sales subject to the average sales price reporting requirement for the
quarter being submitted.
(iii) The manufacturer then uses the result of the calculation
described in paragraph (a)(3)(ii) of this section as the numerator and
the number of units sold in the quarter as the denominator to calculate
the manufacturer's average sales price for the National Drug Code in the
quarter being submitted.
(iv) Example. The total lagged price concessions (discounts,
rebates, etc.) over the most recent 12-month period available associated
with direct sales for National Drug Code 12345-6789-01 subject to the
ASP reporting requirement equal $200,000. The total in dollars for the
sales subject to the average sales price reporting requirement for the
same period equals $600,000. The lagged price concessions percentage for
this period equals 200,000/600,000 = .33333. The total in dollars for
the direct sales subject to the average sales price reporting
requirement for the quarter being reported equals $50,000 for 10,000
units sold. Assuming no non-
[[Page 42]]
lagged price concessions apply, the manufacturer's average sales price
calculation for this National Drug Code for this quarter is: $50,000-
(0.33333 x $50,000) = $33,334 (net total sales amount); $33,334/10,000 =
$3.33 (average sales price).
(4) In calculating the manufacturer's average sales price, a
manufacturer must exclude sales that are exempt from the Medicaid best
price calculation under sections 1927(c)(1)(C)(i) and
1927(c)(1)(C)(ii)(III) of the Act.
(5) The manufacturer's average sales price must be calculated by the
manufacturer every calendar quarter and submitted to CMS within 30 days
of the close of the quarter. The first quarter submission must be
submitted by April 30, 2004. Subsequent reports are due not later than
30 days after the last day of each calendar quarter.
(6) Each report must be certified by one of the following:
(i) The manufacturer's Chief Executive Officer (CEO).
(ii) The manufacturer's Chief Financial Officer (CFO).
(iii) An individual who has delegated authority to sign for, and who
reports directly to, the manufacturer's CEO or CFO.
[69 FR 17938, Apr. 6, 2004, as amended at 69 FR 55764, Sept. 16, 2004;
70 FR 70332, Nov. 21, 2005]
Sec. 414.806 Penalties associated with the failure to submit timely and accurate ASP data.
Section 1847A(d)(4) specifies the penalties associated with
misrepresentations associated with ASP data. If the Secretary determines
that a manufacturer has made a misrepresentation in the reporting of ASP
data, a civil money penalty in an amount of up to $10,000 may be applied
for each price misrepresentation and for each day in which the price
misrepresentation was applied. Section 1927(b)(3)(C) of the Act, as
amended by section 303(i)(4) of the MMA, specifies the penalties
associated with a manufacturer's failure to submit timely information or
the submission of false information.
Subpart K_Payment for Drugs and Biologicals Under Part B
Source: 69 FR 66424, Nov. 15, 2004, unless otherwise noted.
Sec. 414.900 Basis and scope.
(a) This subpart implements sections 1842(o), 1847A, and 1847B of
the Act and outlines two payment methodologies applicable to drugs and
biologicals covered under Medicare Part B that are not paid on a cost or
prospective payment system basis.
(b) Examples of drugs that are subject to the requirements specified
in this subpart are:
(1) Drugs furnished incident to a physician's service; durable
medical equipment (DME) drugs.
(2) Separately billable drugs at independent dialysis facilities not
under the ESRD composite rate.
(3) Statutorily covered drugs, for example--
(i) Influenza.
(ii) Pneumococcal and Hepatitis B vaccines.
(iii) Antigens.
(iv) Hemophilia blood clotting factor.
(v) Immunosuppressive drugs.
(vi) Certain oral anti-cancer drugs.
[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 39093, July 6, 2005]
Sec. 414.902 Definitions.
As used in this subpart, unless the context indicates otherwise--
Approved CAP vendor means an entity that has been awarded a contract
by CMS to participate in the competitive acquisition program under 1847B
of the Act.
Bid means an offer to furnish a CAP drug within a category of CAP
drugs in a competitive acquisition area for a particular price and time
period.
CAP drug means a physician-administered drug or biological furnished
on or after January 1, 2006 described in section 1842(o)(1)(C) of the
Act and supplied by an approved CAP vendor under the CAP as provided in
this subpart.
Competitive acquisition area means a geographic area established by
the Secretary for purposes of implementing the CAP required by section
1847B of the Act.
[[Page 43]]
Competitive acquisition program (CAP) means a program as defined
under section 1847B of the Act.
Designated carrier means an entity assigned by CMS to process and
pay claims for drugs and biologicals under the CAP.
Drug means both drugs and biologicals.
Emergency delivery means delivery of a CAP drug within one business
day in appropriate shipping and packaging, in all areas of the United
States and its territories, with the exception of the Pacific
Territories. In the Pacific Territories, emergency delivery means
delivery of a CAP drug within 5 business days in appropriate shipping
and packaging. In each case, this timeframe shall be reduced if product
stability requires it, meaning that the manufacturer's labeling
instructions, drug compendia, or specialized drug stability references
indicate that a shorter delivery timeframe is necessary to avoid
adversely affecting the product's integrity, safety, or efficacy.
Emergency situation means, for the purposes of the CAP, an
unforeseen occurrence or situation determined by the participating CAP
physician, in his or her clinical judgment, to require prompt action or
attention for purposes of permitting the participating CAP physician to
use a drug from his or her own stock, if the other requirements of Sec.
414.906(e) are met.
Local carrier means an entity assigned by CMS to process and pay
claims for administration of drugs and biologicals under the CAP.
Manufacturer's average sales price means the price calculated and
reported by a manufacturer under part 414, subpart J of this chapter.
Multiple source drug means a drug described by section
1847A(c)(6)(C) of the Act.
Pacific Territories means, for purposes of the CAP, American Samoa,
Guam, or the Northern Mariana Islands.
Participating CAP physician means a physician electing to
participate in the CAP, as described in this subpart. The participating
CAP physician must complete and sign the participating CAP physician
election agreement. Physicians who do not participate in Medicare but
who elect to participate in the CAP must agree to accept assignment for
CAP drug administration claims.
Participating CAP physician election agreement means the agreement
that the physician signs to notify CMS of the physician's election to
participate in the CAP and to agree to the terms and conditions of CAP
participation as set forth in this subpart.
Prescription order means a written order submitted by the
participating CAP physician to the approved CAP vendor that meets the
requirements of this subpart.
Routine delivery means delivery of a drug within 2 business days in
appropriate shipping and packaging in all areas of the United States and
its territories, with the exception of the Pacific Territories. In the
Pacific Territories, routine delivery of drug means delivery of a CAP
drug within 7 business days in appropriate shipping and packaging. In
each case, this timeframe will be reduced if product stability requires
it, meaning that the manufacturer's labeling instructions, drug
compendia, or specialized drug stability references indicate that a
shorter delivery timeframe is necessary to avoid adversely affecting the
product's integrity, safety, or efficacy.
Single source drug means a drug described by section 1847A(c)(6)(D)
of the Act.
Timely delivery means delivery of a CAP drug within the defined
routine and emergency delivery timeframes. Compliance with timely
delivery standards is also a factor for evaluation of potential and
approved CAP vendors.
Unit is defined as in part 414, subpart J of this chapter.
Wholesale acquisition cost (WAC) means the price described by
section 1847A(c)(6)(B) of the Act.
[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 39093, July 6, 2005]
Sec. 414.904 Average sales price as the basis for payment.
(a) Method of payment. Payment for a drug furnished on or after
January 1, 2005 is based on the lesser of--
(1) The actual charge on the claim for program benefits; or
[[Page 44]]
(2) 106 percent of the average sales price, subject to the
applicable limitations specified in paragraph (d) of this section or
subject to the exceptions described in paragraph (e) of this section.
(b) Multiple source drugs--(1) Average sales prices. The average
sales price for all drug products included within the same multiple
source drug billing and payment code is the volume-weighted average of
the manufacturers' average sales prices for those drug products.
(2) Calculation of the average sales price. The average sales price
is determined by--
(i) Computing the sum of the products (for each National Drug Code
assigned to the drug products) of the manufacturer's average sales price
and the total number of units sold; and
(ii) Dividing that sum by the sum of the total number of units sold
for all NDCs assigned to the drug products.
(c) Single source drugs--(1) Average sales price. The average sales
price is the volume-weighted average of the manufacturers' average sales
prices for all National Drug Codes assigned to the drug or biological
product.
(2) Calculation of the average sales price. The average sales price
is determined by computing--
(i) The sum of the products (for each National Drug Code assigned to
the drug product) of the manufacturer's average sales price and the
total number of units sold; and
(ii) Dividing that sum by the sum of the total number of units sold
for all NDCs assigned to the drug product.
(d) Limitations on the average sales price--(1) Wholesale
acquisition cost for a single source drug. The payment limit for a
single source drug product is the lesser of 106 percent of the average
sales price for the product or 106 percent of the wholesale acquisition
cost for the product.
(2) Payment limit for a drug furnished to an end-stage renal disease
patient. (i) Effective for drugs and biologicals furnished in 2005, the
payment for such drugs and biologicals, including erythropoietin,
furnished to an end-stage renal disease patient that is separately
billed by an end-stage renal disease facility and not paid on a cost
basis is acquisition cost as determined by the Inspector General report
as required by section 623(c) of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 inflated by the percentage
increase in the Producer Price Index.
(ii) Except as provided in paragraph (a) of this section, the
payment for drugs and biologicals, furnished to an end-stage renal
disease patient that is separately billed by an end-stage renal disease
facility, is based on 106 percent of the average sales price.
(iii) Effective for drugs and biologicals furnished in 2006, the
payment for such drugs and biologicals furnished in connection with
renal dialysis services and separately billed by freestanding and
hospital-based renal dialysis facilities not paid on a cost basis is 106
percent of the average sales price.
(3) Widely available market price and average manufacturer price. If
the Inspector General finds that the average sales price exceeds the
widely available market price or the average manufacturer price by 5
percent or more in calendar year 2006, the payment limit in the quarter
following the transmittal of this information to the Secretary is the
lesser of the widely available market price or 103 percent of the
average manufacturer price.
(e) Exceptions to the average sales price--(1) Vaccines. The payment
limits for hepatitis B vaccine furnished to individuals at high or
intermediate risk of contracting hepatitis B (as determined by the
Secretary), pneumococcal vaccine, and influenza vaccine and are
calculated using 95 percent of the average wholesale price.
(2) Infusion drugs furnished through a covered item of durable
medical equipment. The payment limit for an infusion drug furnished
through a covered item of durable medical equipment is calculated using
95 percent of the average wholesale price in effect on October 1, 2003
and is not updated in 2006.
(3) Blood and blood products. In the case of blood and blood
products (other than blood clotting factors), the payment limits are
determined in the same manner as the payment limits were determined on
October 1, 2003.
(4) Payment limit in a case where the average sales price during the
first quarter of sales is unavailable. In the case of
[[Page 45]]
a drug during an initial period (not to exceed a full calendar quarter)
in which data on the prices for sales of the drug are not sufficiently
available from the manufacturer to compute an average sales price for
the drug, the payment limit is based on the wholesale acquisition cost
or the applicable Medicare Part B drug payment methodology in effect on
November 1, 2003.
(f) Except as otherwise specified (see paragraph (e)(2) of this
section) for infusion drugs, the payment limits are updated quarterly.
(g) The payment limit is computed without regard to any special
packaging, labeling, or identifiers on the dosage form or product or
package.
(h) The payment amount is subject to applicable deductible and
coinsurance.
[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 70332, Nov. 21, 2005]
Sec. 414.906 Competitive acquisition program as the basis for payment.
(a) Program payment. Beginning in 2006, as an alternative to payment
under Sec. 414.904, payment for a CAP drug may be made through the CAP
if the following occurs:
(1) The CAP drug is supplied under the CAP by an approved CAP vendor
as specified in Sec. 414.908(b).
(2) The claim for the prescribed drug is submitted by the approved
CAP vendor that supplied the drug, and payment is made only to that
vendor.
(3) The approved CAP vendor collects applicable deductible and
coinsurance with respect to the drug furnished under the CAP only after
the drug is administered to the beneficiary.
(4) The approved CAP vendor delivers CAP drugs directly to the
participating CAP physician in unopened vials or other original
containers as supplied by the manufacturer or from a distributor that
has acquired the products directly from the manufacturer and includes
language with the shipping material stating that the drug was acquired
in a manner consistent with all statutory requirements. If the approved
CAP vendor opts to split shipments, the participating CAP physician must
be notified in writing which can be included with the initial shipment,
and each incremental shipment must arrive at least 2 business days
before the anticipated date of administration.
(5) The approved CAP vendor bills Medicare only for the amount of
the drug administered to the patient, and the beneficiary's coinsurance
will be calculated from the quantity of drug that is administered.
(b) Exceptions to competitive acquisition. Specific CAP drugs,
including a category of these drugs, may be excluded from the CAP if the
application of competitive bidding to these drugs--
(1) Is not likely to result in significant savings; or
(2) Is likely to have an adverse impact on access to those drugs.
(c) Computation of payment amount. (1) Except as specified in
paragraph (c)(2) of this section, payment for CAP drugs is based on bids
submitted, as a result of the bidding process as described in Sec.
414.910. Based on these bids, a single payment amount for each CAP drug
in the competitive acquisition area is determined on the basis of the
bids submitted and accepted and updated from the bidding period to the
payment year. This single payment amount is then updated on an annual
basis based on the approved CAP vendor's reasonable net acquisition
costs for that category as determined by CMS, based, in part, on
information disclosed to CMS and limited by the weighted payment amount
established under section 1847A of the Act across all drugs for which a
composite bid is required in the category, and limited by the payment
amount established under section 1847A of the Act for each other drug
for which the approved CAP vendor submits a bid in accordance with Sec.
414.910. Adjustment to the payment amounts may be made more often than
annually, but no more often than quarterly, in any of the following
cases:
(i) Introduction of new drugs.
(ii) Expiration of a drug patent or availability of a generic drug.
(iii) Material shortage that results in a significant price increase
for the drug.
(iv) Withdrawal of a drug from the market.
(2) The alternative payment amount established under section 1847A
of the Act may be used to establish payment for a CAP drug if--
[[Page 46]]
(i) The drug is properly assigned to a category established under
the CAP; and
(ii) It is a drug for which a HCPCS code must be established.
(d) Adjustments. There is an established process for adjustments to
payments to account for drugs that were billed, but which were not
administered.
(e) Resupply of participating CAP physician drug inventory. A
participating CAP physician may acquire drugs under the CAP to resupply
his or her private inventory if all of the following requirements are
met:
(1) The drugs were required immediately.
(2) The participating CAP physician could not have anticipated the
need for the drugs.
(3) The approved CAP vendor could not have delivered the drugs in a
timely manner. For purposes of this section, timely manner means
delivery within the emergency delivery timeframe, as defined in Sec.
414.902.
(4) The participating CAP physician administered the drugs in an
emergency situation, as defined in Sec. 414.902.
(f) Substitution or addition of drugs on an approved CAP vendor's
CAP drug list--(1) Short-term substitution of a CAP drug. On an
occasional basis (for a period of time less than 2 weeks), an approved
CAP vendor may agree to furnish a substitute NDC within a HCPCS code on
the approved CAP vendor's CAP drug list if the approved CAP vendor--
(i) Is willing to accept the payment amount that was established for
the HCPCS code under this section; and
(ii) Obtains the participating CAP physician's prior approval.
(2) Long-term substitution or addition of a CAP drug. An approved
CAP vendor may submit a request, as specified in paragraph (f)(3) of
this section, for approval to substitute an NDC supplied by the approved
CAP vendor for another NDC within the same HCPCS code or to add an NDC
to the approved CAP vendor's drug list, if at least one of the following
criteria is met:
(i) Proposed substitution of an NDC for a period of 2 weeks or
longer.
(ii) Proposed addition of one or more NDCs within a HCPCS code
included in the CAP drug category specified by CMS or on the approved
CAP vendor's approved CAP drug list.
(iii) Proposed addition of--
(A) One or more newly issued HCPCS codes; or
(B) One of the following single indication orphan drug J codes or
their updates: J0205, J0256, J9300, J1785, J2355, J3240, J7513, J9010,
J9015, J9017, J9160, J9216.
(iv) Beginning January 1, 2007, the proposed addition of a drug(s)
that has not yet been assigned a HCPCS code, but for which a HCPCS code
must be established.
(3) Requesting the addition or substitution of CAP drug. An approved
CAP vendor that meets the one of the criteria specified in paragraph
(f)(2) must submit a written request to CMS or its designee. The request
must--
(i) Specify the NDC(s) and the respective HCPCS code that is to be
added or substituted.
(ii) Address the rationale for the substitution or addition of the
NDC(s) or the addition of the HCPCS code(s) as applicable; and
(iii) Address the impact of the substitution of the NDC(s) or the
addition of the NDC(s) or HCPCS code(s), or both on--
(A) Patient and drug safety;
(B) Drug waste; and
(C) The potential for cost savings.
(4) Approval of a request(s). CMS or its designee notifies the
approved CAP vendor of its decision.
(i) Except as specified in paragraph (f)(4)(ii) of this section, an
approved request is effective at the beginning of the next calendar
quarter.
(ii) Approved substitutions for request based on a drug shortage or
other exigent circumstance may become effective immediately provided
that--
(A) CMS approves the immediate substitution; and
(B) The approved CAP vendor's notifies its CAP participating
physicians of the substitution immediately following CMS approval.
(5) Payment for an approved drug change(s). The payment for--
(i) Substituted or added CAP drugs that are within a HCPCS code for
which payment is computed under paragraph (c)(1) of this section is the
[[Page 47]]
single payment for that HCPCS code, as determined and updated in
accordance with paragraph (c)(1) of this section; or
(ii) Added CAP drugs that are not within a HCPCS code for which
payment is computed under paragraph (c)(1) of this section is specified
under paragraph (c)(2) of this section.
[70 FR 39094, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005; 71
FR 9460, Feb. 24, 2006]
Sec. 414.908 Competitive acquisition program.
(a) Participating CAP physician selection of an approved CAP vendor.
(1) CMS provides the participating CAP physician with a process for the
selection of an approved CAP vendor on an annual basis, with exceptions
as specified in Sec. 414.908(a)(2). Participating CAP physicians will
also receive information about the CAP in the enrollment process for
Medicare participation set forth in section 1842(h) of the Act.
(2) A participating CAP physician may select an approved CAP vendor
outside the annual selection process or opt out of the CAP for the
remainder of the annual selection period when--
(i) The selected approved CAP vendor ceases participation in the
CAP;
(ii) The physician leaves a group practice participating in CAP;
(iii) The participating CAP physician relocates to another
competitive acquisition area; or
(iv) For other exigent circumstances defined by CMS.
(3) The physician participating in the CAP--
(i) Elects to use an approved CAP vendor for the drug category and
area as set forth in Sec. 414.908(b);
(ii) Completes and signs the CAP election agreement;
(iii) Submits a written prescription order to the approved CAP
vendor with complete patient information for patients new to the
approved CAP vendor or when information changes. Abbreviated information
may be sent on all subsequent orders for a patient for which the
approved CAP vendor has previously received complete information and
that has no changes to the original information. Prescription orders may
be initiated by telephone, with a follow-up written order provided
within 8 hours for routine deliveries and immediately for emergency
deliveries;
(iv) Does not receive payment for the CAP drug;
(v) Except where applicable State pharmacy law prohibits it,
provides the following information to the approved CAP vendor to
facilitate collection of applicable deductible and coinsurance as
described in Sec. 414.906(a)(3):
(A) Date of order.
(B) Beneficiary name, address, and phone number.
(C) Physician identifying information:
Name, practice location/shipping address, group practice information
(if applicable), PIN, and UPIN.
(D) Drug name.
(E) Strength.
(F) Quantity ordered.
(G) Dose.
(H) Frequency/instructions.
(I) Anticipated date of administration.
(J) Beneficiary Medicare information/Health insurance (HIC) number.
(K) Supplementary insurance information (if applicable).
(L) Medicaid information (if applicable).
(M) Additional patient information: date of birth, allergies,
height/weight, ICD-9-CM (if necessary).
(vi) Agrees to accept the particular National Drug Codes (NDCs)
supplied by the approved CAP vendor for the duration of the
participating CAP physician's enrollment with the approved CAP vendor,
subject to paragraphs (a)(3)(vii) and (a)(3)(xiv) of this section. By
electing to participate with an approved CAP vendor, the participating
CAP physician also agrees to accept the changes to the approved CAP
vendor's CAP drug list that have been approved in accordance with Sec.
414.906(f).
(vii) Agrees to place routine orders for CAP drugs at the HCPCs
level, except when medical necessity requires a particular formulation
on the approved CAP vendor's CAP drug list. Medical necessity must be
documented. When the conditions of this paragraph are met, the
participating CAP physician may submit a prescription order to the
[[Page 48]]
approved CAP vendor that specifies the NDC.
(viii) Notifies the approved CAP vendor when a drug is not
administered or a smaller amount was administered than was originally
ordered. The participating CAP physician and the approved CAP vendor
agree on how to handle the unused CAP drug. If it is agreed that the
participating CAP physician will maintain the CAP drug in his inventory
for administration at a later date, the participating CAP physician
submits a new prescription order at that time. This prescription order
specifies that the CAP drug is being obtained from the participating CAP
physician's CAP inventory and shipment should not occur;
(ix) Maintains a separate electronic or paper inventory for each CAP
drug obtained;
(x) Agrees to file the Medicare claim within 14 calendar days of the
date of drug administration;
(xi) Agrees to submit an appeal accompanied by all required
documentation (such as medical records or a certification) necessary to
support payment if the participating CAP physician's drug administration
claim for a CAP drug is denied;
(xii) Agrees not to transport CAP drugs from one practice location
(place of service) to another location;
(xiii) Agrees to provide the CMS-developed CAP fact sheet to
beneficiaries; and
(xiv) May receive payment under the ASP system when medical
necessity requires a certain brand or formulation of a drug that the
approved CAP vendor has not been contracted to furnish under the CAP.
(4) Physician group practices. If a physician group practice using a
group billing number(s) elects to participate in the CAP, all physicians
in the group are considered to be participating CAP physicians when
using the group's billing number(s).
(5) Additional opt out provision. In addition to the circumstances
listed in paragraph (a)(2) of this section, if the approved CAP vendor
refuses to ship to the participating CAP physician because the
conditions of Sec. 414.914(h) were met, the physician can withdraw from
the CAP category for the remainder of the year immediately upon notice
to CMS and the approved CAP vendor.
(b) Program requirements. (1) CMS selects approved CAP vendors
through a competition among entities based on the following:
(i) Submission of the bid prices using the OMB-approved Vendor
Application and Bid Form for CAP drugs within the category and
competitive acquisition area that--
(A) Places the vendor among the qualified bidders with the lowest
five composite bids; and
(B) Does not exceed the weighted payment amount established under
section 1847A of the Act across all drugs in that category.
(ii) Ability to ensure product integrity.
(iii) Customer service/Grievance process.
(iv) At least 3 years experience in furnishing Part B injectable
drugs.
(v) Financial performance and solvency.
(vi) Record of integrity and the implementation of internal
integrity measures.
(vii) Internal financial controls.
(viii) Acquisition of all CAP drugs directly from the manufacturer
or from a distributor that has acquired the products directly from the
manufacturer.
(ix) Maintenance of appropriate licensure to supply CAP drugs in
States in which they are supplying CAP drugs.
(x) Cost-sharing assistance as described in Sec. 414.914(g).
(xi) Other factors as determined by CMS.
(2) Approved CAP vendors must also meet the contract requirements
under Sec. 414.914.
(c) Additional considerations. CMS may refuse to award a contract or
terminate an approved CAP vendor contract based upon the following:
(1) Suspension or revocation by the Federal or State government of
the entity's license for distribution of drugs, including controlled
substances.
(2) Exclusion of the entity under section 1128 of the Act from
participation in Medicare or other Federal health care programs. These
considerations are in addition to CMS' ability to terminate the approved
CAP vendor for cause as specified in Sec. 414.914(a).
[[Page 49]]
(3) Past violations or misconduct related to the pricing, marketing,
distribution, or handling of drugs provided incident to a physician's
service.
(d) Multiple source drugs. In the case of multiple source drugs,
there must be a competition among entities for the acquisition of at
least one CAP drug within each billing and payment code within each
category for each competitive acquisition area.
(e) Multiple contracts for a category and area. The number of
bidding qualified entities that are awarded a contract for a given
category and area may be limited to no fewer than two.
[70 FR 39094, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005]
Sec. 414.910 Bidding process.
(a) Entities may bid to furnish CAP drugs in all competitive
acquisition areas of the United States, or one or more specific
competitive acquisition areas.
(b) The amount of the bid for any CAP drug for a specific
competitive acquisition area must be uniform for all portions of that
competitive acquisition area.
(c) A submitted bid price must include the following:
(1) All costs related to the delivery of the drug to the
participating CAP physician.
(2) The costs of dispensing (including shipping) of the drug and
management fees. The costs related to the administration of the drug or
wastage, spillage, or spoilage may not be included.
[70 FR 39095, July 6, 2005]
Sec. 414.912 Conflicts of interest
(a) Approved CAP vendors and applicants that bid to participate in
the CAP are subject to the following:
(1) The conflict of interest standards and requirements of the
Federal Acquisition Regulation (FAR) organizational conflict of interest
guidance, found under FAR subpart 9.5.
(2) Those requirements and standards contained in each individual
contract awarded to perform functions under section 1847B of the Act.
(b) Post-award conflicts of interest. Approved CAP vendors must have
a code of conduct that establishes policies and procedures for
recognizing and resolving conflicts of interest between the approved CAP
vendor and any entity, including the Federal Government, with whom it
does business. The code of conduct which is submitted as part of the
application must--
(1) State the need for management, employees, contractors, and
agents to comply with the approved CAP vendor's code of conduct, and
policies and procedures for conflicts of interest; and
(2) State the approved CAP vendor's expectations for management,
employees, contractors, and agents to comply with the approved CAP
vendor's code of conduct, and policies and procedures for detecting,
preventing, and resolving conflicts of interest.
[70 FR 39094, July 6, 2005]
Sec. 414.914 Terms of contract.
(a) The contract between CMS and the approved CAP vendor will be for
a term of 3 years, unless terminated or suspended earlier as provided in
this section or provided in Sec. 414.917. The contract may be
terminated--
(1) By CMS for default if the approved CAP vendor violates any term
of the contract; or
(2) In the absence of a contract violation, by either CMS or the
approved CAP vendor, if the terminating party notifies the other party
by June 30 for an effective date of termination of December 31 of that
year.
(b) The contract will provide for a code of conduct for the approved
CAP vendor that includes standards relating to conflicts of interest
standards as set forth at Sec. 414.912.
(c) The approved CAP vendor will have and implement a compliance
plan that contains policies and procedures that control program fraud,
waste, and abuse, and consists of the following minimum elements:
(1) Written policies, procedures, and standards of conduct
articulating the organization's commitment to comply with all applicable
Federal and State laws, regulations, and guidance, including, but not
limited to, the Prescription Drug Marketing Act (PDMA), the physician
self-referral (``Stark'') prohibition, the Anti-Kickback statute and the
False Claims Act.
[[Page 50]]
(2) The designation of a compliance officer and compliance committee
accountable to senior management.
(3) Effective training and education of the compliance officer and
organization employees, contractors, agents, and directors.
(4) Enforcement of standards through well publicized disciplinary
guidelines.
(5) Procedures for effective internal monitoring and auditing.
(6) Procedures for ensuring prompt responses to detected offenses
and development of corrective action initiatives relating to the
organization's contract as an approved CAP vendor.
(i) If the approved CAP vendor discovers evidence of misconduct
related to payment or delivery of drugs or biologicals under the
contract, it will conduct a timely and reasonable inquiry into that
conduct.
(ii) The approved CAP vendor will conduct appropriate corrective
actions including, but not limited to, repayment of overpayments and
disciplinary actions against responsible individuals, in response to
potential violations referenced at paragraph (c)(6)(i) of this section.
(7) Procedures to voluntarily self-report potential fraud or
misconduct related to the CAP to the appropriate government agency.
(d) The contract must provide for disclosure of the approved CAP
vendor's reasonable, net acquisition costs for a specified period of
time, not to exceed quarterly.
(e) The contract must provide for appropriate adjustments as
described in Sec. 414.906(c)(1).
(f) Under the terms of the contract, the approved CAP vendor must
also--
(1) Have sufficient arrangements to acquire and deliver CAP drugs
within the category in the competitive acquisition area specified by the
contract;
(2) Have arrangements in effect for shipment at least 5 weekdays
each week of CAP drugs under the contract, including the ability to
comply with the routine and emergency delivery timeframes defined in
Sec. 414.902;
(3) Have procedures in place to address and resolve complaints of
participating CAP physicians and individuals and inquiries regarding
shipment of CAP drugs;
(4) Have a grievance and appeals process for dispute resolution;
(5) Respond within 2 business days to any inquiry, or sooner if the
inquiry is related to drug quality;
(6) Staff a toll-free telephone line from 8:30 a.m. or earlier and
until 5 p.m. or later for all time zones served in the continental
United States by the CAP vendor on business days (Monday through Friday
excluding Federal holidays) to provide customer assistance, and
establish reasonable hours of operation for Hawaii, Alaska, Puerto Rico,
and the other U.S. territories;
(7) Staff an emergency toll-free telephone line for weekend and
evening access when the call center is closed, and determine what hours
on Saturday and Sunday the call center is staffed and which hours a
toll-free emergency line is activated; and
(8) Include assistance for the disabled, the hearing impaired, and
Spanish-speaking inquirers in all customer service operations.
(9) Meet applicable licensure requirements in each State in which it
supplies drugs under the CAP;
(10) Be enrolled in Medicare as a participating supplier;
(11) Comply with all applicable Federal and State laws, regulations
and guidance related to the prevention of fraud and abuse;
(12) Supply CAP drugs upon receipt of a prescription order to all
participating CAP physicians who have selected the approved CAP vendor,
except when the conditions of Sec. 414.914(h) are met;
(13) Provide direct notification to participating CAP physicians
enrolled with them of updates to the approved CAP vendor's CAP drug list
on a quarterly basis. Changes must be disseminated at least 30 days
before the approved changes are due to take effect, unless immediate
notification as described in Sec. 414.906(f)(4) is required. The
approved CAP vendor's entire CAP drug list must be disseminated at least
once yearly; and approved CAP vendors must make a complete list that
incorporates the most recent updates available to physicians on an
ongoing basis. CMS posts on its web site the updated CAP drug lists for
each approved CAP vendor.
[[Page 51]]
(14) Ensure that subcontractors who are involved in providing
services under the approved CAP contractor's CAP contract meet all
requirements and comply with all laws and regulations relating to the
services they provide under the CAP program. Notwithstanding any
relationship the CAP vendor may have with any subcontractor, the
approved CAP vendor maintains ultimate responsibility for adhering to
and otherwise fully complying with all terms and conditions of its
contract with CMS;
(15) Comply with product integrity and record keeping requirements
including but not limited to drug acquisition, handling, storage,
shipping, drug waste, and return processes; and
(16) Comply with such other terms and conditions as CMS may specify
in the CAP contract consistent with section 1847B of the Act.
(g) Under the terms of the contract, the approved CAP vendor must
provide assistance to beneficiaries experiencing financial difficulty in
paying their cost-sharing amounts through any one or all of the
following:
(1) Referral to a bona fide and independent charitable organization.
(2) Implementation of a reasonable payment plan.
(3) A full or partial waiver of the cost-sharing amount after
determining in good faith that the individual is in financial need or
the failure of reasonable collection efforts, provided that the waiver
meets all of the requirements of section 1128A(i)(6)(A) of the Act and
the corresponding regulations at paragraph (1) of the definition of
``Remuneration'' in Sec. 1003.101 of this title. The availability of
waivers may not be advertised or be made as part of a solicitation.
Approved CAP vendors must inform beneficiaries that they generally make
available the categories of assistance described in paragraphs (g)(1),
(g)(2), and (g)(3) of this section. In no event may the approved CAP
vendor include or make any statements or representations that promise or
guarantee that beneficiaries receive cost-sharing waivers.
(h) The approved CAP vendor must comply with the following
procedures before it may refuse to make further shipments of CAP drugs
to a participating CAP physician on behalf of a beneficiary:
(1) Subsequent to receipt of final payment by Medicare, or the
verification of drug administration by the participating CAP physician,
the approved CAP vendor must bill any applicable supplemental insurance
policies.
(2) If a balance remains, after the supplemental insurer pays their
share of the bill, or if there is no supplemental insurance, the
approved CAP vendor may bill the beneficiary.
(3) At the time of billing the beneficiary, or the participating CAP
physician's presentation of the bill on behalf of the approved CAP
vendor, the approved CAP vendor must inform the beneficiary of any types
of cost-sharing assistance that may be available consistent with the
requirements of section 1128A(a)(5) of the Act and Sec. 414.914(g).
(4) If the beneficiary demonstrates a financial need, the approved
CAP vendor must follow the conditions outlined in paragraph (g) of this
section.
(5) For purposes of paragraph (h) delivery means postmark date, or
the date the coinsurance bill or notice was presented to the beneficiary
by the participating CAP physician on behalf of the approved CAP vendor.
(i) Except as specified in paragraph (h)(5)(ii), if after 45 days
from delivery of the approved CAP vendor's bill to the beneficiary, the
beneficiary's cost-sharing obligation remains unpaid, the approved CAP
vendor may refuse further shipments to the participating CAP physician
for that beneficiary.
(ii) If the beneficiary has requested cost-sharing assistance within
45 days of receiving delivery of the approved CAP vendor's bill,
provisions of paragraphs (h)(6), (h)(7), or (h)(8) of this section,
apply.
(6) If the approved CAP vendor implements a reasonable payment plan,
as specified in Sec. 414.914(g)(2), the approved CAP vendor must
continue to ship CAP drugs for the beneficiary, as long as the
beneficiary remains in compliance with the payment plan and makes an
initial payment under the plan within 15 days after the delivery of the
approved CAP vendor's written notice to the beneficiary offering the
payment plan.
[[Page 52]]
(7) If the approved CAP vendor has waived the cost-sharing
obligations in accordance with section 1128A of the Act and Sec.
414.914(g)(3), the approved CAP vendor may not refuse to ship drugs for
that beneficiary.
(8) If the approved CAP vendor refers the beneficiary to a bona fide
and independent charity in accordance with Sec. 414.914(g)(1), the
approved CAP vendor may refuse to ship drugs if the past due balance is
not paid 15 days after the date of delivery of the approved CAP vendor's
written notice to the beneficiary containing the referral for cost-
sharing assistance.
(9) The approved CAP vendor may refuse to make further shipments to
that participating CAP physician on behalf of the beneficiary for the
lesser of the end of the calendar year or until the beneficiary's
balance is paid in full.
[70 FR 39096, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005]
Sec. 414.916 Dispute resolution for vendors and beneficiaries.
(a) General rule. Cases of an approved CAP vendor's dissatisfaction
with denied drug claims are resolved through a voluntary alternative
dispute resolution process delivered by the designated carrier, and a
reconsideration process provided by CMS.
(b) Dispute resolution. (1) When an approved CAP vendor is not paid
on claims submitted to the designated carrier, the vendor may appeal to
the designated carrier to counsel the responsible participating CAP
physician on his or her agreement to file a clean claim and pursue an
administrative appeal in accordance with subpart H of part 405 of this
chapter. If problems persist, the approved CAP vendor may ask the
designated carrier to--
(i) Review the participating CAP physician's performance; and
(ii) Potentially recommend to CMS that CMS suspend the participating
CAP physician's CAP election agreement.
(2) The designated carrier--
(i) Gathers information from the local carrier, the participating
CAP physician, the beneficiary, and the approved CAP vendor; and
(ii) Makes a recommendation to CMS on whether the participating CAP
physician has been filing his or her CAP drug administration claims in
accordance with the requirements for physician participation in the CAP
as set forth in Sec. 414.908(a)(3). The recommendation will include
numbered findings of fact.
(3) CMS will review the recommendation of the designated carrier and
gather relevant additional information from the participating CAP
physician before deciding whether to suspend the participating CAP
physician's CAP election agreement. A suspension commencing before
October 1 will conclude on December 31 of the same year. A suspension
commencing on or after October 1 will conclude on December 31 of the
next year.
(4) The participating CAP physician may appeal that suspension by
requesting a reconsideration of CMS' decision. The reconsideration will
address whether the participating CAP physician's denied claims and
appeals were the result of the participating CAP physician's failure to
participate in accordance with the requirements of Sec. 414.908(a)(3).
(c) Reconsideration--(1) Right to reconsideration. A participating
CAP physician dissatisfied with a determination that his or her CAP
election agreement has been suspended by CMS is entitled to a
reconsideration as provided in this subpart.
(2) Eligibility for reconsideration. CMS reconsiders any
determination to suspend a participating CAP physician's election
agreement if the participating CAP physician files a written request for
reconsideration in accordance with paragraphs (c)(3) and (c)(4) of this
section.
(3) Manner and timing of request for reconsideration. A
participating CAP physician who is dissatisfied with a CMS decision to
suspend his or her CAP election agreement may request a reconsideration
of the decision by filing a request with CMS. The request must be filed
within 30 days of receipt of the CMS decision letter notifying the
participating CAP physician of CMS' decision to suspend his or her CAP
election agreement. From the date of receipt of the decision letter
until the day the reconsideration determination is final, the ASP
payment methodology under
[[Page 53]]
section 1847A of the Act applies to the physician.
(4) Content of request. The request for reconsideration must
specify--
(i) The findings or issues with which the participating CAP
physician disagrees;
(ii) The reasons for the disagreement;
(iii) A recital of the facts and law supporting the participating
CAP physician's position;
(iv) Any supporting documentation; and
(v) Any supporting statements from approved CAP vendors, local
carriers, or beneficiaries.
(5) Withdrawal of request for reconsideration. A participating CAP
physician may withdraw his or her request for reconsideration at any
time before the issuance of a reconsideration determination.
(6) Discretionary informal hearing. In response to a request for
reconsideration, CMS may, at its discretion, provide the participating
CAP physician the opportunity for an informal hearing that--
(i) Is conducted by a hearing officer appointed by the director of
the CMS Center for Medicare Management or his or her designee; and
(ii) Provides the participating CAP physician the opportunity to
present, by telephone or in person, evidence to rebut CMS' decision to
suspend or terminate a participating CAP physician's CAP election
agreement.
(7) Informal hearing procedures. (i) CMS provides written notice of
the time and place of the informal hearing at least 10 days before the
scheduled date.
(ii) The informal reconsideration hearing will be conducted in
accordance with the following procedures:
(A) The hearing is open to CMS and the participating CAP physician
requesting the reconsideration, including--
(1) Authorized representatives;
(2) Technical advisors (individuals with knowledge of the facts of
the case or presenting interpretation of the facts);
(3) Representatives from the local carrier;
(4) Representatives from the approved CAP vendor; and
(5) Legal counsel.
(B) The hearing is conducted by the hearing officer who receives
relevant testimony;
(C) Testimony and other evidence may be accepted by the hearing
officer even though it would be inadmissible under the rules of evidence
applied in Federal courts;
(D) Either party may call witnesses from among those individuals
specified in paragraph (c)(7)(ii)(A) of this section; and
(E) The hearing officer does not have the authority to compel by
subpoena the production of witnesses, papers, or other evidence.
(8) Hearing officer's findings. (i) Within 30 days of the hearing
officer's receipt of the hearing request, the hearing officer presents
the findings and recommendations to the participating CAP physician who
requested the reconsideration. If the hearing officer decides to conduct
an in-person or telephone hearing, the hearing officer will send a
hearing notice to the participating CAP physician within 10 days of
receipt of the hearing request, and the findings and recommendations are
due to the participating CAP physician within 30 days of the hearing's
conclusion.
(ii) The written report of the hearing officer includes separate
numbered findings of fact and the legal conclusions of the hearing
officer.
(9) Final reconsideration determination. (i) The hearing officer's
decision is final unless the director of the CMS Center for Medicare
Management or his or her designee chooses to review that decision within
30 days. If the decision is favorable to the participating CAP
physician, then the participating CAP physician may resume his or her
participation in CAP. The hearing officer and the CMS official may
review decisions that are favorable or unfavorable to the participating
CAP physician.
(ii) The CMS official may accept, reject, or modify the hearing
officer's findings.
(iii) If the CMS official reviews the hearing officer's decision,
the CMS official issues a final reconsideration determination to the
participating CAP physician on the basis of the hearing
[[Page 54]]
officer's findings and recommendations and other relevant information.
(iv) The reconsideration determination of the CMS official is final.
If the final decision is unfavorable to the participating CAP physician,
then the participating CAP physician's CAP election agreement is
terminated.
(d) The approved CAP vendor may not charge the beneficiary for the
full drug coinsurance amount if the designated contractor did not pay
the approved CAP vendor in full, unless a properly executed advance
beneficiary notice is in place. When a beneficiary receives an
inappropriate coinsurance bill, the beneficiary may participate in the
approved CAP vendor's grievance process to request correction of the
approved CAP vendor's file. If the beneficiary is dissatisfied with the
result of the approved CAP vendor's grievance process, the beneficiary
may request intervention from the designated carrier. This is in
addition to, rather than in place of, any other beneficiary appeal
rights. The designated carrier will first investigate the facts and then
facilitate correction to the appropriate claim record and beneficiary
file.
[70 FR 39097, July 6, 2005]
Sec. 414.917 Dispute resolution and process for suspension or termination of approved CAP contract.
(a) General rule. If a participating CAP physician finds an approved
CAP vendor's service, or the quality of a CAP drug supplied by the
approved CAP vendor to be unsatisfactory, then the physician may address
the issue first through the approved CAP vendor's grievance process, and
second through an alternative dispute resolution process administered by
the designated carrier and CMS. If CMS suspends an approved CAP vendor's
CAP contract for noncompliance or terminates the CAP contract in
accordance with Sec. 414.914(a), the approved CAP vendor may request a
reconsideration in accordance with paragraph (c) of this section.
(b) Dispute resolution. (1) When a participating CAP physician is
dissatisfied with an approved CAP vendor's service or the quality of a
CAP drug supplied by the approved CAP vendor, then the participating CAP
physician may use the approved CAP vendor's grievance process. If the
service or quality issues are not resolved through the grievance process
to the physician's satisfaction, then the participating CAP physician
may ask the designated carrier to--
(i) Review the approved CAP vendor's performance; and
(ii) Potentially recommend termination of the approved CAP vendor's
CAP contract.
(2) Responsibility of the designated carrier. The designated
carrier--
(i) Gathers information from the local carrier, the participating
CAP physician, the beneficiary, and the approved CAP vendor; and
(ii) Makes a recommendation to CMS on whether the approved CAP
vendor has been meeting the service and quality obligations of its CAP
contract. This recommendation will include numbered findings of fact.
(3) CMS will review the recommendation of the designated carrier
and, gather relevant additional information from the approved CAP
vendor, the participating CAP physician, the local carrier, and the
beneficiary before deciding whether to terminate the approved CAP
vendor's CAP contract.
(4) The approved CAP vendor may appeal that termination by
requesting a reconsideration. A determination must be made as to whether
the approved CAP vendor has been meeting the service and quality
obligations of its CAP contract.
(c) Reconsideration--(1) Right to reconsideration. An approved CAP
vendor dissatisfied with a determination that its CAP contract has been
suspended or terminated by CMS is entitled to a reconsideration as
provided in this subpart.
(2) Eligibility for reconsideration. CMS will reconsider any
determination to suspend or terminate an approved CAP vendor's contract
if the approved CAP vendor files a written request for reconsideration
in accordance with paragraphs (c)(3) and (c)(4) of this section.
(3) Manner and timing of request for reconsideration. An approved
CAP vendor that is dissatisfied with a CMS decision to suspend or
terminate its CAP contract may request a reconsideration of the decision
by filing a request with CMS. The request must be filed within
[[Page 55]]
30 days of receipt of the CMS decision letter notifying the approved CAP
vendor of the suspension or termination of its CAP contract.
(4) Content of request. The request for reconsideration must
specify--
(i) The findings or issues with which the approved CAP vendor
disagrees;
(ii) The reasons for the disagreement;
(iii) A recital of the facts and law supporting the approved CAP
vendor's position;
(iv) Any supporting documentation; and
(v) Any supporting statements from participating CAP physicians, the
local carrier, or beneficiaries.
(5) Withdrawal of request for reconsideration. An approved CAP
vendor may withdraw its request for reconsideration at any time before
the issuance of a reconsideration determination.
(6) Discretionary informal hearing. In response to a request for
reconsideration, CMS may, at its discretion, provide the approved CAP
vendor the opportunity for an informal hearing that--
(i) Is conducted by a hearing officer appointed by the Director of
the CMS Center for Medicare Management or his or her designee; and
(ii) Provides the approved CAP vendor the opportunity to present, by
telephone or in person, evidence to rebut CMS' decision to suspend or
terminate the approved CAP vendor's CAP contract.
(7) Informal hearing procedures. (i) CMS will provide written notice
of the time and place of the informal hearing at least 10 days before
the scheduled date.
(ii) The informal reconsideration hearing will be conducted in
accordance with the following procedures:
(A) The hearing is open to CMS and the approved CAP vendor
requesting the reconsideration, including--
(1) Authorized representatives;
(2) Technical advisors (individuals with knowledge of the facts of
the case or presenting interpretation of the facts);
(3) Representatives from the local carriers and the designated
carrier;
(4) The participating CAP physician who requested the suspension, if
any; and
(5) Legal counsel.
(B) The hearing will be conducted by the hearing officer, who will
receive relevant testimony;
(C) Testimony and other evidence may be accepted by the hearing
officer even though it would be inadmissible under the rules of evidence
applied in Federal courts;
(D) Either party may call witnesses from among those individuals
specified in the paragraph (c)(7)(ii)(A) of this section; and
(E) The hearing officer does not have the authority to compel by
subpoena the production of witnesses, papers, or other evidence.
(8) Hearing officer's findings. (i) Within 30 days of the hearing
officer's receipt of the hearing request, the hearing officer will
present the findings and recommendations to the approved CAP vendor that
requested the reconsideration. If the hearing officer conducts a hearing
in person or by phone, the hearing officer will send a hearing notice to
the approved CAP vendor within 10 days of receipt of the hearing
request, and the findings and recommendations are due to the approved
CAP vendor within 30 days from of the hearing's conclusion.
(ii) The written report of the hearing officer will include separate
numbered findings of fact and the legal conclusions of the hearing
officer.
(9) Final reconsideration determination. (i) The hearing officer's
decision is final unless the Director of the CMS Center for Medicare
Management or his or her designee (CMS official) chooses to review that
decision within 30 days. If the decision is favorable to the approved
CAP vendor, then the approved CAP vendor may resume participation in
CAP. The hearing officer and the CMS official may review decisions that
are favorable or unfavorable to the approved CAP vendor.
(ii) The CMS official may accept, reject, or modify the hearing
officer's findings.
(iii) If the CMS official reviews the hearing officer's decision,
the CMS official will issue a final reconsideration determination to the
approved CAP vendor on the basis of the hearing officer's findings and
recommendations and other relevant information.
[[Page 56]]
(iv) The reconsideration determination of the CMS official is final.
[70 FR 39098, July 6, 2005]
Sec. 414.918 Assignment.
Payment for a CAP drug may be made only on an assignment-related
basis.
[70 FR 39099, July 6, 2005]
Sec. 414.920 Judicial review.
The following areas under the CAP are not subject to administrative
or judicial review:
(a) The establishment of payment amounts.
(b) The awarding of vendor contracts.
(c) The establishment of competitive acquisition areas.
(d) The selection of CAP drugs.
(e) The bidding structure.
(f) The number of vendors selected.
[70 FR 39099, July 6, 2005]
Subpart L_Supplying and Dispensing Fees
Sec. 414.1000 Purpose.
This subpart implements section 1842(o)(2) and section 1842(o)(6) of
the Act, as added by section 303(e)(2) of the MMA, by specifying a
supplying fee for drugs and biologicals covered under Part B of Title
XVIII of the Act that are described in sections 1861(s)(2)(J),
1861(s)(2)(Q), and 1861(s)(2)(T) of the Act.
[69 FR 66425, Nov. 15, 2004]
Sec. 414.1001 Basis of payment.
(a) Supplying fees. Beginning in CY 2006--
(1) A supplying fee of $24 is paid to a pharmacy for the first
prescription of drugs and biologicals described in sections
1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, that the
pharmacy provided to a beneficiary during a 30-day period.
(2) A supplying fee of $16 is paid to a pharmacy for each
prescription following the first prescription (as specified in paragraph
(a)(1) of this section) of drugs and biologicals described in sections
1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, that the
pharmacy provided to a beneficiary during a 30-day period.
(3) A separate supplying fee is paid to a pharmacy for each
prescription of drugs and biologicals described in sections
1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act.
(b) Supplying fees following transplant. Beginning CY 2006--(1) A
supplying fee of $50 is paid to pharmacy for the initial supplied
prescription of drugs and biologicals described in section 1861(s)(2)(J)
of the Act, that the pharmacy provided to a patient during the first 30-
day period following a transplant.
(2) A supplying fee of $16 is paid to a pharmacy for each
prescription following an initial prescription after a transplant (as
specified in paragraph (b)(1) of this section) of drugs and biologicals
describe in section 1861(s)(2)(J) of the Act, that the pharmacy provided
to a beneficiary during a 30-day period.
(c) 30-day dispensing fees. Beginning CY 2006--(1) A dispensing fee
of $57 is paid to a supplier to the extent that the prescription is for
the initial dispensed 30-day supply of inhalation drugs furnished
through durable medical equipment covered under section 1861(n) of the
Act, regardless of the number of partial shipments of that 30-day
supply.
(2) Except for supplied inhalation drugs that meet criteria
described in paragraph (c)(1) of this section, a dispensing fee of $33
is paid for each dispensed 30-day supply of inhalation drugs furnished
through durable medical equipment covered under section 1861(n) of the
Act, regardless of the number of partial shipments of that 30-day
supply.
(d) 90-day dispensing fee. Beginning CY 2006, a dispensing fee of
$66 is paid to a supplier for each dispensed 90-day supply of inhalation
drugs furnished through durable medical equipment covered under section
1861(n) of the Act, regardless of the number of partial shipments of
that 90-day supply.
[70 FR 70334, Nov. 21, 2005]
[[Page 57]]
PART 415_SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, SUPERVISING PHYSICIANS IN TEACHING SETTINGS, AND RESIDENTS IN CERTAIN SETTINGS--Table of Contents
Subpart A_General Provisions
Sec.
415.1 Basis and scope.
Subpart B_Fiscal Intermediary Payments to Providers for Physician
Services
415.50 Scope.
415.55 General payment rules.
415.60 Allocation of physician compensation costs.
415.70 Limits on compensation for physician services in providers.
Subpart C_Part B Carrier Payments for Physician Services to
Beneficiaries in Providers
415.100 Scope.
415.102 Conditions for fee schedule payment for physician services to
beneficiaries in providers.
415.105 Amounts of payment for physician services to beneficiaries in
providers.
415.110 Conditions for payment: Medically directed anesthesia services.
415.120 Conditions for payment: Radiology services.
415.130 Conditions for payment: Physician pathology services.
Subpart D_Physician Services in Teaching Settings
415.150 Scope.
415.152 Definitions.
415.160 Election of reasonable cost payment for direct medical and
surgical services of physicians in teaching hospitals: General
provisions.
415.162 Determining payment for physician services furnished to
beneficiaries in teaching hospitals.
415.164 Payment to a fund.
415.170 Conditions for payment on a fee schedule basis for physician
services in a teaching setting.
415.172 Physician fee schedule payment for services of teaching
physicians.
415.174 Exception: Evaluation and management services furnished in
certain centers.
415.176 Renal dialysis services.
415.178 Anesthesia services.
415.180 Teaching setting requirements for the interpretation of
diagnostic radiology and other diagnostic tests.
415.184 Psychiatric services.
415.190 Conditions of payment: Assistants at surgery in teaching
hospitals.
Subpart E_Services of Residents
415.200 Services of residents in approved GME programs.
415.202 Services of residents not in approved GME programs.
415.204 Services of residents in skilled nursing facilities and home
health agencies.
415.206 Services of residents in nonprovider settings.
415.208 Services of moonlighting residents.
Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C.
1302 and 1395hh).
Source: 60 FR 63178, Dec. 8, 1995, unless otherwise noted.
Subpart A_General Provisions
Sec. 415.1 Basis and scope.
(a) Basis. This part is based on the provisions of the following
sections of the Act: Section 1848 establishes a fee schedule for payment
for physician services. Section 1861(q) specifies what is included in
the term ``physician services'' covered under Medicare. Section
1862(a)(14) sets forth the exclusion of nonphysician services furnished
to hospital patients under Part B of Medicare. Section 1886(d)(5)(B)
provides for a payment adjustment under the prospective payment system
for the operating costs of inpatient hospital services furnished to
Medicare beneficiaries in cost reporting periods beginning on or after
October 1, 1983, to account for the indirect costs of medical education.
Section 1886(h) establishes the methodology for Medicare payment of the
cost of direct GME activities.
(b) Scope. This part sets forth rules for fiscal intermediary
payments to providers for physician services, Part B carrier payments
for physician services to beneficiaries in providers, physician services
in teaching settings, and services of residents.
Subpart B_Fiscal Intermediary Payments to Providers for Physician
Services
Sec. 415.50 Scope.
This subpart sets forth rules for payment by fiscal intermediaries
to providers for services furnished by physicians. Payment for covered
services is
[[Page 58]]
made either under the prospective payment system (PPS) to PPS-
participating providers in accordance with part 412 of this chapter or
under the reasonable cost method to non-PPS participating providers in
accordance with part 413 of this chapter.
Sec. 415.55 General payment rules.
(a) Allowable costs. Except as specified otherwise in Sec. Sec.
413.102 of this chapter (concerning compensation of owners), 415.60
(concerning allocation of physician compensation costs), and 415.162
(concerning payment for physician services furnished to beneficiaries in
teaching hospitals), costs a provider incurs for services of physicians
are allowable only if the following conditions are met:
(1) The services do not meet the conditions in Sec. 415.102(a)
regarding fee schedule payment for services of physicians to a
beneficiary in a provider.
(2) The services include a surgeon's supervision of services of a
qualified anesthetist, but do not include physician availability
services, except for reasonable availability services furnished for
emergency rooms and the services of standby surgical team physicians.
(3) The provider has incurred a cost for salary or other
compensation it furnished the physician for the services.
(4) The costs incurred by the provider for the services meet the
requirements in Sec. 413.9 of this chapter regarding costs related to
patient care.
(5) The costs do not include supervision of interns and residents
unless the provider elects reasonable cost payment as specified in Sec.
415.160, or any other costs incurred in connection with an approved GME
program that are payable under Sec. Sec. 413.75 through 413.83 of this
chapter.
(b) Allocation of allowable costs. The provider must follow the
rules in Sec. 415.60 regarding allocation of physician compensation
costs to determine its costs of services.
(c) Limits on allowable costs. The intermediary must apply the
limits on compensation set forth in Sec. 415.70 to determine its
payments to a provider for the costs of services.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.60 Allocation of physician compensation costs.
(a) Definition. For purposes of this subpart, physician compensation
costs means monetary payments, fringe benefits, deferred compensation,
and any other items of value (excluding office space or billing and
collection services) that a provider or other organization furnishes a
physician in return for the physician services. Other organizations are
entities related to the provider within the meaning of Sec. 413.17 of
this chapter or entities that furnish services for the provider under
arrangements within the meaning of the Act.
(b) General rule. Except as provided in paragraph (d) of this
section, each provider that incurs physician compensation costs must
allocate those costs, in proportion to the percentage of total time that
is spent in furnishing each category of services, among--
(1) Physician services to the provider (as described in Sec.
415.55);
(2) Physician services to patients (as described in Sec. 415.102);
and
(3) Activities of the physician, such as funded research, that are
not paid under either Part A or Part B of Medicare.
(c) Allowable physician compensation costs. Only costs allocated to
payable physician services to the provider (as described in Sec.
415.55) are allowable costs to the provider under this subpart.
(d) Allocation of all compensation to services to the provider.
Generally, the total physician compensation received by a physician is
allocated among all services furnished by the physician, unless--
(1) The provider certifies that the compensation is attributable
solely to the physician services furnished to the provider; and
(2) The physician bills all patients for the physician services he
or she furnishes to them and personally receives the payment from or on
behalf of the patients. If returned directly or indirectly to the
provider or an organization related to the provider within the meaning
of Sec. 413.17 of this chapter, these payments are not compensation for
physician services furnished to the provider.
[[Page 59]]
(e) Assumed allocation of all compensation to beneficiary services.
If the provider and physician agree to accept the assumed allocation of
all the physician services to direct services to beneficiaries as
described under Sec. 415.102(a), CMS does not require a written
allocation agreement between the physician and the provider.
(f) Determination and payment of allowable physician compensation
costs. (1) Except as provided under paragraph (e) of this section, the
intermediary pays the provider for these costs only if--
(i) The provider submits to the intermediary a written allocation
agreement between the provider and the physician that specifies the
respective amounts of time the physician spends in furnishing physician
services to the provider, physician services to patients, and services
that are not payable under either Part A or Part B of Medicare; and
(ii) The compensation is reasonable in terms of the time devoted to
these services.
(2) In the absence of a written allocation agreement, the
intermediary assumes, for purposes of determining reasonable costs of
the provider, that 100 percent of the physician compensation cost is
allocated to services to beneficiaries as specified in paragraph (b)(2)
of this section.
(g) Recordkeeping requirements. Except for services furnished in
accordance with the assumed allocation under paragraph (e) of this
section, each provider that claims payment for services of physicians
under this subpart must meet all of the following requirements:
(1) Maintain the time records or other information it used to
allocate physician compensation in a form that permits the information
to be validated by the intermediary or the carrier.
(2) Report the information on which the physician compensation
allocation is based to the intermediary or the carrier on an annual
basis and promptly notify the intermediary or carrier of any revisions
to the compensation allocation.
(3) Retain each physician compensation allocation, and the
information on which it is based, for at least 4 years after the end of
each cost reporting period to which the allocation applies.
Sec. 415.70 Limits on compensation for physician services in providers.
(a) Principle and scope. (1) Except as provided in paragraphs (a)(2)
and (a)(3) of this section, CMS establishes reasonable compensation
equivalency limits on the amount of compensation paid to physicians by
providers. These limits are applied to a provider's costs incurred in
compensating physicians for services to the provider, as described in
Sec. 415.55(a).
(2) Limits established under this section do not apply to costs of
physician compensation attributable to furnishing inpatient hospital
services that are paid for under the prospective payment system
implemented under part 412 of this chapter or to costs of physician
compensation attributable to approved GME programs that are payable
under Sec. Sec. 413.75 through 413.83 of this chapter.
(3) Compensation that a physician receives for activities that may
not be paid for under either Part A or Part B of Medicare is not
considered in applying these limits.
(b) Methodology for establishing limits. CMS establishes a
methodology for determining annual reasonable compensation equivalency
limits and, to the extent possible, considers average physician incomes
by specialty and type of location using the best available data.
(c) Application of limits. If the level of compensation exceeds the
limits established under paragraph (b) of this section, Medicare payment
is based on the level established by the limits.
(d) Adjustment of the limits. The intermediary may adjust limits
established under paragraph (b) of this section to account for costs
incurred by the physician or the provider related to malpractice
insurance, professional memberships, and continuing medical education.
(1) For the costs of membership in professional societies and
continuing medical education, the intermediary may adjust the limit by
the lesser of--
(i) The actual cost incurred by the provider or the physician for
these activities; or
[[Page 60]]
(ii) Five percent of the appropriate limit.
(2) For the cost of malpractice expenses incurred by either the
provider or the physician, the intermediary may adjust the reasonable
compensation equivalency limit by the cost of the malpractice insurance
expense related to the physician service furnished to patients in
providers.
(e) Exception to limits. An intermediary may grant a provider an
exception to the limits established under paragraph (b) of this section
only if the provider can demonstrate to the intermediary that it is
unable to recruit or maintain an adequate number of physicians at a
compensation level within these limits.
(f) Notification of changes in methodologies and payment limits. (1)
Before the start of a cost reporting period to which limits established
under this section will be applied, CMS publishes a notice in the
Federal Register that sets forth the amount of the limits and explains
how it calculated the limits.
(2) If CMS proposes to revise the methodology for establishing
payment limits under this section, CMS publishes a notice, with
opportunity for public comment, in the Federal Register. The notice
explains the proposed basis and methodology for setting limits,
specifies the limits that would result, and states the date of
implementation of the limits.
(3) If CMS updates limits by applying the most recent economic index
data without revising the limit methodology, CMS publishes the revised
limits in a notice in the Federal Register without prior publication of
a proposal or public comment period.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Subpart C_Part B Carrier Payments for Physician Services to
Beneficiaries in Providers
Sec. 415.100 Scope.
This subpart implements section 1887(a)(1)(A) of the Act by
providing general conditions that must be met in order for services
furnished by physicians to beneficiaries in providers to be paid for on
the basis of the physician fee schedule under part 414 of this chapter.
Section 415.102 sets forth the conditions for fee schedule payment for
physician services to beneficiaries in providers. Section 415.105 sets
forth general requirements for determining the amounts of payment for
services that meet the conditions of this section. Sections 415.120 and
415.130 set forth additional conditions for payment for physician
services in the specialties of radiology and pathology (laboratory
services).
Sec. 415.102 Conditions for fee schedule payment for physician services to beneficiaries in providers.
(a) General rule. If the physician furnishes services to
beneficiaries in providers, the carrier pays on a fee schedule basis
provided the following requirements are met:
(1) The services are personally furnished for an individual
beneficiary by a physician.
(2) The services contribute directly to the diagnosis or treatment
of an individual beneficiary.
(3) The services ordinarily require performance by a physician.
(4) In the case of radiology or laboratory services, the additional
requirements in Sec. 415.120 or Sec. 415.130, respectively, are met.
(b) Exception. If a physician furnishes services in a provider that
do not meet the requirements in paragraph (a) of this section, but are
related to beneficiary care furnished by the provider, the intermediary
pays for those services, if otherwise covered. The intermediary follows
the rules in Sec. Sec. 415.55 and 415.60 for payment on the basis of
reasonable cost or PPS, as appropriate.
(c) Effect of billing charges for physician services to a provider.
(1) If a physician furnishes services that may be paid under the
reasonable cost rules in Sec. 415.55 or Sec. 415.60, and paid by the
intermediary, or would be paid under those rules except for the PPS
rules in part 412 of this chapter, and under the payment rules for GME
established by Sec. Sec. 413.75 through 413.83 of this chapter, neither
the provider nor the physician may seek payment from the carrier,
beneficiary, or another insurer.
(2) If a physician furnishes services to an individual beneficiary
that do not
[[Page 61]]
meet the applicable conditions in Sec. Sec. 415.120 (concerning
conditions for payment for radiology services) and 415.130 (concerning
conditions for payment for physician pathology services), the carrier
does not pay on a fee schedule basis.
(3) If the physician, the provider, or another entity bills the
carrier or the beneficiary or another insurer for physician services
furnished to the provider, as described in Sec. 415.55(a), CMS
considers the provider to which the services are furnished to have
violated its provider participation agreement, and may terminate that
agreement. See part 489 of this chapter for rules governing provider
agreements.
(d) Effect of physician assumption of operating costs. If a
physician or other entity enters into an agreement (such as a lease or
concession) with a provider, and the physician (or entity) assumes some
or all of the operating costs of the provider department in which the
physician furnishes physician services, the following rules apply:
(1) If the conditions set forth in paragraph (a) of this section are
met, the carrier pays for the physician services under the physician fee
schedule in part 414 of this chapter.
(2) To the extent the provider incurs a cost payable on a reasonable
cost basis under part 413 of this chapter, the intermediary pays the
provider on a reasonable cost basis for the costs associated with
producing these services, including overhead, supplies, equipment costs,
and services furnished by nonphysician personnel.
(3) The physician (or other entity) is treated as being related to
the provider within the meaning of Sec. 413.17 of this chapter
(concerning cost to related organizations).
(4) The physician (or other entity) must make its books and records
available to the provider and the intermediary as necessary to verify
the nature and extent of the costs of the services furnished by the
physician (or other entity).
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.105 Amounts of payment for physician services to beneficiaries in providers.
(a) General rule. The carrier determines amounts of payment for
physician services to beneficiaries in providers in accordance with the
general rules governing the physician fee schedule payment in part 414
of this chapter, except as provided in paragraph (b) of this section.
(b) Application in certain settings--(1) Teaching hospitals. The
carrier applies the rules in subpart D of this part (concerning
physician services in teaching settings), in addition to those in this
section, in determining whether fee schedule payment should be made for
physician services to individual beneficiaries in a teaching hospital.
(2) Hospital-based ESRD facilities. The carrier applies Sec. Sec.
414.310 through 414.314 of this chapter, which set forth determination
of reasonable charges under the ESRD program, to determine the amount of
payment for physician services furnished to individual beneficiaries in
a hospital-based ESRD facility approved under part 405 subpart U.
Sec. 415.110 Conditions for payment: Medically directed anesthesia services.
(a) General payment rule. Medicare pays for the physician's medical
direction of anesthesia services for one service or two through four
concurrent anesthesia services furnished after December 31, 1998, only
if each of the services meets the condition in Sec. 415.102(a) and the
following additional conditions:
(1) For each patient, the physician--
(i) Performs a pre-anesthetic examination and evaluation;
(ii) Prescribes the anesthesia plan;
(iii) Personally participates in the most demanding aspects of the
anesthesia plan including, if applicable, induction and emergence;
(iv) Ensures that any procedures in the anesthesia plan that he or
she does not perform are performed by a qualified individual as defined
in operating instructions;
(v) Monitors the course of anesthesia administration at frequent
intervals;
[[Page 62]]
(vi) Remains physically present and available for immediate
diagnosis and treatment of emergencies; and
(vii) Provides indicated post-anesthesia care.
(2) The physician directs no more than four anesthesia services
concurrently and does not perform any other services while he or she is
directing the single or concurrent services so that one or more of the
conditions in paragraph (a)(1) of this section are not violated.
(3) If the physician personally performs the anesthesia service, the
payment rules in Sec. 414.46(c) of this chapter apply (Physician
personally performs the anesthesia procedure).
(b) Medical documentation. The physician alone inclusively documents
in the patient's medical record that the conditions set forth in
paragraph (a)(1) of this section have been satisfied, specifically
documenting that he or she performed the pre-anesthetic exam and
evaluation, provided the indicated post-anesthesia care, and was present
during the most demanding procedures, including induction and emergence
where applicable.
[63 FR 58912, Nov. 2, 1998]
Sec. 415.120 Conditions for payment: Radiology services.
(a) Services to beneficiaries. The carrier pays for radiology
services furnished by a physician to a beneficiary on a fee schedule
basis only if the services meet the conditions for fee schedule payment
in Sec. 415.102(a) and are identifiable, direct, and discrete
diagnostic or therapeutic services furnished to an individual
beneficiary, such as interpretation of x-ray plates, angiograms,
myelograms, pyelograms, or ultrasound procedures. The carrier pays for
interpretations only if there is a written report prepared for inclusion
in the patient's medical record maintained by the hospital.
(b) Services to providers. The carrier does not pay on a fee
schedule basis for physician services to the provider (for example,
administrative or supervisory services) or for provider services needed
to produce the x-ray films or other items that are interpreted by the
radiologist. However, the intermediary pays the provider for these
services in accordance with Sec. 415.55 for provider costs; Sec.
415.102(d)(2) for costs incurred by a physician, such as under a lease
or concession agreement; or part 412 of this chapter for payment under
PPS.
Sec. 415.130 Conditions for payment: Physician pathology services.
(a) Definitions. The following definitions are used in this section.
(1) Covered hospital means, with respect to an inpatient or an
outpatient, a hospital that had an arrangement with an independent
laboratory that was in effect as of July 22, 1999, under which a
laboratory furnished the technical component of physician pathology
services to fee-for-service Medicare beneficiaries who were hospital
inpatients or outpatients, and submitted claims for payment for this
technical component directly to a Medicare carrier.
(2) Fee-for-service Medicare beneficiaries means those beneficiaries
who are entitled to benefits under Part A or are enrolled under Part B
of Title XVIII of the Act or both and are not enrolled in any of the
following:
(i) A Medicare+Choice plan under Part C of Title XVIII of the Act.
(ii) A plan offered by an eligible organization under section 1876
of the Act;
(iii) A program of all-inclusive care for the elderly (PACE) under
1894 of the Act; or
(iv) A social health maintenance organization (SHMO) demonstration
project established under section 4018(b) of the Omnibus Budget
Reconciliation Act of 1987.
(b) Physician pathology services. The carrier pays for pathology
services furnished by a physician to an individual beneficiary on a fee
schedule basis only if the services meet the conditions for payment in
Sec. 415.102(a) and are one of the following services:
(1) Surgical pathology services.
(2) Specific cytopathology, hematology, and blood banking services
that have been identified to require performance by a physician and are
listed in program operating instructions.
(3) Clinical consultation services that meet the requirements in
paragraph (c) of this section.
(4) Clinical laboratory interpretative services that meet the
requirements of
[[Page 63]]
paragraphs (c)(1), (c)(3), and (c)(4) of this section and that are
specifically listed in program operating instructions.
(c) Clinical consultation services. For purposes of this section,
clinical consultation services must meet the following requirements:
(1) Be requested by the beneficiary's attending physician.
(2) Relate to a test result that lies outside the clinically
significant normal or expected range in view of the condition of the
beneficiary.
(3) Result in a written narrative report included in the
beneficiary's medical record.
(4) Require the exercise of medical judgment by the consultant
physician.
(d) Physician pathology services furnished by an independent
laboratory. The technical component of physician pathology services
furnished by an independent laboratory to a hospital inpatient or
outpatient before January 1, 2001 may be paid to the laboratory on a fee
schedule basis. After December 31, 2000 but before January 1, 2003, if
an independent laboratory furnishes the technical component of a
physician pathology service to a fee-for-service Medicare beneficiary
who is an inpatient or outpatient of a covered hospital, the carrier
will treat the technical component as a service for which payment will
be made to the laboratory under the physician fee schedule. For these
two years the service will not be treated as an inpatient hospital
service for which payment is made to the hospital under section 1886(d)
of the Act or as an outpatient hospital service for which payment is
made to the hospital under section 1833(t) of the Act. After December
31, 2002, the technical component for physician pathology services
furnished by an independent laboratory to a hospital inpatient or
outpatient is paid only to the hospital.
[60 FR 63178, Dec. 8, 1995, as amended at 64 FR 59442, Nov. 2, 1999; 66
FR 55332, Nov. 1, 2001]
Subpart D_Physician Services in Teaching Settings
Sec. 415.150 Scope.
This subpart sets forth the rules governing payment for the services
of physicians in teaching settings and the criteria for determining
whether the payments are made as one of the following:
(a) Services to the hospital under the reasonable cost election in
Sec. Sec. 415.160 through 415.164.
(b) Provider services through the direct GME payment mechanism in
Sec. Sec. 413.75 through 413.83 of this chapter.
(c) Physician services to beneficiaries under the physician fee
schedule as set forth in part 414 of this chapter.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.152 Definitions.
As used in this subpart--
Approved graduate medical education (GME) program means one of the
following:
(1) A residency program approved by the Accreditation Council for
Graduate Medical Education of the American Medical Association, by the
Committee on Hospitals of the Bureau of Professional Education of the
American Osteopathic Association, by the Commission on Dental
Accreditation of the American Dental Association, or by the Council on
Podiatric Medicine Education of the American Podiatric Medical
Association.
(2) A program otherwise recognized as an ``approved medical
residency program'' under Sec. 413.75(b) of this chapter.
Direct medical and surgical services means services to individual
beneficiaries that are either personally furnished by a physician or
furnished by a resident under the supervision of a physician in a
teaching hospital making the cost election described in Sec. Sec.
415.160 through 415.162.
Nonprovider setting means a setting other than a hospital, skilled
nursing facility, home health agency, or comprehensive outpatient
rehabilitation facility in which residents furnish services. These
include, but are not limited to, family practice or multispecialty
clinics and physician offices.
Resident means one of the following:
[[Page 64]]
(1) An individual who participates in an approved GME program,
including programs in osteopathy, dentistry, and podiatry.
(2) A physician who is not in an approved GME program, but who is
authorized to practice only in a hospital, for example, individuals with
temporary or restricted licenses, or unlicensed graduates of foreign
medical schools. For purposes of this subpart, the term resident is
synonymous with the terms intern and fellow.
Teaching hospital means a hospital engaged in an approved GME
residency program in medicine, osteopathy, dentistry, or podiatry.
Teaching physician means a physician (other than another resident)
who involves residents in the care of his or her patients.
Teaching setting means any provider, hospital-based provider, or
nonprovider settings in which Medicare payment for the services of
residents is made under the direct GME payment provisions of Sec. Sec.
413.75 through 413.83, or on a reasonable-cost basis under the
provisions of Sec. 409.26 or Sec. 409.40(f) for resident services
furnished in skilled nursing facilities or home health agencies,
respectively.
[60 FR 63178, Dec. 8, 1995, as amended at 61 FR 59554, Nov. 22, 1996; 63
FR 26359, May 12, 1998; 70 FR 47490, Aug. 12, 2005]
Sec. 415.160 Election of reasonable cost payment for direct medical and surgical services of physicians in teaching hospitals: General provisions.
(a) Scope. A teaching hospital may elect to receive payment on a
reasonable cost basis for the direct medical and surgical services of
its physicians in lieu of fee schedule payments that might otherwise be
made for these services.
(b) Conditions. A teaching hospital may elect to receive these
payments only if--
(1) The hospital notifies its intermediary in writing of the
election and meets the conditions of either paragraph (b)(2) or
paragraph (b)(3) of this section;
(2) All physicians who furnish services to Medicare beneficiaries in
the hospital agree not to bill charges for these services; or
(3) All physicians who furnish services to Medicare beneficiaries in
the hospital are employees of the hospital and, as a condition of
employment, are precluded from billing for these services.
(c) Effect of election. If a teaching hospital elects to receive
reasonable cost payment for physician direct medical and surgical
services furnished to beneficiaries--
(1) Those services and the supervision of interns and residents
furnishing care to individual beneficiaries are covered as hospital
services, and
(2) The intermediary pays the hospital for those services on a
reasonable cost basis under the rules in Sec. 415.162. (Payment for
other physician compensation costs related to approved GME programs is
made as described in Sec. 413.78 of this chapter.)
(d) Election declined. If the teaching hospital does not make this
election, payment is made--
(1) For physician services furnished to beneficiaries on a fee
schedule basis as described in part 414 subject to the rules in this
subpart, and
(2) For the supervision of interns and residents as described in
Sec. Sec. 413.75 through 413.83.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.162 Determining payment for physician services furnished to beneficiaries in teaching hospitals.
(a) General rule. Payments for direct medical and surgical services
of physicians furnished to beneficiaries and supervision of interns and
residents furnishing care to beneficiaries is made by Medicare on the
basis of reasonable cost if the hospital exercises the election as
provided for in Sec. 415.160. If this election is made, the following
occurs:
(1) Physician services furnished to beneficiaries and supervision of
interns and residents furnishing care to beneficiaries are paid on a
reasonable-cost basis, as provided for in paragraph (b) of this section.
(2) Payment for certain medical school costs may be made as provided
for in paragraph (c) of this section.
[[Page 65]]
(3) Payments for services donated by volunteer physicians to
beneficiaries are made to a fund designated by the organized medical
staff of the teaching hospital or medical school as provided for in
paragraph (d) of this section.
(b) Reasonable cost of physician services and supervision of interns
and residents. (1) Physician services furnished to beneficiaries and
supervision of interns and residents furnishing care to beneficiaries in
a teaching hospital are payable as provider services on a reasonable-
cost basis.
(2) For purposes of this paragraph, reasonable cost is defined as
the direct salary paid to these physicians, plus applicable fringe
benefits.
(3) The costs must be allocated to the services as provided by
paragraph (j) of this section and apportioned to program beneficiaries
as provided by paragraph (g) of this section.
(4) Other allowable costs incurred by the provider related to the
services described in this paragraph are payable subject to the
requirements applicable to all other provider services.
(c) Reasonable costs for the services furnished by a medical school
or related organization in a hospital. An amount is payable to the
hospital by CMS under the Medicare program provided that the costs would
be payable if incurred directly by the hospital rather than under the
arrangement. The amount must not be in excess of the reasonable costs
(as defined in paragraphs (c)(1) and (c)(2) of this section) incurred by
a teaching hospital for services furnished by a medical school or
organization as described in Sec. 413.17 of this chapter for certain
costs to the medical school (or a related organization) in furnishing
services in the hospital.
(1) Reasonable costs of physician services. (i) When the medical
school and the hospital are related organizations. If the medical school
(or organization related to the medical school) and the hospital are
related by common ownership or control as described in Sec. 413.17 of
this chapter--
(A) The costs of these services are allowable costs to the hospital
under the provisions of Sec. 413.17 of this chapter; and
(B) The reimbursable costs to the hospital are determined under the
provisions of this section in the same manner as the costs incurred for
physicians on the hospital staff and without regard to payments made to
the medical school by the hospital.
(ii) When the medical school and the hospital are not related
organizations. (A) If the medical school and the hospital are not
related organizations under the provisions of Sec. 413.17 of this
chapter and the hospital makes payment to the medical school for the
costs of those services furnished to all patients, payment is made by
Medicare to the hospital for the reasonable cost incurred by the
hospital for its payments to the medical school for services furnished
to beneficiaries.
(B) Costs incurred under an arrangement must be allocated to the
full range of services furnished to the hospital by the medical school
physicians on the same basis as provided for under paragraph (j) of this
section, and costs allocated to direct medical and surgical services
furnished to hospital patients must be apportioned to beneficiaries as
provided for under paragraph (g) of this section.
(C) If the medical school and the hospital are not related
organizations under the provisions of Sec. 413.17 of this chapter and
the hospital makes payment to the medical school only for the costs of
those services furnished to beneficiaries, costs of the medical school
not to exceed 105 percent of the sum of physician direct salaries,
applicable fringe benefits, employer's portion of FICA taxes, Federal
and State unemployment taxes, and workmen's compensation paid by the
medical school or an organization related to the medical school may be
recognized as allowable costs of the medical school.
(D) These allowable medical school costs must be allocated to the
full range of services furnished by the physicians of the medical school
or organization related as provided by paragraph (j) of this section.
(E) Costs allocated to direct medical and surgical services
furnished to hospital patients must be apportioned to beneficiaries as
provided by paragraph (g) of this section.
(2) Reasonable costs of other than direct medical and surgical
services. These costs
[[Page 66]]
are determined in accordance with paragraph (c)(1) of this section
except that--
(i) If the hospital makes payment to the medical school for other
than direct medical and surgical services furnished to beneficiaries and
supervision of interns and residents furnishing care to beneficiaries,
these payments are subject to the required cost-finding and
apportionment methods applicable to the cost of other hospital services
(except for direct medical and surgical services furnished to
beneficiaries); or
(ii) If the hospital makes payment to the medical school only for
these services furnished to beneficiaries, the cost of these services is
not subject to cost-finding and apportionment as otherwise provided by
this subpart, and the reasonable cost paid by Medicare must be
determined on the basis of the health insurance ratio(s) used in the
apportionment of all other provider costs (excluding physician direct
medical and surgical services furnished to beneficiaries) applied to the
allowable medical school costs incurred by the medical school for the
services furnished to all patients of the hospital.
(d) ``Salary equivalent'' payments for direct medical and surgical
services furnished by physicians on the voluntary staff of the hospital.
(1) CMS makes payments under the Medicare program to a fund as defined
in Sec. 415.164 for direct medical and surgical services furnished to
beneficiaries on a regularly scheduled basis by physicians on the unpaid
voluntary medical staff of the hospital (or medical school under
arrangement with the hospital).
(i) These payments represent compensation for contributed medical
staff time which, if not contributed, would have to be obtained through
employed staff on a payable basis.
(ii) Payments for volunteer services are determined by applying to
the regularly scheduled contributed time an hourly rate not to exceed
the equivalent of the average direct salary (exclusive of fringe
benefits) paid to all full-time, salaried physicians (other than interns
and residents) on the hospital staff or, if the number of full-time
salaried physicians is minimal in absolute terms or in relation to the
number of physicians on the voluntary staff, to physicians at like
institutions in the area.
(iii) This ``salary equivalent'' is a single hourly rate covering
all physicians regardless of specialty and is applied to the actual
regularly scheduled time contributed by the physicians in furnishing
direct medical and surgical services to beneficiaries including
supervision of interns and residents in that care.
(iv) A physician who receives any compensation from the hospital or
a medical school related to the hospital by common ownership or control
(within the meaning of Sec. 413.17 of this chapter) for direct medical
and surgical services furnished to any patient in the hospital is not
considered an unpaid voluntary physician for purposes of this paragraph.
(v) If, however, a physician receives compensation from the hospital
or related medical school or organization only for services that are
other than direct medical and surgical services, a salary equivalent
payment for the physician's regularly scheduled direct medical and
surgical services to beneficiaries in the hospital may be imputed.
However, the sum of the imputed value for volunteer services and the
physician's actual compensation from the hospital and the related
medical school (or organization) may not exceed the amount that would
have been imputed if all of the physician's hospital and medical school
services (compensated and volunteer) had been volunteer services, or
paid at the rate of $30,000 per year, whichever is less.
(2) The following examples illustrate how the allowable imputed
value for volunteer services is determined. In each example, it has been
assumed that the average salary equivalent hourly rate is equal to the
hourly rate for the individual physician's compensated services.
Example No: 1. Dr. Jones received $3,000 a year from Hospital X for
services other than direct medical services to all patients, for
example, utilization review and administrative services. Dr. Jones also
voluntarily furnished direct medical services to beneficiaries. The
imputed value of the volunteer services amounted to $10,000 for the cost
reporting period. The full imputed value of Dr. Jones' volunteer direct
medical services would be allowed since the total amount of
[[Page 67]]
the imputed value ($10,000) and the compensated services ($3,000) does
not exceed $30,000.
Example No: 2. Dr. Smith received $25,000 from Hospital X for
services as a department head in a teaching hospital. Dr. Smith also
voluntarily furnished direct medical services to beneficiaries. The
imputed value of the volunteer services amounted to $10,000. Only $5,000
of the imputed value of volunteer services would be allowed since the
total amount of the imputed value ($10,000) and the compensated services
($25,000) exceeds the $30,000 maximum amount allowable for all of Dr.
Smith's services.
Computation:
Maximum amount allowable for all services performed by Dr. $30,000
Smith for purposes of this computation......................
Less compensation received from Hospital X for other than $25,000
direct medical services to individual patients..............
Allowable amount of imputed value for the volunteer services $5,000
furnished by Dr. Smith......................................
Example No. 3. Dr. Brown is not compensated by Hospital X for any
services furnished in the hospital. Dr. Brown voluntarily furnished
direct surgical services to beneficiaries for a period of 6 months, and
the imputed value of these services amounted to $20,000. The allowable
amount of the imputed value for volunteer services furnished by Dr.
Brown would be limited to $15,000 ($30,000x6/12).
(3) The amount of the imputed value for volunteer services
applicable to beneficiaries and payable to a fund is determined in
accordance with the aggregate per diem method described in paragraph (g)
of this section.
(4) Medicare payments to a fund must be used by the fund solely for
improvement of care of hospital patients or for educational or
charitable purposes (which may include but are not limited to medical
and other scientific research).
(i) No personal financial gain, either direct or indirect, from
benefits of the fund may inure to any of the hospital staff physicians,
medical school faculty, or physicians for whom Medicare imputes costs
for purposes of payment into the fund.
(ii) Expenses met from contributions made to the hospital from a
fund are not included as a reimbursable cost when expended by the
hospital, and depreciation expense is not allowed with respect to
equipment or facilities donated to the hospital by a fund or purchased
by the hospital from monies in a fund.
(e) Requirements for payment--(1) Physicians on the hospital staff.
The requirements under which the costs of physician direct medical and
surgical services (including supervision of interns and residents) to
beneficiaries are the same as those applicable to the cost of all other
covered provider services except that the costs of these services are
separately determined as provided by this section and are not subject to
cost-finding as described in Sec. 413.24 of this chapter.
(2) Physicians on the medical school faculty. Payment is made to a
hospital for the costs of services of physicians on the medical school
faculty, provided that if the medical school is not related to the
hospital (within the meaning of Sec. 413.17 of this chapter, concerning
cost to related organizations), the hospital does not make payment to
the medical school for services furnished to all patients and the
following requirements are met: If the hospital makes payment to the
medical school for services furnished to all patients, these
requirements do not apply. (See paragraph (c)(1)(ii) of this section.)
(i) There is a written agreement between the hospital and the
medical school or organization, specifying the types and extent of
services to be furnished by the medical school and specifying that the
hospital must pay to the medical school an amount at least equal to the
reasonable cost (as defined in paragraph (c) of this section) of
furnishing the services to beneficiaries.
(ii) The costs are paid to the medical school by the hospital no
later than the date on which the cost report covering the period in
which the services were furnished is due to CMS.
(iii) Payment for the services furnished under an arrangement would
have been made to the hospital had the services been furnished directly
by the hospital.
(3) Physicians on the voluntary staff of the hospital (or medical
school under arrangement with the hospital). If the conditions for
payment to a fund outlined in Sec. 415.164 are met, payments are made
[[Page 68]]
on a ``salary equivalent'' basis (as defined in paragraph (d) of this
section) to a fund.
(f) Requirements for payment for medical school faculty services
other than physician direct medical and surgical services. If the
requirements for payment for physician direct medical and surgical
services furnished to beneficiaries in a teaching hospital described in
paragraph (e) of this section are met, payment is made to a hospital for
the costs of medical school faculty services other than physician direct
medical and surgical services furnished in a teaching hospital.
(g) Aggregate per diem methods of apportionment--(1) For the costs
of physician direct medical and surgical services. The cost of physician
direct medical and surgical services furnished in a teaching hospital to
beneficiaries is determined on the basis of an average cost per diem as
defined in paragraph (h)(1) of this section for physician direct medical
and surgical services to all patients (see Sec. Sec. 415.172 through
415.184) for each of the following categories of physicians:
(i) Physicians on the hospital staff.
(ii) Physicians on the medical school faculty.
(2) For the imputed value of physician volunteer direct medical and
surgical services. The imputed value of physician direct medical and
surgical services furnished to beneficiaries in a teaching hospital is
determined on the basis of an average per diem, as defined in paragraph
(h)(1) of this section, for physician direct medical and surgical
services to all patients except that the average per diem is derived
from the imputed value of the physician volunteer direct medical and
surgical services furnished to all patients.
(h) Definitions. (1) Average cost per diem for physician direct
medical and surgical services (including supervision of interns and
residents) furnished in a teaching hospital to patients in each category
of physician services described in paragraph (g)(1) of this section
means the amount computed by dividing total reasonable costs of these
services in each category by the sum of--
(i) Inpatient days (as defined in paragraph (h)(2) of this section);
and
(ii) Outpatient visit days (as defined in paragraph (h)(3) of this
section).
(2) Inpatient days are determined by counting the day of admission
as 3.5 days and each day after a patient's day of admission, except the
day of discharge, as 1 day.
(3) Outpatient visit days are determined by counting only one visit
day for each calendar day that a patient visits an outpatient department
or multiple outpatient departments.
(i) Application. (1) The following illustrates how apportionment
based on the aggregate per diem method for costs of physician direct
medical and surgical services furnished in a teaching hospital to
patients is determined.
Teaching Hospital Y
Statistical and financial data:
Total inpatient days as defined in paragraph (h)(2) of this 75,000
section and outpatient visit days as defined in paragraph
(h)(3) of this section....................................
Total inpatient Part A days................................ 20,000
Total inpatient Part B days where Part A coverage is not 1,000
available.................................................
Total outpatient Part B visit days......................... 5,000
Total cost of direct medical and surgical services $1,500,000
furnished to all patients by physicians on the hospital
staff as determined in accordance with paragraph (i) of
this section..............................................
Total cost of direct medical and surgical services $1,650,000
furnished to all patients by physicians on the medical
school faculty as determined in accordance with paragraph
(i) of this section.......................................
Computation of cost applicable to program for physicians on the
hospital staff:
Average cost per diem for direct medical and surgical services to
patients by physicians on the hospital staff: $1,500,000 / 75,000 = $20
per diem.
Cost of physician direct medical and surgical services $400,000
furnished to inpatient beneficiaries covered under Part A:
$20 per diem x 20,000.....................................
Cost of physician direct medical and surgical services $20,000
furnished to inpatient beneficiaries covered under Part B:
$20 per diem x 1,000......................................
[[Page 69]]
Cost of physician direct medical and surgical services $100,000
furnished to outpatient beneficiaries covered under Part
B: $20 per diem x 5,000...................................
Computation of cost applicable to program for physicians on the
medical school faculty:
Average cost per diem for direct medical and surgical services to
patients by physicians on the medical school faculty: $1,650,000 /
75,000 = $22 per diem.
Cost of physician direct medical and surgical services $440,000
furnished to inpatient beneficiaries covered under Part A:
$22 per diem x 20,000.....................................
Cost of physician direct medical and surgical services $22,000
furnished to inpatient beneficiaries covered under Part B:
$20 per diem x 1,000......................................
Cost of physician direct medical and surgical services $110,000
furnished to outpatient beneficiaries covered under Part
B: $22 per diem x 5,000...................................
(2) The following illustrates how the imputed value of physician
volunteer direct medical and surgical services furnished in a teaching
hospital to beneficiaries is determined.
Example: The physicians on the medical staff of Teaching Hospital Y
donated a total of 5,000 hours in furnishing direct medical and surgical
services to patients of the hospital during a cost reporting period and
did not receive any compensation from either the hospital or the medical
school. Also, the imputed value for any physician volunteer services did
not exceed the rate of $30,000 per year per physician.
Statistical and financial data:
Total salaries paid to the full-time salaried physicians by $800,000
the hospital (excluding interns and residents)............
Total physicians who were paid for an average of 40 hours 20
per week or 2,080 (52 weeksx40 hours per week) hours per
year......................................................
Average hourly rate equivalent: $800,000 / 41,600 (2,080 x $19.23
20).......................................................
Computation of total imputed value of physician volunteer services
applicable to all patients:
(Total donated hours x average hourly rate equivalent): $96,150
5,000 x $19.23............................................
Total inpatient days (as defined in paragraph (h)(2) of 75,000
this section) and outpatient visit days (as defined in
paragraph (h)(3) of this section).........................
Total inpatient Part A days................................ 20,000
Total inpatient Part B days if Part A coverage is not 1,000
available.................................................
Total outpatient Part B visit days......................... 5,000
Computation of imputed value of physician volunteer direct medical
and surgical services furnished to Medicare beneficiaries:
Average per diem for physician direct medical and surgical services
to all patients: $96,150 / 75,000 = $1.28 per diem
Imputed value of physician direct medical and surgical $25,600
services furnished to inpatient beneficiaries covered
under Part A: $1.28 per diem x 20,000.....................
Imputed value of physician direct medical and surgical $1,280
services furnished to inpatient beneficiaries covered
under Part B: $1.28 per diem x 1,000......................
Imputed value of physician direct medical and surgical $6,400
services furnished to outpatient beneficiaries covered
under Part B: $1.28 per diem x 5,000......................
Total...................................................... $33,280
(j) Allocation of compensation paid to physicians in a teaching
hospital. (1) In determining reasonable cost under this section, the
compensation paid by a teaching hospital, or a medical school or related
organization under arrangement with the hospital, to physicians in a
teaching hospital must be allocated to the full range of services
implicit in the physician compensation arrangements. (However, see
paragraph (d) of this section for the computation of the ``salary
equivalent'' payments for volunteer services furnished to patients.)
(2) This allocation must be made and must be capable of
substantiation on the basis of the proportion of each physician's time
spent in furnishing each type of service to the hospital or medical
school.
Sec. 415.164 Payment to a fund.
(a) General rules. Payment for certain voluntary services by
physicians in teaching hospitals (as these services are described in
Sec. 415.160) is made on a salary equivalent basis (as described in
Sec. 415.162(d)) subject to the conditions and limitations contained in
parts 405 and 413 of this chapter and this part 415, to a single fund
(as defined in paragraph (b) of this section) designated by
[[Page 70]]
the organized medical staff of the hospital (or, if the services are
furnished in the hospital by the faculty of a medical school, to a fund
as may be designated by the faculty), if the following conditions are
met:
(1) The hospital (or medical school furnishing the services under
arrangement with the hospital) incurs no actual cost in furnishing the
services.
(2) The hospital has an agreement with CMS under part 489 of this
chapter.
(3) The intermediary, or CMS as appropriate, has received written
assurances that--
(i) The payment is used solely for the improvement of care of
hospital patients or for educational or charitable purposes; and
(ii) Neither the individuals who are furnished the services nor any
other persons are charged for the services (and if charged, provision is
made for the return of any monies incorrectly collected).
(b) Definition of a fund. For purposes of paragraph (a) of this
section, a fund is an organization that meets either of the following
requirements:
(1) The organization has and retains exemption, as a governmental
entity or under section 501(c)(3) of the Internal Revenue Code
(nonprofit educational, charitable, and similar organizations), from
Federal taxation.
(2) The organization is an organization of physicians who, under the
terms of their employment by an entity that meets the requirements of
paragraph (b)(1) of this section, are required to turn over to that
entity all income that the physician organization derives from the
physician services.
(c) Status of a fund. A fund approved for payment under paragraph
(a) of this section has all the rights and responsibilities of a
provider under Medicare except that it does not enter into an agreement
with CMS under part 489 of this chapter.
Sec. 415.170 Conditions for payment on a fee schedule basis for physician services in a teaching setting.
Services meeting the conditions for payment in Sec. 415.102(a)
furnished in teaching settings are payable under the physician fee
schedule if--
(a) The services are personally furnished by a physician who is not
a resident; or
(b) The services are furnished by a resident in the presence of a
teaching physician except as provided in Sec. 415.172 (concerning
physician fee schedule payment for services of teaching physicians),
Sec. 415.174 (concerning an exception for services furnished in
hospital outpatient and certain other ambulatory settings), Sec.
415.176 (concerning renal dialysis services), and Sec. 415.184
(concerning psychiatric services), as applicable.
Sec. 415.172 Physician fee schedule payment for services of teaching physicians.
(a) General rule. If a resident participates in a service furnished
in a teaching setting, physician fee schedule payment is made only if a
teaching physician is present during the key portion of any service or
procedure for which payment is sought.
(1) In the case of surgical, high-risk, or other complex procedures,
the teaching physician must be present during all critical portions of
the procedure and immediately available to furnish services during the
entire service or procedure.
(i) In the case of surgery, the teaching physician's presence is not
required during opening and closing of the surgical field.
(ii) In the case of procedures performed through an endoscope, the
teaching physician must be present during the entire viewing.
(2) In the case of evaluation and management services, the teaching
physician must be present during the portion of the service that
determines the level of service billed. (However, in the case of
evaluation and management services furnished in hospital outpatient
departments and certain other ambulatory settings, the requirements of
Sec. 415.174 apply.)
(b) Documentation. Except for services furnished as set forth in
Sec. Sec. 415.174 (concerning an exception for services furnished in
hospital outpatient and certain other ambulatory settings), 415.176
(concerning renal dialysis services), and 415.184 (concerning
psychiatric services), the medical records must
[[Page 71]]
document the teaching physician was present at the time the service is
furnished. The presence of the teaching physician during procedures may
be demonstrated by the notes in the medical records made by a physician,
resident, or nurse. In the case of evaluation and management procedures,
the teaching physician must personally document his or her participation
in the service in the medical records.
(c) Payment level. In the case of services such as evaluation and
management for which there are several levels of service codes available
for reporting purposes, the appropriate payment level must reflect the
extent and complexity of the service when fully furnished by the
teaching physician.
Sec. 415.174 Exception: Evaluation and management services furnished in certain centers.
(a) In the case of certain evaluation and management codes of lower
and mid-level complexity (as specified by CMS in program instructions),
carriers may make physician fee schedule payment for a service furnished
by a resident without the presence of a teaching physician. For the
exception to apply, all of the following conditions must be met:
(1) The services must be furnished in a center that is located in an
outpatient department of a hospital or another ambulatory care entity in
which the time spent by residents in patient care activities is included
in determining intermediary payments to a hospital under Sec. Sec.
413.75 through 413.83.
(2) Any resident furnishing the service without the presence of a
teaching physician must have completed more than 6 months of an approved
residency program.
(3) The teaching physician must not direct the care of more than
four residents at any given time and must direct the care from such
proximity as to constitute immediate availability. The teaching
physician must--
(i) Have no other responsibilities at the time;
(ii) Assume management responsibility for those beneficiaries seen
by the residents;
(iii) Ensure that the services furnished are appropriate;
(iv) Review with each resident during or immediately after each
visit, the beneficiary's medical history, physical examination,
diagnosis, and record of tests and therapies; and
(v) Document the extent of the teaching physician's participation in
the review and direction of the services furnished to each beneficiary.
(4) The range of services furnished by residents in the center
includes all of the following:
(i) Acute care for undifferentiated problems or chronic care for
ongoing conditions.
(ii) Coordination of care furnished by other physicians and
providers.
(iii) Comprehensive care not limited by organ system, or diagnosis.
(5) The patients seen must be an identifiable group of individuals
who consider the center to be the continuing source of their health care
and in which services are furnished by residents under the medical
direction of teaching physicians.
(b) Nothing in paragraph (a) of this section may be construed as
providing a basis for the coverage of services not determined to be
covered under Medicare, such as routine physical checkups.
[60 FR 63178, Dec. 8, 1995, as amended at 61 FR 59554, Nov. 22, 1996; 70
FR 47490, Aug. 12, 2005]
Sec. 415.176 Renal dialysis services.
In the case of renal dialysis services, physicians who are not paid
under the physician monthly capitation payment method (as described in
Sec. 414.314 of this chapter) must meet the requirements of Sec. Sec.
415.170 and 415.172 (concerning physician fee schedule payment for
services of teaching physicians).
Sec. 415.178 Anesthesia services.
(a) General rule. An unreduced physician fee schedule payment may be
made if a physician is involved in a single anesthesia procedure
involving an anesthesia resident. In the case of anesthesia services,
the teaching physician must be present during all critical portions of
the procedure and immediately available to furnish services during the
entire service or procedure. The teaching physician cannot receive an
unreduced fee if he or she performs
[[Page 72]]
services involving other patients during the period the anesthesia
resident is furnishing services in a single case. For additional rules
for payment of anesthesia services involving residents, see Sec.
414.46(c)(1)(iii)).
(b) Documentation. Documentation must indicate the physician's
presence or participation in the administration of the anesthesia.
[60 FR 63178, Dec. 8, 1995; 61 FR 42385, Aug. 15, 1996]
Sec. 415.180 Teaching setting requirements for the interpretation of diagnostic radiology and other diagnostic tests.
(a) General rule. Physician fee schedule payment is made for the
interpretation of diagnostic radiology and other diagnostic tests if the
interpretation is performed or reviewed by a physician other than a
resident.
(b) Documentation. Documentation must indicate that the physician
personally performed the interpretation or reviewed the resident's
interpretation with the resident.
Sec. 415.184 Psychiatric services.
To qualify for physician fee schedule payment for psychiatric
services furnished under an approved GME program, the physician must
meet the requirements of Sec. Sec. 415.170 and 415.172, including
documentation, except that the requirement for the presence of the
teaching physician during the service in which a resident is involved
may be met by observation of the service by use of a one-way mirror,
video equipment, or similar device.
Sec. 415.190 Conditions of payment: Assistants at surgery in teaching hospitals.
(a) Basis, purpose, and scope. This section describes the conditions
under which Medicare pays on a fee schedule basis for the services of an
assistant at surgery in a teaching hospital. This section is based on
section 1842(b)(7)(D)(I) of the Act and applies only to hospitals with
an approved GME residency program. Except as specified in paragraph (c)
of this section, fee schedule payment is not available for assistants at
surgery in hospitals with--
(1) A training program relating to the medical specialty required
for the surgical procedure; and
(2) A resident in a training program relating to the specialty
required for the surgery available to serve as an assistant at surgery.
(b) Definition. Assistant at surgery means a physician who actively
assists the physician in charge of a case in performing a surgical
procedure.
(c) Conditions for payment for assistants at surgery. Payment on a
fee schedule basis is made for the services of an assistant at surgery
in a teaching hospital only if the services meet one of the following
conditions:
(1) Are required as a result of exceptional medical circumstances.
(2) Are complex medical procedures performed by a team of
physicians, each performing a discrete, unique function integral to the
performance of a complex medical procedure that requires the special
skills of more than one physician.
(3) Constitute concurrent medical care relating to a medical
condition that requires the presence of, and active care by, a physician
of another specialty during surgery.
(4) Are medically required and are furnished by a physician who is
primarily engaged in the field of surgery, and the primary surgeon does
not use interns and residents in the surgical procedures that the
surgeon performs (including preoperative and postoperative care).
(5) Are not related to a surgical procedure for which CMS determines
that assistants are used less than 5 percent of the time.
Subpart E_Services of Residents
Sec. 415.200 Services of residents in approved GME programs.
(a) General rules. Services furnished in hospitals by residents in
approved GME programs are specifically excluded from being paid as
``physician services'' defined in Sec. 414.2 of this chapter and are
payable as hospital services. This exclusion applies whether or not the
resident is licensed to practice under the laws of the State in which he
[[Page 73]]
or she performs the service. The payment methodology for services of
residents in hospitals and hospital-based providers is set forth in
Sec. Sec. 413.75 through 413.83 of this chapter.
(b) Exception. For low and mid-level evaluation and management
services furnished under certain conditions in centers located in
hospital outpatient departments and other ambulatory settings, see Sec.
415.174.
(c) Definitions. See Sec. 415.152 for definitions of terms used in
this subpart E.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.202 Services of residents not in approved GME programs.
(a) General rules. For services of a physician employed by a
hospital who is authorized to practice only in a hospital setting and
for the services of a resident who is not in any approved GME program,
payment is made to the hospital on a Part B reasonable cost basis
regardless of whether the services are furnished to hospital inpatients
or outpatients.
(b) Payment. For services described in paragraph (a) of this
section, payment is made under Part B by reducing the reasonable costs
of furnishing the services by the beneficiary deductible and paying 80
percent of the remaining amount. No payment is made for other costs of
unapproved programs, such as administrative costs related to teaching
activities of physicians.
Sec. 415.204 Services of residents in skilled nursing facilities and home health agencies.
(a) Medicare Part A payment. Payment is made under Medicare Part A
for interns' and residents' services furnished in the following settings
that meet the specified requirements:
(1) Skilled nursing facility. Payment to a participating skilled
nursing facility may include the cost of services of an intern or
resident who is in an approved GME program in a hospital with which the
skilled nursing facility has a transfer agreement that provides, in
part, for the transfer of patients and the interchange of medical
records.
(2) Home health agency. A participating home health agency may
receive payment for the cost of the services of an intern or resident
who is under an approved GME program of a hospital with which the home
health agency is affiliated or under common control if these services
are furnished as part of the home health visits for a Medicare
beneficiary. (Nevertheless, see Sec. Sec. 413.75 through 413.83 of this
chapter for the costs of approved GME programs in hospital-based
providers.)
(b) Medicare Part B payment. Medical services of a resident of a
hospital that are furnished by a skilled nursing facility or home health
agency are paid under Medicare Part B if payment is not provided under
Medicare Part A. Payment is made under Part B for a resident's services
by reducing the reasonable costs of furnishing the services by the
beneficiary deductible and paying 80 percent of the remaining amount.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.206 Services of residents in nonprovider settings.
Patient care activities of residents in approved GME programs that
are furnished in nonprovider settings are payable in one of the
following two ways:
(a) Direct GME payments. If the conditions in Sec. 413.78 regarding
patient care activities and training of residents are met, the time
residents spend in nonprovider settings such as clinics, nursing
facilities, and physician offices in connection with approved GME
programs is included in determining the number of full-time equivalency
residents in the calculation of a teaching hospital's resident count.
The teaching physician rules on carrier payments in Sec. Sec. 415.170
through 415.184 apply in these teaching settings.
(b) Physician fee schedule. (1) Services furnished by a resident in
a nonprovider setting are covered as physician services and payable
under the physician fee schedule if the following requirements are met:
(i) The resident is fully licensed to practice medicine, osteopathy,
dentistry, or podiatry in the State in which the service is performed.
(ii) The time spent in patient care activities in the nonprovider
setting is not included in a teaching hospital's full-time equivalency
resident count
[[Page 74]]
for the purpose of direct GME payments.
(2) Payment may be made regardless of whether a resident is
functioning within the scope of his or her GME program in the
nonprovider setting.
(3) If fee schedule payment is made for the resident's services in a
nonprovider setting, payment must not be made for the services of a
teaching physician.
(4) The carrier must apply the physician fee schedule payment rules
set forth in subpart A of part 414 of this chapter to payments for
services furnished by a resident in a nonprovider setting.
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
Sec. 415.208 Services of moonlighting residents.
(a) Definition. For purposes of this section, the term services of
moonlighting residents refers to services that licensed residents
perform that are outside the scope of an approved GME program.
(b) Services in GME program hospitals. (1) The services of residents
to inpatients of hospitals in which the residents have their approved
GME program are not covered as physician services and are payable under
Sec. Sec. 413.75 through 413.83 regarding direct GME payments.
(2) Services of residents that are not related to their approved GME
programs and are performed in an outpatient department or emergency
department of a hospital in which they have their training program are
covered as physician services and payable under the physician fee
schedule if all of the following criteria are met:
(i) The services are identifiable physician services and meet the
conditions for payment of physician services to beneficiaries in
providers in Sec. 415.102(a).
(ii) The resident is fully licensed to practice medicine,
osteopathy, dentistry, or podiatry by the State in which the services
are performed.
(iii) The services performed can be separately identified from those
services that are required as part of the approved GME program.
(3) If the criteria specified in paragraph (b)(2) of this section
are met, the services of the moonlighting resident are considered to
have been furnished by the individual in his or her capacity as a
physician, rather than in the capacity of a resident. The carrier must
review the contracts and agreements for these services to ensure
compliance with the criteria specified in paragraph (b)(2) of this
section.
(4) No payment is made for services of a ``teaching physician''
associated with moonlighting services, and the time spent furnishing
these services is not included in the teaching hospital's full-time
equivalency count for the indirect GME payment (Sec. 412.105 of this
chapter) and for the direct GME payment (Sec. Sec. 413.75 through
413.83 of this chapter).
(c) Other settings. Moonlighting services of a licensed resident in
an approved GME program furnished outside the scope of that program in a
hospital or other setting that does not participate in the approved GME
program are payable under the physician fee schedule as set forth in
Sec. 415.206(b)(1).
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]
PART 416_AMBULATORY SURGICAL SERVICES--Table of Contents
Subpart A_General Provisions and Definitions
Sec.
416.1 Basis and scope.
416.2 Definitions.
Subpart B_General Conditions and Requirements
416.25 Basic requirements.
416.26 Qualifying for an agreement.
416.30 Terms of agreement with CMS.
416.35 Termination of agreement.
Subpart C_Specific Conditions for Coverage
416.40 Condition for coverage--Compliance with State licensure law.
416.41 Condition for coverage--Governing body and management.
416.42 Condition for coverage--Surgical services.
416.43 Condition for coverage--Evaluation of quality.
416.44 Condition for coverage--Environment.
[[Page 75]]
416.45 Condition for coverage--Medical staff.
416.46 Condition for coverage--Nursing services.
416.47 Condition for coverage--Medical records.
416.48 Condition for coverage--Pharmaceutical services.
416.49 Condition for coverage--Laboratory and radiologic services.
Subpart D_Scope of Benefits
416.60 General rules.
416.61 Scope of facility services.
416.65 Covered surgical procedures.
416.75 Performance of listed surgical procedures on an inpatient
hospital basis.
Subpart E_Payment for Facility Services
416.120 Basis for payment.
416.125 ASC facility services payment rate.
416.130 Publication of revised payment methodologies.
416.140 Surveys.
416.150 Beneficiary appeals.
Subpart F_Adjustment in Payment Amounts for New Technology Intraocular
Lenses Furnished by Ambulatory Surgical Centers
416.180 Definitions.
416.185 Payment review process.
416.190 Who may request a review.
416.195 A request to review.
416.200 Application of the payment adjustment.
Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C.
1302 and 1395hh).
Source: 47 FR 34094, Aug. 5, 1982, unless otherwise noted.
Subpart A_General Provisions and Definitions
Sec. 416.1 Basis and scope.
(a) Statutory basis. (1) Section 1832(a)(2)(F)(i) of the Act
provides for Medicare Part B coverage of facility services furnished in
connection with surgical procedures specified by the Secretary under
section 1833(i)(1) of the Act.
(2) Section 1833(i)(1)(A) of the Act requires the Secretary to
specify the surgical procedures that can be performed safely on an
ambulatory basis in an ambulatory surgical center, or a hospital
outpatient department.
(3) Section 1833(i) (2)(A) and (3) specify the amounts to be paid
for facility services furnished in connection with the specified
surgical procedures when they are performed, respectively, in an ASC, or
in a hospital outpatient department.
(b) Scope. This part sets forth--
(1) The conditions that an ASC must meet in order to participate in
the Medicare program;
(2) The scope of covered services; and
(3) The conditions for Medicare payment for facility services.
[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, 1991]
Sec. 416.2 Definitions.
As used in this part:
Ambulatory surgical center or ASC means any distinct entity that
operates exclusively for the purpose of providing surgical services to
patients not requiring hospitalization, has an agreement with CMS to
participate in Medicare as an ASC, and meets the conditions set forth in
subparts B and C of this part.
ASC services means facility services that are furnished in an ASC.
Covered surgical procedures means those surgical and other medical
procedures that meet the criteria specified in Sec. 416.65 and are
published by CMS in the Federal Register.
Facility services means services that are furnished in connection
with covered surgical procedures performed in an ASC, or in a hospital
on an outpatient basis.
[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, 1991]
Subpart B_General Conditions and Requirements
Sec. 416.25 Basic requirements.
Participation as an ASC is limited to facilities that--
(a) Meet the definition in Sec. 416.2; and
(b) Have in effect an agreement obtained in accordance with this
subpart.
[56 FR 8843, Mar. 1, 1991]
Sec. 416.26 Qualifying for an agreement.
(a) Deemed compliance. CMS may deem an ASC to be in compliance with
any or all of the conditions set forth in subpart C of this part if--
[[Page 76]]
(1) The ASC is accredited by a national accrediting body, or
licensed by a State agency, that CMS determines provides reasonable
assurance that the conditions are met;
(2) In the case of deemed status through accreditation by a national
accrediting body, where State law requires licensure, the ASC complies
with State licensure requirements; and
(3) The ASC authorizes the release to CMS, of the findings of the
accreditation survey.
(b) Survey of ASCs. (1) Unless CMS deems the ASC to be in compliance
with the conditions set forth in subpart C of this part, the State
survey agency must survey the facility to ascertain compliance with
those conditions, and report its findings to CMS.
(2) CMS surveys deemed ASCs on a sample basis as part of CMS's
validation process.
(c) Acceptance of the ASC as qualified to furnish ambulatory
surgical services. If CMS determines, after reviewing the survey agency
recommendation and other evidence relating to the qualification of the
ASC, that the facility meets the requirements of this part, it sends to
the ASC--
(1) Written notice of the determination; and
(2) Two copies of the ASC agreement.
(d) Filing of agreement by the ASC. If the ASC wishes to participate
in the program, it must--
(1) Have both copies of the ASC agreement signed by its authorized
representative; and
(2) File them with CMS.
(e) Acceptance by CMS. If CMS accepts the agreement filed by the
ASC, returns to the ASC one copy of the agreement, with a notice of
acceptance specifying the effective date.
(f) Appeal rights. If CMS refuses to enter into an agreement or if
CMS terminates an agreement, the ASC is entitled to a hearing in
accordance with part 498 of this chapter.
[56 FR 8843, Mar. 1, 1991]
Sec. 416.30 Terms of agreement with CMS.
As part of the agreement under Sec. 416.26 the ASC must agree to
the following:
(a) Compliance with coverage conditions. The ASC agrees to meet the
conditions for coverage specified in subpart C of this part and to
report promptly to CMS any failure to do so.
(b) Limitation on charges to beneficiaries. \1\ The ASC agrees to
charge the beneficiary or any other person only the applicable
deductible and coinsurance amounts for facility services for which the
beneficiary--
---------------------------------------------------------------------------
\1\ For facility services furnished before July 1987, the ASC had to
agree to make no charge to the beneficiary, since those services were
not subject to the part B deductible and coinsurance provisions.
---------------------------------------------------------------------------
(1) Is entitled to have payment made on his or her behalf under this
part; or
(2) Would have been so entitled if the ASC had filed a request for
payment in accordance with Sec. 410.165 of this chapter.
(c) Refunds to beneficiaries. (1) The ASC agrees to refund as
promptly as possible any money incorrectly collected from beneficiaries
or from someone on their behalf.
(2) As used in this section, money incorrectly collected means sums
collected in excess of those specified in paragraph (b) of this section.
It includes amounts collected for a period of time when the beneficiary
was believed not to be entitled to Medicare benefits if--
(i) The beneficiary is later determined to have been entitled to
Medicare benefits; and
(ii) The beneficiary's entitlement period falls within the time the
ASC's agreement with CMS is in effect.
(d) Furnishing information. The ASC agrees to furnish to CMS, if
requested, information necessary to establish payment rates specified in
Sec. Sec. 416.120-416.130 in the form and manner that CMS requires.
(e) Acceptance of assignment. The ASC agrees to accept assignment
for all facility services furnished in connection with covered surgical
procedures. For purposes of this section, assignment means an assignment
under Sec. 424.55 of this chapter of the right to receive payment under
Medicare Part B and payment under Sec. 424.64 of this chapter (when an
individual dies before assigning the claim).
(f) ASCs operated by a hopsital. In an ASC operated by a hospital--
[[Page 77]]
(1) The agreement is made effective on the first day of the next
Medicare cost reporting period of the hospital that operates the ASC;
and
(2) The ASC participates and is paid only as an ASC, without the
option of converting to or being paid as a hospital outpatient
department, unless CMS determines there is good cause to do otherwise.
(3) Costs for the ASC are treated as a non-reimbursable cost center
on the hopsital's cost report.
(g) Additional provisions. The agreement may contain any additional
provisions that CMS finds necessary or desirable for the efficient and
effective administration of the Medicare program.
[47 FR 34094, Aug. 5, 1982, as amended at 51 FR 41351, Nov. 14, 1986; 56
FR 8844, Mar. 1, 1991]
Sec. 416.35 Termination of agreement.
(a) Termination by the ASC--(1) Notice to CMS. An ASC that wishes to
terminate its agreement must send CMS written notice of its intent.
(2) Date of termination. The notice may state the intended date of
termination which must be the first day of a calendar month.
(i) If the notice does not specify a date, or the date is not
acceptable to CMS, CMS may set a date that will not be more than 6
months from the date on the ASC's notice of intent.
(ii) CMS may accept a termination date that is less than 6 months
after the date on the ASC's notice if it determines that to do so would
not unduly disrupt services to the community or otherwise interfere with
the effective and efficient administration of the Medicare program.
(3) Voluntary termination. If an ASC ceases to furnish services to
the community, that shall be deemed to be a voluntary termination of the
agreement by the ASC, effective on the last day of business with
Medicare beneficiaries.
(b) Termination by CMS--(1) Cause for termination. CMS may terminate
an agreement if it determines that the ASC--
(i) No longer meets the conditions for coverage as specified under
Sec. 416.26; or
(ii) Is not in substantial compliance with the provisions of the
agreement, the requirements of this subpart, and other applicable
regulations of subchapter B of this chapter, or any applicable
provisions of title XVIII of the Act.
(2) Notice of termination. CMS sends notice of termination to the
ASC at least 15 days before the effective date stated in the notice.
(3) Appeal by the ASC. An ASC may appeal the termination of its
agreement in accordance with the provisions set forth in part 498 of
this chapter.
(c) Effect of termination. Payment is not available for ASC services
furnished on or after the effective date of termination.
(d) Notice to the public. Prompt notice of the date and effect of
termination is given to the public, through publication in local
newspapers by--
(1) The ASC, after CMS has approved or set a termination date; or
(2) CMS, when it has terminated the agreement.
(e) Conditions for reinstatement after termination of agreement by
CMS. When an agreement with an ASC is terminated by CMS, the ASC may not
file another agreement to participate in the Medicare program unless
CMS--
(1) Finds that the reason for the termination of the prior agreement
has been removed; and
(2) Is assured that the reason for the termination will not recur.
[47 FR 34094, Aug. 5, 1982, as amended at 52 FR 22454, June 12, 1987; 56
FR 8844, Mar. 1, 1991; 61 FR 40347, Aug. 2, 1996]
Subpart C_Specific Conditions for Coverage
Sec. 416.40 Condition for coverage--Compliance with State licensure law.
The ASC must comply with State licensure requirements.
Sec. 416.41 Condition for coverage--Governing body and management.
The ASC must have a governing body, that assumes full legal
responsibility for determining, implementing, and monitoring policies
governing the ASC's total operation and for ensuring that these policies
are administered so as to provide quality health care in a
[[Page 78]]
safe environment. When services are provided through a contract with an
outside resource, the ASC must assure that these services are provided
in a safe and effective manner. Standard: Hospitalization. The ASC must
have an effective procedure for the immediate transfer to a hospital, of
patients requiring emergency medical care beyond the capabilities of the
ASC. This hospital must be a local, Medicare participating hospital or a
local, nonparticipating hospital that meets the requirements for payment
for emergency services under Sec. 482.2 of this chapter. The ASC must
have a written transfer agreement with such a hospital, or all
physicians performing surgery in the ASC must have admitting privileges
at such a hospital.
[47 FR 34094, Aug. 5, 1982, as amended at 51 FR 22041, June 17, 1986]
Sec. 416.42 Condition for coverage--Surgical services.
Surgical procedures must be performed in a safe manner by qualified
physicians who have been granted clinical privileges by the governing
body of the ASC in accordance with approved policies and procedures of
the ASC.
(a) Standard: Anesthetic risk and evaluation. A physician must
examine the patient immediately before surgery to evaluate the risk of
anesthesia and of the procedure to be performed. Before discharge from
the ASC, each patient must be evaluated by a physician for proper
anesthesia recovery.
(b) Standard: Administration of anesthesia. Anesthetics must be
administered by only--
(1) A qualified anesthesiologist; or
(2) A physician qualified to administer anesthesia, a certified
registered nurse anesthetist (CRNA) or an anesthesiologist's assistant
as defined in Sec. 410.69(b) of this chapter, or a supervised trainee
in an approved educational program. In those cases in which a non-
physician administers the anesthesia, unless exempted in accordance with
paragraph (d) of this section, the anesthetist must be under the
supervision of the operating physician, and in the case of an
anesthesiologist's assistant, under the supervision of an
anesthesiologist.
(c) Standard: Discharge. All patients are discharged in the company
of a responsible adult, except those exempted by the attending
physician.
(d) Standard: State exemption. (1) An ASC may be exempted from the
requirement for physician supervision of CRNAs as described in paragraph
(b)(2) of this section, if the State in which the ASC is located submits
a letter to CMS signed by the Governor, following consultation with the
State's Boards of Medicine and Nursing, requesting exemption from
physician supervision of CRNAs. The letter from the Governor must attest
that he or she has consulted with State Boards of Medicine and Nursing
about issues related to access to and the quality of anesthesia services
in the State and has concluded that it is in the best interests of the
State's citizens to opt-out of the current physician supervision
requirement, and that the opt-out is consistent with State law.
(2) The request for exemption and recognition of State laws, and the
withdrawal of the request may be submitted at any time, and are
effective upon submission.
[57 FR 33899, July 31, 1992, as amended at 66 FR 56768, Nov. 13, 2001.]
Sec. 416.43 Condition for coverage--Evaluation of quality.
The ASC, with the active participation of the medical staff, must
conduct an ongoing, comprehensive self-assessment of the quality of care
provided, including medical necessity of procedures performed and
appropriateness of care, and use findings, when appropriate, in the
revision of center policies and consideration of clinical privileges.
Sec. 416.44 Condition for coverage--Environment.
The ASC must have a safe and sanitary environment, properly
constructed, equipped, and maintained to protect the health and safety
of patients.
(a) Standard: Physical environment. The ASC must provide a
functional and sanitary environment for the provision of surgical
services.
(1) Each operating room must be designed and equipped so that the
types of surgery conducted can be performed
[[Page 79]]
in a manner that protects the lives and assures the physical safety of
all individuals in the area.
(2) The ASC must have a separate recovery room and waiting area.
(3) The ASC must establish a program for identifying and preventing
infections, maintaining a sanitary environment, and reporting the
results to appropriate authorities.
(b) Standard: Safety from fire. (1) Except as otherwise provided in
this section, the ASC must meet the provisions applicable to Ambulatory
Health Care Centers of the 2000 edition of the Life Safety Code of the
National Fire Protection Association, regardless of the number of
patients served. The Director of the Office of the Federal Register has
approved the NFPA 101 [reg] 2000 edition of the Life Safety
Code, issued January 14, 2000, for incorporation by reference in
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. A copy of the Code is
available for inspection at the CMS Information Resource Center, 7500
Security Boulevard, Baltimore, MD and at the National Archives and
Records Administration (NARA). For information on the availability of
this material at NARA, call 202-741-6030, or go to: http://
www.archives.gov/federal--register/code--of--federal--regulations/ibr--
locations.html. Copies may be obtained from the National Fire Protection
Association, 1 Batterymarch Park, Quincy, MA 02269. If any changes in
this edition of the Code are incorporated by reference, CMS will publish
notice in the Federal Register to announce the changes.
(2) In consideration of a recommendation by the State survey agency,
CMS may waive, for periods deemed appropriate, specific provisions of
the Life Safety Code which, if rigidly applied, would result in
unreasonable hardship upon an ASC, but only if the waiver will not
adversely affect the health and safety of the patients.
(3) The provisions of the Life Safety Code do not apply in a State
if CMS finds that a fire and safety code imposed by State law adequately
protects patients in an ASC.
(4) An ASC must be in compliance with Chapter 21.2.9.1, Emergency
Lighting, beginning on March 13, 2006.
(5) Notwithstanding any provisions of the 2000 edition of the Life
Safety Code to the contrary, an ASC may place alcohol-based hand rub
dispensers in its facility if--
(i) Use of alcohol-based hand rub dispensers does not conflict with
any State or local codes that prohibit or otherwise restrict the
placement of alcohol-based hand rub dispensers in health care
facilities;
(ii) The dispensers are installed in a manner that minimizes leaks
and spills that could lead to falls;
(iii) The dispensers are installed in a manner that adequately
protects against access by vulnerable populations; and
(iv) The dispensers are installed in accordance with the following
provisions:
(A) Where dispensers are installed in a corridor, the corridor shall
have a minimum width of 6 ft (1.8m);
(B) The maximum individual dispenser fluid capacity shall be:
(1) 0.3 gallons (1.2 liters) for dispensers in rooms, corridors, and
areas open to corridors.
(2) 0.5 gallons (2.0 liters) for dispensers in suites of rooms;
(C) The dispensers shall have a minimum horizontal spacing of 4 ft
(1.2m) from each other;
(D) Not more than an aggregate 10 gallons (37.8 liters) of ABHR
solution shall be in use in a single smoke compartment outside of a
storage cabinet;
(E) Storage of quantities greater than 5 gallons (18.9 liters) in a
single smoke compartment shall meet the requirements of NFPA 30,
Flammable and Combustible Liquids Code;
(F) The dispensers shall not be installed over or directly adjacent
to an ignition source; and
(G) In locations with carpeted floor coverings, dispensers installed
directly over carpeted surfaces shall be permitted only in sprinklered
smoke compartments.
(c) Standard: Emergency equipment. Emergency equipment available to
the operating rooms must include at least the following:
(1) Emergency call system.
(2) Oxygen.
[[Page 80]]
(3) Mechanical ventilatory assistance equipment including airways,
manual breathing bag, and ventilator.
(4) Cardiac defibrillator.
(5) Cardiac monitoring equipment.
(6) Tracheostomy set.
(7) Laryngoscopes and endotracheal tubes.
(8) Suction equipment.
(9) Emergency medical equipment and supplies specified by the
medical staff.
(d) Standard: Emergency personnel. Personnel trained in the use of
emergency equipment and in cardiopulmonary resuscitation must be
available whenever there is a patient in the ASC.
[47 FR 34094, Aug. 5, 1982, amended at 53 FR 11508, Apr. 7, 1988; 54 FR
4026, Jan. 27, 1989; 68 FR 1385, Jan. 10, 2003; 69 FR 18803, Apr. 9,
2004; 70 FR 15237, Mar. 25, 2005]
Effective Date Note: At 71 FR 55339, Sept. 22, 2006, Sec. 416.44
was amended by revising paragraphs, (b)(5)(iii) and (iv)(F) and (G) and
by adding paragraph (b)(5)(v), effective October 23, 2006. For the
convenience of the user, the revised and added text is set forth as
follows:
Sec. 416.44 Conditions for coverage-Environment.
* * * * *
(b) * * *
(5) * * *
(iii) The dispensers are installed in a manner that adequately
protects against inappropriate access;
(iv) * * *
(F) The dispensers shall not be installed over or directly adjacent
to an ignition source;
(G) In locations with carpeted floor coverings, dispensers installed
directly over carpeted surfaces shall be permitted only in sprinklered
smoke compartments; and
(v) The dispensers are maintained in accordance with dispenser
manufacturer guidelines.
* * * * *
Sec. 416.45 Condition for coverage--Medical staff.
The medical staff of the ASC must be accountable to the governing
body.
(a) Standard: Membership and clinical privileges. Members of the
medical staff must be legally and professionally qualified for the
positions to which they are appointed and for the performance of
privileges granted. The ASC grants privileges in accordance with
recommendations from qualified medical personnel.
(b) Standard: Reappraisals. Medical staff privileges must be
periodically reappraised by the ASC. The scope of procedures performed
in the ASC must be periodically reviewed and amended as appropriate.
(c) Standard: Other practitioners. If the ASC assigns patient care
responsibilities to practitioners other than physicians, it must have
established policies and procedures, approved by the governing body, for
overseeing and evaluating their clinical activities.
Sec. 416.46 Condition for coverage--Nursing services.
The nursing services of the ASC must be directed and staffed to
assure that the nursing needs of all patients are met.
(a) Standard: Organization and staffing. Patient care
responsibilities must be delineated for all nursing service personnel.
Nursing services must be provided in accordance with recognized
standards of practice. There must be a registered nurse available for
emergency treatment whenever there is a patient in the ASC.
(b) [Reserved]
Sec. 416.47 Condition for coverage--Medical records.
The ASC must maintain complete, comprehensive, and accurate medical
records to ensure adequate patient care.
(a) Standard: Organization. The ASC must develop and maintain a
system for the proper collection, storage, and use of patient records.
(b) Standard: Form and content of record. The ASC must maintain a
medical record for each patient. Every record must be accurate, legible,
and promptly completed. Medical records must include at least the
following:
(1) Patient identification.
(2) Significant medical history and results of physical examination.
(3) Pre-operative diagnostic studies (entered before surgery), if
performed.
[[Page 81]]
(4) Findings and techniques of the operation, including a
pathologist's report on all tissues removed during surgery, except those
exempted by the governing body.
(5) Any allergies and abnormal drug reactions.
(6) Entries related to anesthesia administration.
(7) Documentation of properly executed informed patient consent.
(8) Discharge diagnosis.
Sec. 416.48 Condition for coverage--Pharmaceutical services.
The ASC must provide drugs and biologicals in a safe and effective
manner, in accordance with accepted professional practice, and under the
direction of an individual designated responsible for pharmaceutical
services.
(a) Standard: Administration of drugs. Drugs must be prepared and
administered according to established policies and acceptable standards
of practice.
(1) Adverse reactions must be reported to the physician responsible
for the patient and must be documented in the record.
(2) Blood and blood products must be administered by only physicians
or registered nurses.
(3) Orders given orally for drugs and biologicals must be followed
by a written order, signed by the prescribing physician.
(b) [Reserved]
Sec. 416.49 Condition for coverage--Laboratory and radiologic services.
If the ASC performs laboratory services, it must meet the
requirements of part 493 of this chapter. If the ASC does not provide
its own laboratory services, it must have procedures for obtaining
routine and emergency laboratory services from a certified laboratory in
accordance with part 493 of this chapter. The referral laboratory must
be certified in the appropriate specialties and subspecialties of
service to perform the referred tests in accordance with the
requirements of part 493 of this chapter. The ASC must have procedures
for obtaining radiologic services from a Medicare approved facility to
meet the needs of patients.
[57 FR 7135, Feb. 28, 1992]
Subpart D_Scope of Benefits
Sec. 416.60 General rules.
(a) The services payable under this part are facility services
furnished to Medicare beneficiaries, by a participating facility, in
connection with covered surgical procedures specified in Sec. 416.65.
(b) The surgical procedures, including all preoperative and post-
operative services that are performed by a physician, are covered as
physician services under part 410 of this chapter.
[56 FR 8844, Mar. 1, 1991]
Sec. 416.61 Scope of facility services.
(a) Included services. Facility services include, but are not
limited to--
(1) Nursing, technician, and related services;
(2) Use of the facilities where the surgical procedures are
performed;
(3) Drugs, biologicals, surgical dressings, supplies, splints,
casts, and appliances and equipment directly related to the provision of
surgical procedures;
(4) Diagnostic or therapeutic services or items directly related to
the provision of a surgical procedure;
(5) Administrative, recordkeeping and housekeeping items and
services; and
(6) Materials for anesthesia.
(7) Intra-ocular lenses (IOLs).
(8) Supervision of the services of an anesthetist by the operating
surgeon.
(b) Excluded services. Facility services do not include items and
services for which payment may be made under other provisions of part
405 of this chapter, such as physicians' services, laboratory, X-ray or
diagnostic procedures (other than those directly related to performance
of the surgical procedure), prosthetic devices (except IOLs), ambulance
services, leg, arm, back and neck braces, artificial limbs, and durable
medical equipment for use in the patient's home. In addition, they do
not include anesthetist services furnished on or after January 1, 1989.
[56 FR 8844, Mar. 1, 1991, as amended at 57 FR 33899, July 31, 1992]
[[Page 82]]
Sec. 416.65 Covered surgical procedures.
Covered surgical procedures are those procedures that meet the
standards described in paragraphs (a) and (b) of this section and are
included in the list published in accordance with paragraph (c) of this
section.
(a) General standards. Covered surgical procedures are those
surgical and other medical procedures that--
(1) Are commonly performed on an inpatient basis in hospitals, but
may be safely performed in an ASC;
(2) Are not of a type that are commonly performed, or that may be
safely performed, in physicians' offices;
(3) Are limited to those requiring a dedicated operating room (or
suite), and generally requiring a post-operative recovery room or short-
term (not overnight) convalescent room; and
(4) Are not otherwise excluded under Sec. 405.310 of this chapter.
(b) Specific standards. (1) Covered surgical procedures are limited
to those that do not generally exceed--
(i) A total of 90 minutes operating time; and
(ii) A total of 4 hours recovery or convalescent time.
(2) If the covered surgical procedures require anesthesia, the
anesthesia must be--
(i) Local or regional anesthesia; or
(ii) General anesthesia of 90 minutes or less duration.
(3) Covered surgical procedures may not be of a type that--
(i) Generally result in extensive blood loss;
(ii) Require major or prolonged invasion of body cavities;
(iii) Directly involve major blood vessels; or
(iv) Are generally emergency or life-threatening in nature.
(c) Publication of covered procedures. CMS will publish in the
Federal Register a list of covered surgical procedures and revisions as
appropriate.
Sec. 416.75 Performance of listed surgical procedures on an inpatient hospital basis.
The inclusion of any procedure as a covered surgical procedure under
Sec. 416.65 does not preclude its coverage in an inpatient hospital
setting under Medicare.
Subpart E_Payment for Facility Services
Sec. 416.120 Basis for payment.
The basis for payment depends on where the services are furnished.
(a) Hospital outpatient department. Payment is in accordance with
part 413 of this chapter.
(b) [Reserved]
(c) ASC--(1) General rule. Payment is based on a prospectively
determined rate. This rate covers the cost of services such as supplies,
nursing services, equipment, etc., as specified in Sec. 416.61. The
rate does not cover physician services or other medical services covered
under part 410 of this chapter (for example, X-ray services or
laboratory services) which are not directly related to the performance
of the surgical procedures. Those services may be billed separately and
paid on a reasonable charge basis.
(2) Single and multiple surgical procedures. (i) If one covered
surgical procedure is furnished to a beneficiary in an operative
session, payment is based on the prospectively determined rate for that
procedure.
(ii) If more than one surgical procedure is furnished in a single
operative session, payment is based on--
(A) The full rate for the procedure with the highest prospectively
determined rate; and
(B) One half of the prospectively determined rate for each of the
other procedures.
(3) Deductibles and coinsurance. Part B deductible and coinsurance
amounts apply as specified in Sec. 410.152 (a) and (i) of this chapter.
[56 FR 8844, Mar. 1, 1991; 56 FR 23022, May 20, 1991]
Sec. 416.125 ASC facility services payment rate.
(a) The payment rate is based on a prospectively determined standard
overhead amount per procedure derived from an estimate of the costs
incurred by ambulatory surgical centers generally in providing services
furnished in connection with the performance of that procedure.
(b) The payment must be substantially less than would have been paid
under the program if the procedure had
[[Page 83]]
been performed on an inpatient basis in a hospital.
[56 FR 8844, Mar. 1, 1991]
Sec. 416.130 Publication of revised payment methodologies.
Whenever CMS proposes to revise the payment rate for ASCs, CMS
publishes a notice in the Federal Register describing the revision. The
notice also explains the basis on which the rates were established.
After reviewing public comments, CMS publishes a notice establishing the
rates authorized by this section. In setting these rates, CMS may adopt
reasonable classifications of facilities and may establish different
rates for different types of surgical procedures.
[47 FR 34094, Aug. 5, 1982, as amended at 56 FR 8844, Mar. 1, 1991]
Sec. 416.140 Surveys.
(a) Timing, purpose, and procedures. (1) No more often than once a
year, CMS conducts a survey of a randomly selected sample of
participating ASCs to collect data for analysis or reevaluation of
payment rates.
(2) CMS notifies the selected ASCs by mail of their selection and of
the form and content of the report the ASCs are required to submit
within 60 days of the notice.
(3) If the facility does not submit an adequate report in response
to CMS's survey request, CMS may terminate the agreement to participate
in the Medicare program as an ASC.
(4) CMS may grant a 30-day postponement of the due date for the
survey report if it determines that the facility has demonstrated good
cause for the delay.
(b) Requirements for ASCs. ASCs must--
(1) Maintain adequate financial records, in the form and containing
the data required by CMS, to allow determination of the payment rates
for covered surgical procedures furnished to Medicare beneficiaries
under this subpart.
(2) Within 60 days of a request from CMS submit, in the form and
detail as may be required by CMS, a report of--
(i) Their operations, including the allowable costs actually
incurred for the period and the actual number and kinds of surgical
procedures furnished during the period; and
(ii) Their customary charges for each surgical procedure furnished
for the period.
[47 FR 34094, Aug. 5, 1982, as amended at 56 FR 8845, Mar. 1, 1991]
Sec. 416.150 Beneficiary appeals.
A beneficiary (or ASC as his or her assignee) may request a hearing
by a carrier (subject to the limitations and conditions set forth in
part 405, subpart H of this chapter) if the beneficiary or the ASC--
(a) Is dissatisfied with a carrier's denial of a request for payment
made on his or her behalf by an ASC;
(b) Is dissatisfied with the amount of payment; or
(c) Believes the request for payment is not being acted upon with
reasonable promptness.
Subpart F_Adjustment in Payment Amounts for New Technology Intraocular
Lenses Furnished by Ambulatory Surgical Centers
Source: 64 FR 32205, June 16, 1999, unless otherwise noted.
Sec. 416.180 Definitions.
As used in this subpart, the following definitions apply:
Class of new technology intraocular lenses (IOLs) means all of the
IOLs, collectively, that CMS determines meet the definition of ``new
technology IOL'' under the provisions of this subpart.
Interested party means any individual, partnership, corporation,
association, society, scientific or academic establishment, professional
or trade organization, or any other legal entity.
New technology IOL means an IOL that CMS determines has been
approved by the FDA for use in labeling and advertising the IOL's claims
of specific clinical advantages and superiority over existing IOLs with
regard to reduced risk of intraoperative or postoperative complication
or trauma, accelerated postoperative recovery, reduced induced
astigmatism, improved
[[Page 84]]
postoperative visual acuity, more stable postoperative vision, or other
comparable clinical advantages.
New technology subset means a group of IOLs that CMS determines meet
the criterion for being treated as new technology IOLs and that share a
common feature or features that distinguish them from other IOLs. For
example, all new technology IOLs that are made of a particular
bioengineered material could comprise one subset, while all that rely on
a particular optical innovation could comprise another.
Sec. 416.185 Payment review process.
(a) CMS publishes a Federal Register notice announcing the deadline
and requirements for submitting a request for CMS to review payment for
an IOL.
(b) CMS receives a request to review the appropriateness of the
payment amount for an IOL.
(c) CMS compiles a list of the requests it receives and identifies
the IOL manufacturer's name, the model number of the IOL to be reviewed,
the interested party or parties that submit requests, and a summary of
the interested party's grounds for requesting review of the
appropriateness of the IOL payment amount.
(d) CMS publishes the list of requests in a Federal Register notice
with comment period, giving the public 30 days to comment on the IOLs
for which review was requested.
(e) CMS reviews the information submitted with the request to
review, any timely public comments that are submitted regarding the list
of IOLs published in the Federal Register, and any other timely
information that CMS deems relevant to decide whether to provide a
payment adjustment as specified in Sec. 416.200. CMS makes a
determination of whether the IOL meets the definition of a new
technology IOL in Sec. 416.180.
(f) If CMS determines that a lens is a new technology IOL, CMS
establishes a payment adjustment as follows:
(1) Before July 16, 2002--$50.
(2) After July 16, 2002--$50 or the amount announced through
proposed and final rulemaking in connection with ambulatory surgical
center services.
(g) CMS designates a predominant characteristic of a new technology
IOL that both sets it apart from other IOLs and links it with other
similar IOLs with the same characteristic to establish a specific subset
of new technology within the ``class of new technology IOLs.''
(h) Within 90 days of the end of the comment period following the
Federal Register notice identified in paragraph (d) of this section, CMS
publishes in the Federal Register its determinations with regard to IOLs
that it has determined are ``new technology'' lenses that qualify for a
payment adjustment.
(i) Payment adjustments are effective beginning 30 days after the
publication of CMS's determinations in the Federal Register.
Sec. 416.190 Who may request a review.
Any party who is able to furnish the information required in Sec.
416.195 may request that CMS review the appropriateness of the payment
amount provided under section 1833(i)(2)(A)(iii) of the Act with respect
to an IOL that meets the definition of a new technology IOL in Sec.
416.180.
Sec. 416.195 A request to review.
(a) Content of a request. The request must include all of the
following information:
(1) The name of the manufacturer, the model number, and the trade
name of the IOL.
(2) A copy of the FDA's summary of the IOL's safety and
effectiveness.
(3) A copy of the labeling claims of specific clinical advantages
approved by the FDA for the IOL.
(4) A copy of the IOL's original FDA approval notification.
(5) Reports of modifications made after the original FDA approval.
(6) Other information that CMS finds necessary for identification of
the IOL.
(b) Confidential information. To the extent that information
received from an IOL manufacturer can reasonably be characterized as a
trade secret or as privileged or confidential commercial or financial
information, CMS maintains the confidentiality of the information and
protects it from disclosure not otherwise authorized or required
[[Page 85]]
by Federal law as allowed under Exemption 4 of the Freedom of
Information Act (5 U.S.C. 552(b)(4)) and, with respect to trade secrets,
the Trade Secrets Act (18 U.S.C. 1905).
Sec. 416.200 Application of the payment adjustment.
(a) CMS recognizes the IOL(s) that define a new technology subset
for purposes of this subpart as belonging to the class of new technology
IOLs for a period of 5 years effective from the date that CMS recognizes
the first new technology IOL for a payment adjustment.
(b) Any IOL that CMS subsequently recognizes as belonging to a new
technology subset receives the new technology payment adjustment for the
remainder of the 5-year period established with CMS's recognition of the
first IOL in the subset.
(c) Beginning 5 years after the effective date of CMS's initial
recognition of a new technology subset, payment adjustments cease for
all IOLs that CMS designates as belonging to that subset and payment
reverts to the standard payment rate set under section
1833(i)(2)(A)(iii) of the Act for IOL insertion procedures performed in
ASCs.
(d) ASCs that furnish an IOL designated by CMS as belonging to the
class of new technology IOLs must submit claims using specific billing
codes to receive the new technology IOL payment adjustment.
PART 417_HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS--Table of Contents
Subpart A_General Provisions
Sec.
417.1 Definitions.
417.2 Basis and scope.
Subpart B_Qualified Health Maintenance Organizations: Services
417.101 Health benefits plan: Basic health services.
417.102 Health benefits plan: Supplemental health services.
417.103 Providers of basic and supplemental health services.
417.104 Payment for basic health services.
417.105 Payment for supplemental health services.
417.106 Quality assurance program; Availability, accessibility, and
continuity of basic and supplemental health services.
Subpart C_Qualified Health Maintenance Organizations: Organization and
Operation
417.120 Fiscally sound operation and assumption of financial risk.
417.122 Protection of enrollees.
417.124 Administration and management.
417.126 Recordkeeping and reporting requirements.
Subpart D_Application for Federal Qualification
417.140 Scope.
417.142 Requirements for qualification.
417.143 Application requirements.
417.144 Evaluation and determination procedures.
Subpart E_Inclusion of Qualified Health Maintenance Organizations in
Employee Health Benefits Plans
417.150 Definitions.
417.151 Applicability.
417.153 Offer of HMO alternative.
417.155 How the HMO option must be included in the health benefits plan.
417.156 When the HMO must be offered to employees.
417.157 Contributions for the HMO alternative.
417.158 Payroll deductions.
417.159 Relationship of section 1310 of the Public Health Service Act to
the National Labor Relations Act and the Railway Labor Act.
Subpart F_Continued Regulation of Federally Qualified Health Maintenance
Organizations
417.160 Applicability.
417.161 Compliance with assurances.
417.162 Reporting requirements.
417.163 Enforcement procedures.
417.164 Effect of revocation of qualification on inclusion in employee's
health benefit plans.
417.165 Reapplication for qualification.
417.166 Waiver of assurances.
Subparts G-I [Reserved]
Subpart J_Qualifying Conditions for Medicare Contracts
417.400 Basis and scope.
417.401 Definitions.
417.402 Effective date of initial regulations.
417.404 General requirements.
[[Page 86]]
417.406 Application and determination.
417.407 Requirements for a Competitive Medical Plan (CMP).
417.408 Contract application process.
417.410 Qualifying conditions: General rules.
417.412 Qualifying condition: Administration and management.
417.413 Qualifying condition: Operating experience and enrollment.
417.414 Qualifying condition: Range of services.
417.416 Qualifying condition: Furnishing of services.
417.418 Qualifying condition: Quality assurance program.
Subpart K_Enrollment, Entitlement, and Disenrollment Under Medicare
Contract
417.420 Basic rules on enrollment and entitlement.
417.422 Eligibility to enroll in an HMO or CMP.
417.423 Special rules: ESRD and hospice patients.
417.424 Denial of enrollment.
417.426 Open enrollment requirements.
417.428 Marketing activities.
417.430 Application procedures.
417.432 Conversion of enrollment.
417.434 Reenrollment.
417.436 Rules for enrollees.
417.440 Entitlement to health care services from an HMO or CMP.
417.442 Risk HMO's and CMP's: Conditions for provision of additional
benefits.
417.444 Special rules for certain enrollees of risk HMOs and CMPs.
417.446 [Reserved]
417.448 Restriction on payments for services received by Medicare
enrollees of risk HMOs or CMPs.
417.450 Effective date of coverage.
417.452 Liability of Medicare enrollees.
417.454 Charges to Medicare enrollees.
417.456 Refunds to Medicare enrollees.
417.458 Recoupment of uncollected deductible and coinsurance amounts.
417.460 Disenrollment of beneficiaries by an HMO or CMP.
417.461 Disenrollment by the enrollee.
417.464 End of CMS's liability for payment: Disenrollment of
beneficiaries and termination or default of contract.
Subpart L_Medicare Contract Requirements
417.470 Basis and scope.
417.472 Basic contract requirements.
417.474 Effective date and term of contract.
417.476 Waived conditions.
417.478 Requirements of other laws and regulations.
417.479 Requirements for physician incentive plans.
417.480 Maintenance of records: Cost HMOs and CMPs.
417.481 Maintenance of records: Risk HMOs or CMPs.
417.482 Access to facilities and records.
417.484 Requirement applicable to related entities.
417.486 Disclosure of information and confidentiality.
417.488 Notice of termination and of available alternatives: Risk
contract.
417.490 Renewal of contract.
417.492 Nonrenewal of contract.
417.494 Modification or termination of contract.
417.500 Sanctions against HMOs and CMPs.
Subpart M_Change of Ownership and Leasing of Facilities: Effect on
Medicare Contract
417.520 Effect on HMO and CMP contracts.
Subpart N_Medicare Payment to HMOs and CMPs: General Rules
417.524 Payment to HMOs or CMPs: General.
417.526 Payment for covered services.
417.528 Payment when Medicare is not primary payer.
Subpart O_Medicare Payment: Cost Basis
417.530 Basis and scope.
417.531 Hospice care services.
417.532 General considerations.
417.533 Part B carrier responsibilities.
417.534 Allowable costs.
417.536 Cost payment principles.
417.538 Enrollment and marketing costs.
417.540 Enrollment costs.
417.542 Reinsurance costs.
417.544 Physicians' services furnished directly by the HMO or CMP.
417.546 Physicians' services and other Part B supplier services
furnished under arrangements.
417.548 Provider services through arrangements.
417.550 Special Medicare program requirements.
417.552 Cost apportionment: General provisions.
417.554 Apportionment: Provider services furnished directly by the HMO
or CMP.
417.556 Apportionment: Provider services furnished by the HMO or CMP
through arrangements with others.
417.558 Emergency, urgently needed, and out-of-area services for which
the HMO or CMP accepts financial responsibility.
417.560 Apportionment: Part B physician and supplier services.
417.564 Apportionment and allocation of administrative and general
costs.
417.566 Other methods of allocation and apportionment.
[[Page 87]]
417.568 Adequate financial records, statistical data, and cost finding.
417.570 Interim per capita payments.
417.572 Budget and enrollment forecast and interim reports.
417.574 Interim settlement.
417.576 Final settlement.
Subpart P_Medicare Payment: Risk Basis
417.580 Basis and scope.
417.582 Definitions.
417.584 Payment to HMOs or CMPs with risk contracts.
417.585 Special rules: Hospice care.
417.588 Computation of adjusted average per capita cost (AAPCC).
417.590 Computation of the average of the per capita rates of payment.
417.592 Additional benefits requirement.
417.594 Computation of adjusted community rate (ACR).
417.596 Establishment of a benefit stabilization fund.
417.597 Withdrawal from a benefit stabilization fund.
417.598 Annual enrollment reconciliation.
Subpart Q_Beneficiary Appeals
417.600 Basis and scope.
Subpart R_Medicare Contract Appeals
417.640 Determinations subject to appeal.
417.642 Administrative actions that are not initial determinations.
417.644 Notice of initial determination.
417.646 Effect of initial determination.
417.648 Reconsideration: Applicability.
417.650 Request for reconsideration.
417.652 Opportunity to submit evidence.
417.654 Reconsidered determination.
417.656 Notice of reconsidered determination.
417.658 Effect of reconsidered determination.
417.660 Right to a hearing.
417.662 Request for hearing.
417.664 Postponement of effective date of initial determination.
417.666 Designation of hearing officer.
417.668 Disqualification of hearing officer.
417.670 Time and place of hearing.
417.672 Appointment of representatives.
417.674 Authority of representatives.
417.676 Conduct of hearing.
417.678 Evidence.
417.680 Witnesses.
417.682 Discovery.
417.684 Prehearing.
417.686 Record of hearing.
417.688 Authority of hearing officer.
417.690 Notice and effect of hearing decision.
417.692 Reopening of initial or reconsidered determination or decision
of a hearing officer.
417.694 Effect of revised determination.
Subparts S-T [Reserved]
Subpart U_Health Care Prepayment Plans
417.800 Payment to HCPPs: Definitions and basic rules.
417.801 Agreements between CMS and health care prepayment plans.
417.802 Allowable costs.
417.804 Cost apportionment.
417.806 Financial records, statistical data, and cost finding.
417.808 Interim per capita payments.
417.810 Final settlement.
417.830 Scope of regulations on beneficiary appeals.
417.832 Applicability of requirements and procedures.
417.834 Responsibility for establishing administrative review
procedures.
417.836 Written description of administrative review procedures.
417.838 Organization determinations.
417.840 Administrative review procedures.
Subpart V_Administration of Outstanding Loans and Loan Guarantees
417.910 Applicability.
417.911 Definitions.
417.920 Planning and initial development.
417.930 Initial costs of operation.
417.931 [Reserved]
417.934 Reserve requirement.
417.937 Loan and loan guarantee provisions.
417.940 Civil action to enforce compliance with assurances.
Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C.
1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public Health
Service Act (42 U.S.C. 300e, 300e-5, and 300e-9), and 31 U.S.C. 9701.
Subpart A_General Provisions
Sec. 417.1 Definitions.
As used in this part, unless the context indicates otherwise--
Basic health services means health services described in Sec.
417.101(a).
Community rating system means a system of fixing rates of payments
for health services that meets the requirements of Sec. 417.104(a)(3).
Comprehensive health services means as a minimum the following
services which may be limited as to time and cost:
(1) Physician services (Sec. 417.101(a)(1));
(2) Outpatient services and inpatient hospital services (Sec.
417.101(a)(2));
(3) Medically necessary emergency health services (Sec.
417.101(a)(3)); and
[[Page 88]]
(4) Diagnostic laboratory and diagnostic and therapeutic radiologic
services (Sec. 417.101(a)(6)).
Direct service contract means a contract for the provision of basic
or supplemental health services or both between an HMO and (1) a health
professional other than a member of the staff of the HMO, or (2) an
entity other than a medical group or an IPA.
Enrollee means an individual for whom an HMO, CMP, or HCPP assumes
the responsibility, under a contract or agreement, for the furnishing of
health care services on a prepaid basis.
Full-time student means a student who is enrolled for a sufficient
number of credit hours in a semester or other academic term to enable
the student to complete the course of study within not more than the
number of semesters or other academic terms normally required to
complete that course of study on a full-time basis at the school in
which the student is enrolled.
Furnished, when used in connection with prepaid health care
services, means services that are maid available to an enrollee either
dierctly by, or under arrangements made by, the HMO, CMP, or HCPP.
Health maintenance organization (HMO) means a legal entity that
provides or arranges for the provision of basic and supplemental health
services to its enrollees in the manner prescribed by, is organized and
operated in the manner prescribed by, and otherwise meets the
requirements of, section 1301 of the PHS Act and the regulations in
subparts B and C of this part.
Health professionals means physicians (doctors of medicine and
doctors of osteopathy), dentists, nurses, podiatrists, optometrists,
physicians' assistants, clinical psychologists, social workers,
pharmacists, nutritionists, occupational therapists, physical
therapists, and other professionals engaged in the delivery of health
services who are licensed, practice under an institutional license, are
certified, or practice under authority of the HMO, a medical group,
individual practice association, or other authority consistent with
State law.
Individual practice association (IPA) means a partnership,
association, corporation, or other legal entity that delivers or
arranges for the delivery of health services and which has entered into
written services arrangement or arrangements with health professionals,
a majority of whom are licensed to practice medicine or osteopathy. The
written services arrangement must provide:
(1) That these health professionals will provide their professional
services in accordance with a compensation arrangement established by
the entity; and
(2) To the extent feasible, for the sharing by these health
professionals of health (including medical) and other records,
equipment, and professional, technical, and administrative staff.
Medical group means a partnership, association, corporation, or
other group:
(1) That is composed of health professionals licensed to practice
medicine or osteopathy and of such other licensed health professionals
(including dentists, optometrists, and podiatrists) as are necessary for
the provision of health services for which the group is responsible;
(2) A majority of the members of which are licensed to practice
medicine or osteopathy; and
(3) The members of which:
(i) After the end of the 48 month period beginning after the month
in which the HMO for which the group provides health services becomes a
qualified HMO, as their principal professional activity (over 50 percent
individually) engage in the coordinated practice of their profession and
as a group responsibility have substantial responsibility (over 35
percent in the aggregate of their professional activity) for the
delivery of health services to enrollees of an HMO;
(ii) Pool their income from practice as members of the group and
distribute it among themselves according to a prearranged salary or
drawing account or other similar plan unrelated to the provision of
specific health services;
(iii) Share health (including medical) records and substantial
portions of major equipment and of professional, technical, and
administrative staff;
(iv) Establish an arrangement whereby an enrollee's enrollment
status is not known to the health professional
[[Page 89]]
who provides health services to the enrollee.
Medical group members means (1) a health professional engaged as a
partner, associate, or shareholder in the medical group, or (2) any
other health professional employed by the group who may be designated as
a medical group member by the medical group.
Medically underserved population means the population of an urban or
rural area as described in Sec. 417.912(d).
Nonmetropolitan area means an area no part of which is within a
standard metropolitan statistical area as designated by the Office of
Management and Budget and which does not contain a city whose population
exceeds 50,000 individuals.
Party in interest means: (1) Any director, officer, partner, or
employee responsible for management or administration of an HMO, any
person who is directly or indirectly the beneficial owner of more than 5
percent of the equity of the HMO, any person who is the beneficial owner
of a mortgage, deed of trust, note, or other interest secured by, and
valuing more than 5 percent of the assets of the HMO, and, in the case
of an HMO organized as a nonprofit corporation, an incorporator or
member of the corporation under applicable State corporation law;
(2) Any entity in which a person described in paragraph (1):
(i) Is an officer or director;
(ii) Is a partner (if the entity is organized as a partnership);
(iii) Has directly or indirectly a beneficial interest of more than
5 percent of the equity; or
(iv) Has a mortgage, deed of trust, note, or other interest valuing
more than 5 percent of the assets of such entity;
(3) Any spouse, child, or parent of an individual described in
paragraph (1).
Policymaking body of an HMO means a board of directors, governing
body, or other body of individuals that has the authority to establish
policy for the HMO.
Qualified HMO means an HMO found by CMS to be qualified within the
meaning of section 1310 of the PHS Act and subpart D of this part.
Rural area means any area not listed as a place having a population
of 2,500 or more in Document PC(1)A, ``Number of Inhabitants,''
Table VI, ``Population of Places,'' and not listed as an urbanized area
in Table XI, ``Population of Urbanized Areas'' of the same document
(1970 Census or most recent update of this document, Bureau of Census,
U.S. Department of Commerce).
Secretary means the Secretary of Health and Human Services and any
other officer or employee of the Department of Health and Human Services
to whom the authority involved has been delegated.
Service area means a geographic area, defined through zip codes,
census tracts, or other geographic measurements, that is the area, as
determined by CMS, within which the HMO furnishes basic and supplemental
health services and makes them available and accessible to all its
enrollees in accordance with Sec. 417.106(b).
Significant business transaction means any business transaction or
series of transactions during any one fiscal year of the HMO, the total
value of which exceeds the lesser of $25,000 or 5 percent of the total
operating expenses of the HMO.
Staff of the HMO means health professionals who are employees of the
HMO and who--
(1) Provide services to HMO enrollees at an HMO facility subject to
the staff policies and operational procedures of the HMO;
(2) Engage in the coordinated practice of their profession and
provide to enrollees of the HMO the health services that the HMO has
contracted to provide;
(3) Share medical and other records, equipment, and professional,
technical, and administrative staff of the HMO; and
(4) Provide their professional services in accordance with a
compensation arrangement, other than fee-for-service, established by the
HMO. This arrangement may include, but is not limited to, fee-for-time,
retainer or salary.
Subscriber means an enrollee who has entered into a contractual
relationship with the HMO or who is responsible for
[[Page 90]]
making payments for basic health services (and contracted for
supplemental health services) to the HMO or on whose behalf these
payments are made.
Supplemental health services means the health services described in
Sec. 417.102(a).
Unusual or infrequently used health services means:
(1) Those health services that are projected to involve fewer than 1
percent of the encounters per year for the entire HMO enrollment, or,
(2) Those health services the provision of which, given the
enrollment projection of the HMO and generally accepted staffing
patterns, is projected will require less than 0.25 full time equivalent
health professionals.
[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19338, May 5, 1982; 52
FR 22321, June 11, 1987. Redesignated at 52 FR 36746, Sept. 30, 1987.
Redesignated and amended at 56 FR 51985, Oct. 17, 1991; 58 FR 38067,
July 15, 1993; 60 FR 34887, July 5, 1995; 60 FR 45674, Sept. 1, 1995]
Sec. 417.2 Basis and scope.
(a) Subparts B through F of this part pertain to the Federal
qualification of HMOs under title XIII of the Public Health Service
(PHS) Act.
(b) Subparts G through R of this part set forth the rules for
Medicare contracts with, and payment to, HMOs and competitive medical
plans (CMPs) under section 1876 of the Act.
(c) Subpart U of this part pertains to Medicare payment to health
care prepayment plans under section 1833(a)(1)(A) of the Act.
(d) Subpart V of this part applies to the administration of
outstanding loans and loan guarantees previously granted under title
XIII of the PHS Act.
[56 FR 51985, Oct. 17, 1991, as amended at 60 FR 45675, Sept. 1, 1995]
Subpart B_Qualified Health Maintenance Organizations: Services
Sec. 417.101 Health benefits plan: Basic health services.
(a) An HMO must provide or arrange for the provision of basic health
services to its enrollees as needed and without limitations as to time
and cost other than those prescribed in the PHS Act and these
regulations, as follows:
(1) Physician services (including consultant and referral services
by a physician), which must be provided by a licensed physician, or if a
service of a physician may also be provided under applicable State law
by other health professionals, an HMO may provide the service through
these other health professionals;
(2)(i) Outpatient services, which must include diagnostic services,
treatment services and x-ray services, for patients who are ambulatory
and may be provided in a non-hospital based health care facility or at a
hospital;
(ii) Inpatient hospital services, which must include but not be
limited to, room and board, general nursing care, meals and special
diets when medically necessary, use of operating room and related
facilities, use of intensive care unit and services, x-ray services,
laboratory, and other diagnostic tests, drugs, medications, biologicals,
anesthesia and oxygen services, special duty nursing when medically
necessary, radiation therapy, inhalation therapy, and administration of
whole blood and blood plasma;
(iii) Outpatient services and inpatient hospital services must
include short-term rehabilitation services and physical therapy, the
provision of which the HMO determines can be expected to result in the
significant improvement of a member's condition within a period of two
months;
(3) Instructions to its enrollees on procedures to be followed to
secure medically necessary emergency health services both in the service
area and out of the service area;
(4) Twenty outpatient visits per enrollee per year, as may be
necessary and appropriate for short-term evaluative or crisis
intervention mental health services, or both;
(5) Diagnosis, medical treatment and referral services (including
referral services to appropriate ancillary services) for the abuse of or
addiction to alcohol and drugs:
(i) Diagnosis and medical treatment for the abuse of or addiction to
alcohol and drugs must include detoxification for alcoholism or drug
abuse on either an outpatient or inpatient basis,
[[Page 91]]
whichever is medically determined to be appropriate, in addition to the
other required basic health services for the treatment of other medical
conditions;
(ii) Referral services may be either for medical or for nonmedical
ancillary services. Medical services must be a part of basic health
services; nonmedical ancillary services (such as vocational
rehabilitation and employment counseling) and prolonged rehabilitation
services in a specialized inpatient or residential facility need not be
a part of basic health services;
(6) Diagnostic laboratory and diagnostic and therapeutic radiologic
services in support of basic health services;
(7) Home health services provided at an enrollee's home by health
care personnel, as prescribed or directed by the responsible physician
or other authority designated by the HMO; and
(8) Preventive health services, which must be made available to
members and must include at least the following:
(i) A broad range of voluntary family planning services;
(ii) Services for infertility;
(iii) Well-child care from birth;
(iv) Periodic health evaluations for adults;
(v) Eye and ear examinations for children through age 17, to
determine the need for vision and hearing correction; and
(vi) Pediatric and adult immunizations, in accord with accepted
medical practice.
(b) In addition, an HMO may include a health service described in
Sec. 417.102 as a supplemental health service in the basic health
services that it provides or arranges for its enrollees for a basic
health services payment.
(c) To the extent that a natural disaster, war, riot, civil
insurrection, epidemic or any other emergency or similar event not
within the control of an HMO results in the facilities, personnel, or
financial resources of an HMO being unavailable to provide or arrange
for the provision of a basic or supplemental health service in
accordance with the requirements of Sec. Sec. 417.101 through 417.106
and Sec. Sec. 417.168 and 417.169, the HMO is required only to make a
good-faith effort to provide or arrange for the provision of the
service, taking into account the impact of the event. For purposes of
this paragraph, an event is not within the control of an HMO if the HMO
cannot exercise influence or dominion over its occurrence.
(d) The following are not required to be provided as basic health
services:
(1) Corrective appliances and artificial aids;
(2) Mental health services, except as required under section
1302(1)(D) of the PHS Act and paragraph (a)(4) of this section;
(3) Cosmetic surgery, unless medically necessary;
(4) Prescribed drugs and medicines incidental to outpatient care;
(5) Ambulance services, unless medically necessary;
(6) Care for military service connected disabilities for which the
enrollee is legally entitled to services and for which facilities are
reasonably available to this enrollee;
(7) Care for conditions that State or local law requires be treated
in a public facility;
(8) Dental services;
(9) Vision and hearing care except as required by sections
1302(1)(A) and 1302(1)(H)(vi) of the PHS Act and paragraphs (a)(1) and
(a)(8) of this section;
(10) Custodial or domiciliary care;
(11) Experimental medical, surgical, or other experimental health
care procedures, unless approved as a basic health service by the
policymaking body of the HMO;
(12) Personal or comfort items and private rooms, unless medically
necessary during inpatient hospitalization;
(13) Whole blood and blood plasma;
(14) Long-term physical therapy and rehabilitation;
(15) Durable medical equipment for home use (such as wheel chairs,
surgical beds, respirators, dialysis machines); and
(16) Health services that are unusual and infrequently provided and
not necessary for the protection of individual health, as approved by
CMS upon application by the HMO.
(e) An HMO may not offer to provide or arrange for the provision of
basic health services on a prepayment basis that do not include all the
basic health services set forth in paragraph (a) of
[[Page 92]]
this section or that are limited as to time and cost except in a manner
prescribed by this subpart.
[45 FR 72528, Oct. 31, 1980. Redesignated at 52 FR 36746, Sept. 30,
1987, and amended at 58 FR 38077, July 15, 1993]
Sec. 417.102 Health benefits plan: Supplemental health services.
(a) An HMO may provide to its enrollees any health service that is
not included as a basic health service under Sec. 417.101(a). These
health services may be limited as to time and cost.
(b) An HMO must determine the level and scope of supplemental health
services included with basic health services provided to its enrollees
for a basic health services payment or those services offered to its
enrollees as supplemental health services.
[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19339, May 5, 1982.
Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082,
38083, July 15, 1993]
Sec. 417.103 Providers of basic and supplemental health services.
(a)(1) The HMO must provide that the services of health
professionals that are provided as basic health services will, except as
provided in paragraph (c) of this section, be provided or arranged for
through (i) health professionals who are staff of the HMO, (ii) a
medical group or groups, (iii) an IPA or IPAs, (iv) physicians or other
health professionals under direct service contracts with the HMO for the
provision of these services, or (v) any combination of staff, medical
group or groups, IPA or IPAs, or physicians or other health
professionals under direct service contracts with the HMO.
(2) A staff or medical group model HMO may have as providers of
basic health services physicians who have also entered into written
services arrangements with an IPA or IPAs, but only if either (i) these
physicians number less than 50 percent of the physicians who have
entered into arrangements with the IPA or IPAs, or (ii) if the sharing
is 50 percent or greater, CMS approves the sharing as being consistent
with the purposes of section 1310(b) of the PHS Act.
(3) After the 4 year period beginning with the month following the
month in that an HMO becomes a qualified HMO, an entity that meets the
requirements of the definition of medical group in Sec. 417.100, except
for subdivision (3)(i) of that definition, may be considered a medical
group if CMS determines that the principal professional activity (over
50 percent individually) of the entity's members is the coordinated
practice of their profession, and if the HMO has demonstrated to the
satisfaction of CMS that the entity is committed to the delivery of
medical services on a prepaid group practice basis by either:
(i) Presenting a reasonable time-phased plan for the entity to
achieve compliance with the ``substantial responsibility'' requirement
of subdivision (3)(i) of the definition of ``medical group'' in Sec.
417.100. The HMO must update the plan annually and must demonstrate to
the satisfaction of CMS that the entity is making continuous efforts and
progress towards compliance with the requirements of the definition of
``medical group,'' or
(ii) Demonstrating that compliance by the entity with the
``substantial responsibility'' requirement is unreasonable or
impractical because (A) the HMO serves a non-metropolitan or rural area
as defined in Sec. 417.100, or (B) the entity is a multi-speciality
group that provides medical consultation upon referral on a regional or
national basis, or (C) the majority of the residents of the HMO's
service area are not eligible for employer-employee health benefits
plans and the HMO has an insufficient number of enrollees to require
utilization of at least 35 percent of the entity's services.
(b) HMOs must have effective procedures to monitor utilization and
to control cost of basic and supplemental health services and to achieve
utilization goals, which may include mechanisms such as risk sharing,
financial incentives, or other provisions agreed to by providers.
(c) Paragraph (a) of this section does not apply to the provision of
the services of a physician:
(1) Which the HMO determines are unusual or infrequently used
services; or
(2) Which, because of an emergency, it was medically necessary to
provide
[[Page 93]]
to the enrollee other than as required by paragraph (a) of this section;
or
(3) Which are provided as part of the inpatient hospital services by
employees or staff of a hospital or provided by staff of other entities
such as community mental health centers, home health agencies, visiting
nurses' associations, independent laboratories, or family planning
agencies.
(d) Supplemental health services must be provided or arranged for by
the HMO and need not be provided by providers of basic health services
under contract with the HMO.
(e) Each HMO must:
(1) Pay the provider, or reimburse its enrollees for the payment of
reasonable charges for basic health services (or supplemental health
services that the HMO agreed to provide on a prepayment basis) for which
its enrollees have contracted, which were medically necessary and
immediately required to be obtained other than through the HMO because
of an unforeseen illness, injury, or condition, as determined by the
HMO;
(2) Adopt procedures to review promptly all claims from enrollees
for reimbursement for the provision of health services described in
paragraph (e)(1) of this section, including a procedure for the
determination of the medical necessity for obtaining the services other
than through the HMO; and
(3) Provide instructions to its enrollees on procedures to be
followed to secure these health services.
(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67
Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35,
95 Stat. 572-578 (42 U.S.C. 300e-300e-17)
[45 FR 72528, Oct. 31, 1980; 45 FR 77031, Nov. 21, 1980, as amended at
47 FR 19339, May 5, 1982; 50 FR 6174, Feb. 14, 1985. Redesignated at 52
FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 38083, July 15,
1993]
Sec. 417.104 Payment for basic health services.
(a) Basic health services payment. Each HMO must provide or arrange
for the provision of basic health services for a basic health services
payment that:
(1) Is to be paid on a periodic basis without regard to the dates
these services are provided;
(2) Is fixed without regard to the frequency, extent, or kind of
basic health services actually furnished;
(3) Except as provided in paragraph (c) of this section, is fixed
under a community rating system, as described in paragraph (b) of this
section; and
(4) May be supplemented by nominal copayments which may be required
for the provision of specific basic health services. Each HMO may
establish one or more copayment options calculated on the basis of a
community rating system.
(i) An HMO may not impose copayment charges that exceed 50 percent
of the total cost of providing any single service to its enrollees, nor
in the aggregate more than 20 percent of the total cost of providing all
basic health services.
(ii) To insure that copayments are not a barrier to the utilization
of health services or enrollment in the HMO, an HMO may not impose
copayment charges on any subscriber (or enrollees covered by the
subscriber's contract with the HMO) in any calendar year, when the
copayments made by the subscriber (or enrollees) in that calendar year
total 200 percent of the total annual premium cost which that subscriber
(or enrollees) would be required to pay if he (or they) were enrolled
under an option with no copayments. This limitation applies only if the
subscriber (or enrollees) demonstrates that copayments in that amount
have been paid in that year.
(b) Community rating system. Under a community rating system, rates
of payment for health services may be determined on a per person or per
family basis, as described in paragraph (b)(1) of this section or on a
per group basis as described in paragraph (b)(2) of this section. An HMO
may fix its rates of payment under the system described in paragraph
(b)(1) or (b)(2) of this section or under both such systems, but an HMO
may use only one such system for fixing its rates of payment for any one
group.
(1) A system of fixing rates of payment for health services may
provide that the rates will be fixed on a per person or per family basis
and may vary with the number of persons in a family. Except as otherwise
authorized
[[Page 94]]
in this paragraph, these rates must be equivalent for all individuals
and for all families of similar composition. Rates of payment may be
based on either a schedule of rates charged to each subscriber group or
on a per-enrollee-per-month (or per-subscriber-per-month) revenue
requirement for the HMO. In the former event, rates may vary from group
to group if the projected total revenue from each group is substantially
equivalent to the revenue that would be derived if the schedule of rates
were uniform for all groups. In the latter event, the payments from each
group of subscribers must be calculated to yield revenues substantially
equivalent to the product of the total number of enrollees (or
subscribers) expected to be enrolled from the group and the per-
enrollee-per-month (or per-subscriber-per-month) revenue requirement for
the HMO. Under the system described in this paragraph, rates of payment
may not vary because of actual or anticipated utilization of services by
individuals associated with any specific group of subscribers. These
provisions do not preclude changes in the rates of payment that are
established for new enrollments or re-enrollments and that do not apply
to existing contracts until the renewal of these contracts.
(2) A system of fixing rates of payment for health services may
provide that the rates will be fixed for individuals and families by
groups. Except as otherwise authorized in this paragraph, such rates
must be equivalent for all individuals in the same group and for all
families of similar composition in the same group. If an HMO is to fix
rates of payment for individuals and families by groups, it must:
(i) Classify all of the enrollees of the organization into classes
based on factors that the HMO determines predict the differences in the
use of health services by the individuals or families in each class and
which have not been disapproved by CMS,
(ii) Determine its revenue requirements for providing services to
the enrollees of each class established under paragraph (b)(2)(i) of
this section, and
(iii) Fix the rates of payment for the individuals and families of a
group on the basis of a composite of the organization's revenue
requirements determined under paragraph (b)(2)(ii) of this section for
providing services to them as members of the classes established under
paragraph (b)(2)(i) of this section. CMS will review the factors used by
each HMO to establish classes under paragraph (b)(2)(i) of this section.
If CMS determines that any such factor may not reasonably be used to
predict the use of the health services by individuals and families, CMS
will disapprove the factor for that purpose.
(3)(i) Nominal differentials in rates may be established to reflect
differences in marketing costs and the different administrative costs of
collecting payments from the following categories of potential
subscribers:
(A) Individual (non-group) subscribers (including their families).
(B) Small groups of subscribers (100 subscribers or fewer).
(C) Large groups of subscribers (over 100 subscribers).
(ii) Differentials in rates may be established for subscribers
enrolled in an HMO: (A) Under a contract with a governmental authority
under section 1079 (``Contracts for Medical Care for Spouses and
Children: Plans'') or section 1086 (``Contracts for Health Benefits for
Certain Members, Former Members and their Dependents'') of title 10
(``Armed Forces''), United States Code; or (B) under any other
governmental program (other than the health benefits program authorized
by chapter 89 (``Health Insurance'') of title 5 (``Government
Organization and Employees''), United States Code; or (C) under any
health benefits program for employees of States, political subdivisions
of states, and other public entities.
(4) An HMO may establish a separate community rate for separate
regional components of the organization upon satisfactory demonstration
to CMS of the following:
(i) Each regional component is geographically distinct and separate
from any other regional component; and
(ii) Each regional component provides substantially the full range
of basic health services to its enrollees, without extensive referral
between components of the organization for these services, and without
substantial utilization by any two components of
[[Page 95]]
the same health care facilities. The separate community rate for each
regional component of the HMO must be based on the different costs of
providing health services in the respective regions.
(c) Exceptions to community rating requirement. (1) In the case of
an HMO that provided comprehensive health services on a prepaid basis
before it became a qualifed HMO, the requirement of community rating
shall not apply to the HMO during the forty-eight month period beginning
with the month following the month in which it became a qualifed HMO.
(2) The requirement of community rating does not apply to the basic
health services payment for basic health services provided an enrollee
who is a full-time student at an accredited institution of higher
education.
(d) Late payment penalty. HMOs may charge a late payment penalty on
accounts receivable that are in arrears.
(e) Review procedures for evaluating the community rating by class
system under paragraph (b)(2). \1\ An HMO may establish a community
rating system under paragraph (b)(2) of this section or revised factors
used to establish classes after it receives written approval of the
factors from CMS. CMS will give approval if it concludes that the
factors can reasonably be used to predict the use of health services by
individuals and families.
---------------------------------------------------------------------------
\1\ Further information entitled ``Guidelines for Rating by Class''
may be obtained from the Office of Prepaid Health Care, Division of
Qualification Analysis, HHS Cohen Bldg., room 4360, 330 Independence
Ave. SW., Washington, DC 20201.
---------------------------------------------------------------------------
(1) An HMO must make a written request to CMS, listing the factors
to be used in the community rating by class system under paragraph
(b)(2) of this section.
(2) CMS will notify each HMO within 30 days of receipt of the
request and application of one of the following:
(i) The application is approved;
(ii) Additional information or data are required and CMS will notify
the HMO of its decision within 30 days from the date of receipt of this
information or data; or
(iii) CMS needs additional time to review the written request and
the HMO will be notified of CMS's decision within 90 days.
(Approved by the Office of Management and Budget under control number
0915-0051)
(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67
Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35,
95 Stat. 572-578 (42 U.S.C. 300e-300e-17)
[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19339, May 5, 1982; 50
FR 6175, Feb. 14, 1985. Redesignated at 52 FR 36746, Sept. 30, 1987, as
amended at 56 FR 8853, Mar. 1, 1991; 58 FR 38082, 38083, July 15, 1993]
Sec. 417.105 Payment for supplemental health services.
(a) An HMO may require supplemental health services payments, in
addition to the basic health services payments, for the provision of
each health service included in the supplemental health services set
forth in Sec. 417.102 for which subscribers have contracted, or it may
include supplemental health services in the basic health services
provided its enrollees for a basic health services payment.
(b) Supplemental health services payments may be made in any agreed
upon manner, such as prepayment or fee-for-service. Supplemental health
services payments that are fixed on a prepayment basis, however, must be
fixed under a community rating system, unless the supplemental health
services payment is for a supplemental health service provided an
enrollee who is a full-time student at an accredited institution of
higher education. In the case of an HMO that provided comprehensive
health services on a prepaid basis before it became a qualifed HMO, the
community rating requirement shall not apply to that HMO during the
forty-eight month period beginning with the month following the month in
which it became a qualifed HMO.
(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67
Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35,
95 Stat. 572-578 (42 U.S.C. 300e-300e-17)
[45 FR 72528, Oct. 31, 1980, as amended at 50 FR 6175, Feb. 14, 1985.
Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082,
38083, July 15, 1993]
[[Page 96]]
Sec. 417.106 Quality assurance program; Availability, accessibility, and continuity of basic and supplemental health services.
(a) Quality assurance program. Each HMO or CMP must have an ongoing
quality assurance program for its health services that meets the
following conditions:
(1) Stresses health outcomes to the extent consistent with the state
of the art.
(2) Provides review by physicians and other health professionals of
the process followed in the provision of health services.
(3) Uses systematic data collection of performance and patient
results, provides interpretation of these data to its practitioners, and
institutes needed change.
(4) Includes written procedures for taking appropriate remedial
action whenever, as determined under the quality assurance program,
inappropriate or substandard services have been provided or services
that ought to have been furnished have not been provided.
(b) Availability and accessibility of health care services. Basic
health services and those supplemental health services for which
enrollees have contracted must be provided or arranged for by the HMO in
accordance with the following rules:
(1) Except as provided in paragraph (b)(2) of this section, the
services must be available to each enrollee within the HMO's service
area.
(2) Exception. If the HMO's service area is located wholly within a
nonmetropolitan area, the HMO may make available outside its service
area any basic health service that is not a primary care or emergency
care service, if the number of providers of that basic health service
who will provide the service to the HMO's enrollees is insufficient to
meet the demand. As used in this paragraph, primary care includes
general practice, family practice, general internal medicine, general
pediatrics, and general obstetrics and gynecology. An HMO that provides
the services covered by these fields through at least a general or
family practitioner, or a pediatrician and a general internist, is
considered to be providing primary care.
(3) The services must be available and accessible with reasonable
promptness to each of the HMO's enrollees as ensured through--
(i) Staffing patterns within generally accepted norms for meeting
the projected enrollment needs; and
(ii) Geographic location, hours of operation, and arrangements for
after-hours services. (Medically necessary emergency services must be
available 24 hours a day, 7 days a week.)
(c) Continuity of care. The HMO must ensure continuity or care
through arrangements that include but are not limited to the following:
(1) Use of a health professional who is primarily responsible for
coordinating the enrollee's overall health care.
(2) A system of health and medical records that accumulates
pertinent information about the enrollee's health care and makes it
available to appropriate professionals.
(3) Arrangements made directly or through the HMO's providers to
ensure that the HMO or the health professional who coordinates the
enrollee's overall health care is kept informed about the services that
the referral resources furnish to the enrollee.
(d) Confidentiality of health records. Each HMO must establish
adequate procedures to ensure the confidentiality of the health and
medical records of its enrollees.
[58 FR 38068, July 15, 1993]
Subpart C_Qualified Health Maintenance Organizations: Organization and
Operation
Source: 58 FR 38068, July 15, 1993, unless otherwise noted.
Sec. 417.120 Fiscally sound operation and assumption of financial risk.
(a) Fiscally sound operation--(1) General requirements. Each HMO
must have a fiscally sound operation, as demonstrated by the following:
(i) Total assets greater than total unsubordinated liabilities. In
evaluating assets and liabilities, loan funds awarded or guaranteed
under section
[[Page 97]]
1306 of the PHS Act are not included as liabilities.
(ii) Sufficient cash flow and adequate liquidity to meet obligations
as they become due.
(iii) A net operating surplus, or a financial plan that meets the
requirements of paragraph (a)(2) of this section.
(iv) An insolvency protection plan that meets the requirements of
Sec. 417.122(b) for protection of enrollees.
(v) A fidelity bond or bonds, procured and maintained by the HMO, in
an amount fixed by its policymaking body but not less than $100,000 per
individual, covering each officer and employee entrusted with the
handling of its funds. The bond may have reasonable deductibles, based
upon the financial strength of the HMO.
(vi) Insurance policies or other arrangements, secured and
maintained by the HMO and approved by CMS to insure the HMO against
losses arising from professional liability claims, fire, theft, fraud,
embezzlement, and other casualty risks.
(2) Financial plan requirement. (i) If an HMO has not earned a
cumulative net operating surplus during the three most recent fiscal
years, did not earn a net operating surplus during the most recent
fiscal year or does not have positive net worth, the HMO must submit a
financial plan satisfactory to CMS to achieve net operating surplus
within available fiscal resources.
(ii) This plan must include--
(A) A detailed marketing plan;
(B) Statements of revenue and expense on an accrual basis;
(C) Sources and uses of funds statements; and
(D) Balance sheets.
(b) Assumption of financial risk. Each HMO must assume full
financial risk on a prospective basis for the provision of basic health
services, except that it may obtain insurance or make other arrangements
as follows:
(1) For the cost of providing to any enrollee basic health services
with an aggregate value of more than $5,000 in any year.
(2) For the cost of basic health services obtained by its enrollees
from sources other than the HMO because medical necessity required that
they be furnished before they could be secured through the HMO.
(3) For not more than 90 percent of the amount by which its costs
for any of its fiscal years exceed 115 percent of its income for that
fiscal year.
(4) For physicians or other health professionals, health care
institutions, or any other combination of such individuals or
institutions to assume all or part of the financial risk on a
prospective basis for their furnishing of basic health services to the
HMO's enrollees.
Sec. 417.122 Protection of enrollees.
(a) Liability protection. (1) Each HMO must adopt and maintain
arrangements satisfactory to CMS to protect its enrollees from incurring
liability for payment of any fees that are the legal obligation of the
HMO. These arrangements may include any of the following:
(i) Contractual arrangements that prohibit health care providers
used by the enrollees from holding any enrollee liable for payment of
any fees that are the legal obligation of the HMO.
(ii) Insurance, acceptable to CMS.
(iii) Financial reserves, acceptable to CMS, that are held for the
HMO and restricted for use only in the event of insolvency.
(iv) Any other arrangements acceptable to CMS.
(2) The requirements of this paragraph do not apply to an HMO if CMS
determines that State law protects the HMO enrollees from liability for
payment of any fees that are the legal obligation of the HMO.
(b) Protection against loss of benefits if the HMO becomes
insolvent. The insolvency protection plan required under Sec.
417.120(a) must provide for continuation of benefits as follows:
(1) For all enrollees, for the duration of the contract period for
which payment has been made.
(2) For enrollees who are in an inpatient facility on the date of
insolvency, until they are discharged from the facility.
Sec. 417.124 Administration and management.
(a) General requirements. Each HMO must have administrative and
managerial arrangements satisfactory to CMS,
[[Page 98]]
as demonstrated by at least the following:
(1) A policymaking body that exercises oversight and control over
the HMO's policies and personnel to ensure that management actions are
in the best interest of the HMO and its enrollees.
(2) Personnel and systems sufficient for the HMO to organize, plan,
control and evaluate the financial, marketing, health services, quality
assurance program, administrative and management aspects of the HMO.
(3) At a minimum, management by an executive whose appointment and
removal are under the control of the HMO's policymaking body.
(b) Full and fair disclosure--(1) Basic rule. Each HMO must prepare
a written description of the following:
(i) Benefits (including limitations and exclusions).
(ii) Coverage (including a statement of conditions on eligibility
for benefits).
(iii) Procedures to be followed in obtaining benefits and a
description of circumstances under which benefits may be denied.
(iv) Rates.
(v) Grievance procedures.
(vi) Service area.
(vii) Participating providers.
(viii) Financial condition including at least the following most
recently audited information: Current assets, other assets, total
assets; current liabilities, long term liabilities; and net worth.
(2) Requirements for the description. (i) The description must be
written in a way that can be easily understood by the average person who
might enroll in the HMO.
(ii) The description of benefits and coverage may be in general
terms if reference is made to a detailed statement of benefits and
coverage that is available without cost to any person who enrolls in the
HMO or to whom the opportunity for enrollment is offered.
(iii) The HMO must provide the description to any enrollee or person
who is eligible to elect the HMO option and who requests the material
from the HMO or the administrator of a health benefits plan. For
purposes of this requirement, ``administrator'' (of a health benefits
plan) has the meaning it is given in the Employment Retirement Income
Security Act of 1974 (ERISA) at 29 U.S.C. 1002(16)(A).
(iv) If the HMO provides health services through individual practice
associations (IPAs), the HMO must specify the number of member
physicians by specialty, and a listing of the hospitals where HMO
enrollees will receive basic and supplemental health services.
(v) If the HMO provides health services other than through IPAs, the
HMO must specify, for each ambulatory care facility, the facility's
address, days and hours of operation, and the number of physicians by
specialty, and a listing of the hospitals where HMO enrollees will
receive basic and supplemental health services.
(c) Broadly representative enrollment. (1) Each HMO must offer
enrollment to persons who are broadly representative of the various age,
social, and income groups within its service area.
(2) If an HMO has a medically underserved population located in its
service area, not more than 75 percent of its enrollees may be from the
medically underserved population unless the area in which that
population resides is a rural area.
(d) Health status and enrollment. (1) The HMO may not, on the basis
of health status, health care needs, or age of the individual--
(i) Expel or refuse to reenroll any enrollee; or
(ii) Refuse to enroll individual members of a group.
(2) For purposes of this paragraph, a ``group'' is composed of
individuals who enroll in the HMO under a contract or other arrangement
that covers two or more subscribers. Examples of groups are employees
who enroll under a contract between their employer and the HMO, or
members of an organization that arranges coverage for its membership.
(3) Nothing in this subpart prohibits an HMO from requiring that, as
a condition for continued eligibility for enrollment, enrolled dependent
children, upon reaching a specified age, convert to individual
enrollment, consistent with paragraph (e) of this section.
[[Page 99]]
(e) Conversion of enrollment. (1) Each HMO must offer individual
enrollment to the following:
(i) Each enrollee (and his or her enrolled dependents) leaving a
group.
(ii) Each enrollee who would otherwise cease to be eligible for HMO
enrollment because of his or her age, or the death or divorce of an
enrollee.
(2) The individual enrollment offered must meet the conditions of
subpart B of this part and this subpart C.
(3) The HMO is not required to offer individual enrollment except to
the enrollees specified in this paragraph.
(4) The HMO must offer the enrollment on the same terms and
conditions that it makes available to other nongroup enrollees.
(f) [Reserved]
(g) Grievance procedures. Each HMO must have and use meaningful
procedures for hearing and resolving grievances between the HMO's
enrollees and the HMO, including the HMO staff and medical groups and
IPAs that furnish services. These procedures must ensure that:
(1) Grievances and complaints are transmitted in a timely manner to
appropriate HMO decisionmaking levels that have authority to take
corrective action; and
(2) Appropriate action is taken promptly, including a full
investigation if necessary and notification of concerned parties as to
the results of the HMO's investigation.
(h) Certification of institutional providers. Each HMO must ensure
that its affiliated institutional providers meet one of the following
conditions:
(1) In the case of hospitals, are either accredited by the Joint
Commission on Accreditation of Health Care Organizations, or certified
by Medicare.
(2) In the case of laboratories, are either CLIA-exempt, or have in
effect a valid certificate of one of the following types, issued by CMS
in accordance with section 353 of the PHS Act and part 493 of this
chapter:
(i) Registration certificate.
(ii) Certificate.
(iii) Certificate of waiver.
(iv) Certificate of accreditation.
(3) In the case of other affiliated institutional providers, are
certified for participation in Medicare and Medicaid in accordance with
part 405, 416, 418, 488, or 491 of this chapter, as appropriate.
[58 FR 38068, July 15, 1993, as amended at 59 FR 49843, Sept. 30, 1994]
Sec. 417.126 Recordkeeping and reporting requirements.
(a) General reporting and disclosure requirements. Each HMO must
have an effective procedure to develop, compile, evaluate, and report to
CMS, to its enrollees, and to the general public, at the times and in
the manner that CMS requires, and while safeguarding the confidentiality
of the doctor-patient relationship, statistics and other information
with respect to the following:
(1) The cost of its operations.
(2) The patterns of utilization of its services.
(3) The availability, accessibility, and acceptability of its
services.
(4) To the extent practical, developments in the health status of
its enrollees.
(5) Information demonstrating that the HMO has a fiscally sound
operation.
(6) Other matters that CMS may require.
(b) Significant business transactions. Each HMO must report to CMS
annually, within 120 days of the end of its fiscal year (unless for good
cause shown, CMS authorizes an extension of time), the following:
(1) A description of significant business transactions (as defined
in paragraph (c) of this section) between the HMO and a party in
interest.
(2) With respect to those transactions--
(i) A showing that the costs of the transactions listed in paragraph
(c) of this section do not exceed the costs that would be incurred if
these transactions were with someone who is not a party in interest; or
(ii) If they do exceed, a justification that the higher costs are
consistent with prudent management and fiscal soundness requirements.
(3) A combined financial statement for the HMO and a party in
interest if either of the following conditions is met:
[[Page 100]]
(i) Thirty-five percent or more of the costs of operation of the HMO
go to a party in interest.
(ii) Thirty-five percent or more of the revenue of a party in
interest is from the HMO.
(c) ``Significant business transaction'' defined. As used in
paragraph (b) of this section--
(1) Business transaction means any of the following kinds of
transactions:
(i) Sale, exchange or lease of property.
(ii) Loan of money or extension of credit.
(iii) Goods, services, or facilities furnished for a monetary
consideration, including management services, but not including--
(A) Salaries paid to employees for services performed in the normal
course of their employment; or
(B) Health services furnished to the HMO's enrollees by hospitals
and other providers, and by HMO staff, medical groups, or IPAs, or by
any combination of those entities.
(2) Significant business transaction means any business transaction
or series of transactions of the kind specified in paragraph (c)(1) of
this section that, during any fiscal year of the HMO, have a total value
that exceeds $25,000 or 5 percent of the HMO's total operating expenses,
whichever is less.
(d) Requirements for combined financial statements. (1) The combined
financial statements required by paragraph (b)(3) of this section must
display in separate columns the financial information for the HMO and
each of these parties in interest.
(2) Inter-entity transactions must be eliminated in the consolidated
column.
(3) These statements must have been examined by an independent
auditor in accordance with generally accepted accounting principles, and
must include appropriate opinions and notes.
(4) Upon written request from an HMO showing good cause, CMS may
waive the requirement that its combined financial statement include the
financial information required in this paragraph (d) with respect to a
particular entity.
(e) Reporting and disclosure under ERISA. (1) For any employees'
health benefits plan that includes an HMO in its offerings, the HMO must
furnish, upon request, the information the plan needs to fulfill its
reporting and disclosure obligations (with respect to the particular
HMO) under the Employee Retirement Income Security Act of 1974 (ERISA).
(i) The HMO must furnish the information to the employer or the
employer's designee, or to the plan administrator, as the term
``administrator'' is defined in ERISA.
(ii) Loan of money or extension of credit.
(iii) Goods, services, or facilities furnished for a monetary
consideration, including management services, but not including--
(A) Salaries paid to employees for services performed in the normal
course of their employment; or
(B) Health services furnished to the HMO's enrollees by hospitals
and other providers, and by HMO staff, medical groups, or IPAs, or by
any combination of those entities.
(2) Significant business transaction means any business transaction
or series of transactions of the kind specified in paragraph (c)(1) of
this section that, during any fiscal year of the HMO, have a total value
that exceeds $25,000 or 5 percent of the HMO's total operating expenses,
whichever is less.
(d) Requirements for combined financial statements. (1) The combined
financial statements required by paragraph (b)(3) of this section must
display in separate columns the financial information for the HMO and
each of these parties in interest.
(2) Inter-entity transactions must be eliminated in the consolidated
column.
(3) These statements must have been examined by an independent
auditor in accordance with generally accepted accounting principles, and
must include appropriate opinions and notes.
(4) Upon written request from an HMO showing good cause, CMS may
waive the requirement that its combined financial statement include the
financial information required in this paragraph (d) with respect to a
particular entity.
(e) Reporting and disclosure under ERISA. (1) For any employees'
health benefits plan that includes an HMO in its offerings, the HMO must
furnish,
[[Page 101]]
upon request, the information the plan needs to fulfill its reporting
and disclosure obligations (with respect to the particular HMO) under
the Employee Retirement Income Security Act of 1974 (ERISA).
(2) The HMO must furnish the information to the employer or the
employer's designee, or to the plan administrator, as the term
``administrator'' is defined in ERISA.
Subpart D_Application for Federal Qualification
Sec. 417.140 Scope.
This subpart sets forth--
(a) The requirements for--
(1) Entities that seek qualification as HMOs under title XIII of the
PHS Act; and
(2) HMOs that seek--
(i) Qualification for their regional components; or
(ii) Expansion of their service areas;
(b) The procedures that CMS follows to make determinations; and
(c) Other related provisions, including application fees.
[59 FR 49836, Sept. 30, 1994]
Sec. 417.142 Requirements for qualification.
(a) General rules. (1) An entity seeking qualification as an HMO
must meet the requirements and provide the assurances specified in
paragraphs (b) through (f) of this section, as appropriate.
(2) CMS determines whether the entity is an HMO on the basis of the
entity's application and any additional information and investigation
(including site visits) that CMS may require.
(3) CMS may determine that an entity is any of the following:
(i) An operational qualified HMO.
(ii) A preoperational qualified HMO.
(iii) A transitional qualified HMO.
(b) Operational qualified HMO. CMS determines that an entity is an
operational qualified HMO if--
(1) CMS finds that the entity meets the requirements of subparts B
and C of this part.
(2) The entity, within 30 days of CMS's determination, provides
written assurances, satisfactory to CMS, that it--
(i) Provides and will provide basic health services (and any
supplemental health services included in any contract) to its enrollees;
(ii) Provides and will provide these services in the manner
prescribed in sections 1301(b) and 1301(c) of the PHS Act and subpart B
of this part;
(iii) Is organized and operated and will continue to be organized
and operated in the manner prescribed in section 1301(c) of the PHS Act
and subpart C of this part;
(iv) Under arrangements that safeguard the confidentiality of
patient information and records, will provide access to CMS and the
Comptroller General or any of their duly authorized representatives for
the purpose of audit, examination or evaluation to any books, documents,
papers, and records of the entity relating to its operation as an HMO,
and to any facilities that it operates; and
(v) Will continue to comply with any other assurances that it has
given to CMS.
(c) Preoperational qualified HMO. (1) CMS may determine that an
entity is a preoperational qualified HMO if it provides, within 30 days
of CMS's determination, satisfactory assurances that it will become
operational within 60 days following that determination and will, when
it becomes operational, meet the requirements of subparts B and C of
this part.
(2) Within 30 days after receiving notice that the entity has begun
operation, CMS determines whether it is an operational qualified HMO. In
the absence of this determination, the entity is not an operational
qualified HMO even though it becomes operational.
(d) Transitional qualified HMO: General rules--(1) Basic
requirements. CMS may determine that an entity is a transitional
qualified HMO if the entity--
(i) Meets the requirements of paragraph (d)(2) through (d)(4) of
this section; and
(ii) Provides the assurances specified in paragraphs (d)(5) through
(d)(7) of this section within 30 days of CMS's determination.
[[Page 102]]
(2) Organization and operation. The entity is organized and operated
in accordance with subpart C of this part, except that it need not--
(i) Assume full financial risk for the provision of basic health
services as required by Sec. 417.120(b); or
(ii) Comply with the limitations that are imposed on insurance by
Sec. 417.120(b)(1).
(3) Range of services. The entity is currently providing the
following services on a prepaid basis:
(i) Physician services.
(ii) Outpatient services and inpatient hospital services. (The
entity need not provide or pay for hospital inpatient or outpatient
services that it can show are being provided directly, through
insurance, or under arrangements, by other entities.)
(iii) Medically necessary emergency services.
(iv) Diagnostic laboratory services and diagnostic and therapeutic
radiologic services.
These services must meet the requirement of Sec. 417.101, but may be
limited in time and cost without regard to the constraints imposed by
Sec. 417.101(a).
(4) Payment for services--(i) General rule. The entity pays for
basic health services in accordance with Sec. 417.104, except that it
need not comply with the copayments limitations imposed by Sec.
417.104(a)(4).
(ii) Determination of payment rates. In determining payment rates,
the entity need not comply with the community rating requirements of
Sec. Sec. 417.104(b) and 417.105(b).
(5) Contracts in effect on the date of CMS's determination. The
entity gives assurances that it will meet the following conditions with
respect to its group and individual contracts that are in effect on the
date of CMS's determination, and which are renewed or renegotiated
during the period approved by CMS under paragraph (d)(6) of this
section:
(i) Continue to provide services in accordance with paragraph (d)(3)
of this section.
(ii) Continue to be organized and operated and to pay for basic
health services in accordance with paragraphs (d)(2) and (d)(4) of this
section, respectively.
(6) Time-phased plan. The entity gives assurances as follows:
(i) It will implement a time-phased plan acceptable to CMS that--
(A) May not extend for more than 3 years from the date of CMS's
determination; and
(B) Specifies definite steps for meeting, at the time of renewal of
each group or individual contract, all the requirements of subparts B
and C of this part.
(ii) Upon completion of this time-phased plan, it will--
(A) Provide basic and supplemental services to all of its enrollees;
and
(B) Be organized and operated, and provide services, in accordance
with subparts B and C of this part.
(7) Contracts entered into after the date of CMS's determination.
The entity gives assurances that, with respect to any group or
individual contract entered into after the date of CMS's determination,
it will--
(i) Be organized and operated in accordance with subpart C of this
part; and
(ii) Provide basic health services and any supplemental health
services included in the contract, in accordance with subpart B of this
part.
(e) Failure to sign assurances timely. If CMS determines that an
entity meets the requirements for qualification and the entity fails to
sign its assurances within 30 days following the date of the
determination, CMS gives the entity written notice that its application
is considered withdrawn and that it is not a qualified HMO.
(f) Qualification of regional components. An HMO that has more than
one regional component is considered qualified for those regional
components for which assurances have been signed in accordance with this
section.
(g) Special rules: Enrollees entitled to Medicare or Medicaid. For
an HMO that accepts enrollees entitled to Medicare or Medicaid, the
following rules apply:
(1) The requirements of titles XVIII and XIX of the Act, as
appropriate, take precedence over conflicting requirements of sections
1301(b) and 1301(c) of the PHS Act.
[[Page 103]]
(2) The HMO must, with respect to its enrollees entitled to Medicare
or Medicaid, comply with the applicable requirement of title XVIII or
XIX, including those that pertain to--
(i) Deductibles and coinsurance;
(ii) Enrollment mix and enrollment practices;
(iii) State plan rules on copayment options; and
(iv) Grievance procedures.
(3) An HMO that complies with paragraph (g)(2) of this section may
obtain and retain Federal qualification if, for its other enrollees, the
HMO meets the requirements of sections 1301(b) and 1301(c) of the PHS
Act and implementing regulations in this subpart D and in subparts B and
C of this part.
(h) Special rules: Enrollees under the Federal employee health
benefits program (FEHBP). An HMO that accepts enrollees under the FEHBP
(Chapter 89 of title 5 of the U.S.C.) may obtain and retain Federal
qualification if, for its other enrollees, it complies with the
requirements of section 1301(b) and 1301(c) of the PHS Act and
implementing regulations in this subpart D and subparts B and C of this
part.
[59 FR 49836, Sept. 30, 1994]
Sec. 417.143 Application requirements.
(a) General requirements. This section sets forth application
requirements for entities that seek qualification as HMOs; HMOs that
seek expansion of their service areas; and HMOs that seek qualification
of their regional components as HMOs.
(b) Completion of an application form. (1) In order to receive a
determination concerning whether an entity is a qualified HMO, an
individual authorized to act for the entity (the applicant) must
complete an application form provided by CMS.
(2) The authorized individual must describe thoroughly how the
entity meets, or will meet, the requirements for qualified HMOs
described in the PHS Act and in subparts B and C of this part, this
subpart D, and 417.168 and 417.169 of subpart F.
(c) Collection of an application fee. In accordance with the
requirements of 31 U.S.C. 9701, Fees and charges for Government services
and things of value, CMS determines the amount of the application fee
that must be submitted with each type of application.
(1) The fee is reasonably related to the Federal government's cost
of qualifying an entity and may vary based on the type of application.
(2) Each type of application has one set fee rather than a charge
based on the specific cost of each determination. (For example, each
Federally qualified HMO applicant seeking Federal qualification of one
of its regional components as an HMO is charged the same amount, unless
the amount of the fee has been changed under paragraph (f) of this
section.)
(d) Application fee amounts. The application fee amounts for
applications completed on or after July 13, 1987 are as follows:
(1) $18,400 for an entity seeking qualification as an HMO or
qualification of a regional component of an HMO.
If, in the case of an HMO seeking qualification of a regional component,
CMS determines that there is no need for a site visit, $8,000 will be
returned to the applicant.
(2) $6,900 for an HMO seeking expansion of its service area.
(3) $3,100 for a CMP seeking qualification as an HMO.
(e) Refund of an application fee. CMS refunds an application fee
only if the entity withdraws its application within 10 working days
after receipt by CMS. Application fees are not returned in any other
circumstance, even if qualification or certification is denied.
(f) Procedure for changing the amount of an application fee. If CMS
determines that a change in the amount of a fee is appropriate, CMS
issues a notice of proposed rulemaking in the Federal Register to
announce the proposed new amount.
(g) New application after denial. An entity may not submit another
application under this subpart for the same type of determination for
four full months after the date of the notice in which CMS denied the
application.
(h) Disclosure of application information under the Freedom of
Information Act. An applicant submitting material that he or she
believes is protected from disclosure under 5 U.S.C. 552, the Freedom of
Information Act, or because of exceptions provided in 45 CFR
[[Page 104]]
part 5, the Department's regulations providing exceptions to disclosure,
should label the material ``privileged'' and include an explanation of
the applicability of an exception described in 45 CFR part 5.
[52 FR 22321, June 11, 1987. Redesignated at 52 FR 36746, Sept. 30,
1987, as amended at 58 FR 38077, July 15, 1993]
Sec. 417.144 Evaluation and determination procedures.
(a) Basis for evaluation and determination. (1) CMS evaluates an
application for Federal qualification on the basis of information
contained in the application itself and any additional information that
CMS obtains through on-site visits, public hearings, and any other
appropriate procedures.
(2) If the application is incomplete, CMS notifies the entity and
allows 60 days from the date of the notice for the entity to furnish the
missing information.
(3) After evaluating all relevant information, CMS determines
whether the entity meets the applicable requirements of Sec. Sec.
417.142 and 417.143.
(b) Notice of determination. CMS notifies each entity that applies
for qualification under this subpart of its determination and the basis
for the determination. The determination may be granting of
qualification, intent to deny, or denial.
(c) Intent to deny. (1) If CMS finds that the entity does not appear
to meet the requirements for qualification and appears to be able to
meet those requirements within 60 days, CMS gives the entity notice of
intent to deny qualification and a summary of the basis for this
preliminary finding.
(2) Within 60 days from the date of the notice, the entity may
respond in writing to the issues or other matters that were the basis
for CMS's preliminary finding, and may revise its application to remedy
any defects identified by CMS.
(d) Denial and reconsideration of denial. (1) If CMS denies an
application for qualification under this subpart, CMS gives the entity
written notice of the denial and an opportunity to request
reconsideration of that determination.
(2) A request for reconsideration must--
(i) Be submitted in writing, within 60 days following the date of
the notice of denial;
(ii) Be addressed to the CMS officer or employee who denied the
application; and
(iii) Set forth the grounds upon which the entity requests
reconsideration, specifying the material issues of fact and of law upon
which the entity relies.
(3) CMS bases its reconsideration upon the record compiled during
the qualification review proceedings, materials submitted in support of
the request for reconsideration, and other relevant materials available
to CMS.
(4) CMS gives the entity written notice of the reconsidered
determination and the basis for the determination.
(e) Information on qualified HMOs--(1) Federal Register notices. In
quarterly Federal Register notices, CMS gives the names, addresses, and
service areas of newly qualified HMOs and describes the expanded service
areas of other qualified HMOs.
(2) Listings. A cumulative list of qualified HMOs is available from
the following office, which is open from 8:30 a.m. to 5 p.m., Monday
through Friday: Office of Managed Care, room 4360, Cohen Building, 400
Independence Avenue SW., Washington, DC 20201.
[59 FR 49837, Sept. 30, 1994]
Subpart E_Inclusion of Qualified Health Maintenance Organizations in
Employee Health Benefits Plans
Source: 45 FR 72517, Oct. 31, 1980, unless otherwise noted.
Redesignated at 52 FR 36746, Sept. 30, 1987.
Sec. 417.150 Definitions.
As used in this subpart, unless the context indicates otherwise--
Agreement means a collective bargaining agreement.
Bargaining representative means an individual or entity designated
or selected, under any applicable Federal, State, or local law, or
public entity collective bargaining agreement, to
[[Page 105]]
represent employees in collective bargaining, or any other employee
representative designated or selected under any law.
Carrier means a voluntary association, corporation, partnership, or
other organization that is engaged in providing, paying for, or
reimbursing all or part of the cost of health benefits under group
insurance policies or contracts, medical or hospital service agreements,
enrollment or subscription contracts, or similar group arrangements, in
consideration of premiums or other periodic charges payable to the
carrier.
Collective bargaining agreement means an agreement entered into
between an employing entity and the bargaining representative of its
employees.
Contract means an employer-employee or public entity-employee
contract, or a contract for health benefits.
Designee means any person or entity authorized to act on behalf of
an employing entity or a group of employing entities to offer the option
of enrollment in a qualified health maintenance organization to their
eligible employees.
Eligible employee means an employee who meets the employer's
requirements for participation in the health benefits plan.
Employee means any individual employed by an employer or public
entity on a full-time or part-time basis.
Employer has the meaning given that term in section 3(d) of the Fair
Labor Standards Act of 1938, except that it--
(1) Includes non-appropriated fund instrumentalities of the United
States Government; and
(2) Excludes the following:
(i) The governments of the United States, the District of Columbia
and the territories and possessions of the United States, the 50 States
and their political subdivisions, and any agencies or instrumentalities
of any of the foregoing, including the United States Postal Service and
Postal Rate Commission.
(ii) Any church, or convention or association of churches, and any
organization operated, supervised, or controlled by a church, or
convention or association of churches that meets the following
conditions:
(A) Is an organization that is described in section 501(c)(3) of the
Internal Revenue Code of 1954.
(B) Does not discriminate, in the employment, compensation,
promotion or termination of employment of any personnel, or in the
granting of staff and other privileges to physicians or other health
personnel, on the grounds that the individuals obtain health care
through HMOs, or participate in furnishing health care through HMOs.
Employing entity means an employer or public entity.
Employing entity-employee contract means a legally enforceable
agreement (other than a collective bargaining agreement) between an
employing entity and its employees for the provision of, or payment for,
health benefits for its employees, or for its employees and their
eligible dependents.
Group enrollment period means the period of at least 10 working days
each calendar year during which each eligible employee is given the
opportunity to select among the alternatives included in a health
benefits plan.
Health benefits means health benefits and services.
Health benefits contract means a contract or other agreement between
an employing entity or a designee and a carrier for the provision of, or
payment for, health benefits to eligible employees or to eligible
employees and their eligible dependents.
Health benefits plan means any arrangement, to provide or pay for
health services, that is offered to eligible employees, or to eligible
employees and their eligible dependents, by or on behalf of an employing
entity.
Public entity means the 50 states, Puerto Rico, Guam, the Virgin
Islands, the Northern Mariana Islands and American Samoa and their
political subdivisions, the District of Columbia, and any agency or
instrumentality of the foregoing, and political subdivisions include
counties, parishes, townships, cities, municipalities, towns, villages,
and incorporated villages.
Qualified HMO means an HMO that has in effect a determination, made
under subpart D of this part, that the HMO is an operational,
preoperational, or transitional qualified HMO.
[[Page 106]]
To offer a health benefits plan means to make participation in a
health benefits plan available to eligible employees, or to eligible
employees and their eligible dependents regardless of whether the
employing entity makes a financial contribution to the plan on behalf of
these employees, directly or indirectly, for example, through payments
on any basis into a health and welfare trust fund.
[45 FR 72517, Oct. 31, 1980, as amended at 47 FR 19341, May 5, 1982.
Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38077,
July 15, 1993; 59 FR 49837, 49843, Sept. 30, 1994]
Sec. 417.151 Applicability.
(a) Basic rule. Effective October 24, 1995, \1\ this subpart applies
to any employing entity that offers a health benefits plan to its
employees, meets the conditions specified in paragraphs (b) through (e)
of this section, and elects to include one or more qualified HMOs in the
health plan alternatives it offers its employees.
---------------------------------------------------------------------------
\1\ Before October 24, 1995, an employing entity that met the
conditions specified in Sec. 417.151 was required to include one or
more qualified HMOs, if it received from at least one qualified HMO a
written request for inclusion and that request met the timing, content,
and procedural requirements specified in Sec. 417.152.
---------------------------------------------------------------------------
(b) Number of employees. During any calendar quarter of the
preceding calendar year, the employer or public entity employed an
average of not less than 25 employees.
(c) Minimum wage. During any calendar quarter of the preceding
calendar year, the employer was required to pay the minimum wage
specified in section 6 of the Fair Labor Standards Act of 1938, or would
have been required to pay that wage but for section 13(a) of that Act.
(d) Federal assistance under section 317 of the PHS Act. The public
entity has a pending application for, or is receiving, assistance under
section 317 of the PHS Act.
(e) Employees in HMO's service area. At least 25 of the employing
entity's employees reside within the HMO's service area.
[59 FR 49838, Sept. 30, 1994, as amended at 61 FR 27287, May 31, 1996]
Sec. 417.153 Offer of HMO alternative.
(a) Basic rule. An employing entity that is subject to this subpart
and that elects to include one or more qualified HMOs must offer the HMO
alternative in accordance with this section.
(b) Employees to whom the HMO option must be offered. Each employing
entity must offer the option of enrollment in a qualified HMO to each
eligible employee and his or her eligible dependents who reside in the
HMO's service area.
(c) Manner of offering the HMO option. (1) For employees who are
represented by a bargaining representative, the option of enrollment in
a qualified HMO--
(i) Must first be presented to the bargaining representative; and
(ii) If the representative accepts the option, must then be offered
to each represented employee.
(2) For employees not represented by a bargaining representative,
the option must be offered directly to those employees.
[59 FR 49839, Sept. 30, 1994, as amended at 61 FR 27287, May 31, 1996]
Sec. 417.155 How the HMO option must be included in the health benefits plan.
(a) HMO access to employees--(1) Purpose and timing--(i) Purpose.
The employing entity must provide each HMO included in its health
benefits plan fair and reasonable access to all employees specified in
Sec. 417.153(b), so that the HMO can explain its program in accordance
with Sec. 417.124(b).
(ii) Timing. The employing entity must provide access beginning at
least 30 days before, and continuing during, the group enrollment
period.
(2) Nature of access. (i) Access must include, at a minimum,
opportunity to distribute educational literature, brochures,
announcements of meetings, and other relevant printed materials that
meet the requirements of Sec. 417.124(b).
(ii) Access may not be more restrictive or less favorable than the
access the employing entity provides to other
[[Page 107]]
offerors of options included in the health benefits plan, whether or not
those offerors elect to avail themselves of that access.
(b) Review of HMO offering materials. (1) The HMO must give the
employing entity or designee opportunity to review, revise, and approve
HMO educational and offering materials before distribution.
(2) Revisions must be limited to correcting factual errors and
misleading or ambiguous statements, unless--
(i) The HMO and the employing entity agree otherwise; or
(ii) Other revisions are required by law.
(3) The employing entity or designee must complete revision of the
materials promptly so as not to delay or otherwise interfere with their
use during the group enrollment period.
(c) Group enrollment period; prohibition of restrictions; effective
date of HMO coverage--(1) Prohibition of restrictions. If an employing
entity or designee includes the option of enrollment in a qualified HMO
in the health benefits plan offered to its eligible employees, it must
provide a group enrollment period before the effective date of HMO
coverage. The employing entity may not impose waiting periods as a
condition of enrollment in the HMO or of transfer from HMO to non-HMO
coverage, or exclusions, or limitations based on health status.
(2) Effective date of coverage. Unless otherwise agreed to by the
employing entity, or designee, and the HMO, coverage under the HMO
contract for employees selecting the HMO option begins on the day the
non-HMO contract expires or is renewed without lapse.
(3) Coordination of benefits. Nothing in this subpart precludes the
uniform application of coordination of benefits agreements between the
HMOs and the other carriers that are included in the health benefits
plan.
(d) Continued eligibility for ``free-standing'' health benefits--(1)
Basic requirement. At the request of a qualified HMO, the employing
entity or its designee must provide that employees selecting the option
of HMO membership will not, because of this selection, lose their
eligibility for free-standing dental, optical, or prescription drug
benefits for which they were previously eligible or would be eligible if
selecting a non-HMO option and that are not included in the services
provided by the HMO to its enrollees as part of the HMO prepaid benefit
package.
(2) ``Free-standing'' defined. For purposes of this paragraph, the
term ``free-standing'' refers to a benefit that--
(i) Is not integrated or incorporated into a basic health benefits
package or major medical plan, and
(ii) Is--
(A) Offered by a carrier other than the one offering the basic
health benefits package or major medical plan; or
(B) Subject to a premium separate from the premium for the basic
health benefits package or major medical plan.
(3) Examples of the employing entity's obligation with respect to
the continued eligibility. (i) The health benefits plan includes a free-
standing dental benefit. The HMO does not offer any dental coverage as
part of its health services provided to members on a prepaid basis. The
employing entity must provide that employees who select the HMO option
continue to be eligible for dental coverage. (If the dental coverage is
not optional for employees selecting the non-HMO option, nothing in this
regulation requires that the coverage be made optional for employees
selecting the HMO option. Conversely, if this coverage is optional for
employees selecting the non-HMO option, nothing in this regulation
requires that the coverage be mandatory for employees selecting the non-
HMO option.) -
(ii) The non-HMO option provides free-standing coverage for optical
services (such as refraction and the provision of eyeglasses), and the
HMO does not. The employing entity must provide that employees who
select the HMO option continue to be eligible for optical coverage.
(iii) The non-HMO option includes dental coverage in its major
medical package, with a common deductible applied to dental as well as
non-dental benefits. The HMO provides no dental coverage as part of its
pre-paid health services. Because the dental coverage is not free-
standing, the employing entity is not required to provide that employees
who select the HMO option
[[Page 108]]
continue to be eligible for dental coverage, but is free to do so.
(e) Opportunity to select among coverage options: Requirement for
affirmative written selection--(1) Opportunity other than during a group
enrollment period. The employing entity or designee must provide
opportunity (in addition to the group enrollment period) for selection
among coverage options, by eligible employees who meet any of the
following conditions:
(i) Are new employees.
(ii) Have been transferred or have changed their place of residence,
resulting in--
(A) Eligibility for enrollment in a qualified HMO for which they
were not previously eligible by place of residence; or
(B) Residence outside the service area of a qualified HMO in which
they were previously enrolled.
(iii) Are covered by any coverage option that ceases operation.
(2) Prohibition of restrictions. When the employees specified in
paragraph (e)(1) of this section are eligible to participate in the
health benefits plan, the employing entity or designee must make
available, without waiting periods or exclusions based on health status
as a condition, the opportunity to enroll in an HMO, or transfer from
HMO coverage to non-HMO coverage.
(3) Affirmative written selection. The employing entity or designee
must require that the eligible employee make an affirmative written
selection in any of the following circumstances:
(i) Enrollment in a particular qualified HMO is offered for the
first time.
(ii) The eligible employee elects to change from one option to
another.
(iii) The eligible employee is one of those specified in paragraph
(e)(1) of this section.
(f) Determination of copayment levels and supplemental health
services. The selection of a copayment level and of supplemental health
services to be contracted for must be made as follows:
(1) For employees represented by a collective bargaining
representative, the selection of copayment levels and supplemental
health services is subject to the collective bargaining process.
(2) For employees not represented by a bargaining representative,
the selection of copayment levels and supplemental health services is
subject to the same decisionmaking process used by the employing entity
with respect to the non-HMO option in its health benefits plan.
(3) In all cases, the HMO has the right to include, with the basic
benefits package it provides to its enrollees for a basic health
services payment, on a non-negotiable basis, those supplemental health
services that meet the following conditions:
(i) Are required to be offered under State law.
(ii) Are included uniformly by the HMO in its prepaid benefit
package.
(iii) Are available to employees who select the non-HMO option but
not available to those who select the HMO option.
[59 FR 49840, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]
Sec. 417.156 When the HMO must be offered to employees.
(a) General rules. (1) The employing entity or designee must offer
eligible employees the option of enrollment in a qualified HMO at the
earliest date permitted under the terms of existing agreements or
contracts.
(2) If the HMO's request for inclusion in a health benefits plan is
received at a time when existing contracts or agreements do not provide
for inclusion, the employing entity must include the HMO option in the
health benefits plan at the time that new agreements or contracts are
offered or negotiated.
(b) Specific requirements. Unless mutually agreed otherwise, the
following rules apply:
(1) Collective bargaining agreement. The employing entity or
designee must raise the HMO's request during the collective bargaining
process--
(i) When a new agreement is negotiated;
(ii) At the time prescribed, in an agreement with a fixed term of
more than 1 year, for discussion of change in health benefits; or
(iii) In accordance with a specific process for review of HMO
offers.
(2) Contracts. For employees not covered by a collective bargaining
agreement, the employing entity or designee
[[Page 109]]
must include the HMO option in any health benefits plan offered to
eligible employees when the existing contract is renewed or when a new
health benefits contract or other arrangement is negotiated.
(i) If a contract has no fixed term or has a term in excess of 1
year, the contract must be treated as renewable on its earliest
anniversary date.
(ii) If the employing entity or designee is self-insured, the budget
year must be treated as the term of the existing contract.
(3) Multiple arrangements. In the case of a health benefits plan
that includes multiple contracts or other arrangements with varying
expiration or renewal dates, the employing entity must include the HMO
option, in accordance with paragraphs (b)(1) and (b)(2) of this
section,--
(i) At the time each contract or arrangement is renewed or reissued;
or
(ii) The benefits provided under the contract or arrangement are
offered to employees.
[59 FR 49841, Sept. 30, 1994]
Sec. 417.157 Contributions for the HMO alternative.
(a) General principles--(1) Nondiscrimination. The employer
contribution to an HMO must be in an amount that does not discriminate
financially against an employee who enrolls in an HMO. A contribution
does not discriminate financially if the method of determining the
contribution is reasonable and is designed to ensure that employees have
a fair choice among health benefits plan alternatives.
(2) Effect of agreements or contracts. The employing entity or
designee is not required to pay more for health benefits as a result of
offering the HMO alternative than it would otherwise be required to pay
under a collective bargaining agreement or contract that provides for
health benefits and is in effect at the time the HMO alternative is
included.
(3) Examples of acceptable employer contributions. The following are
methods that are considered nondiscriminatory:
(i) The employer contribution to the HMO is the same, per employee,
as the contribution to non-HMO alternatives.
(ii) The employer contribution reflects the composition of the HMO's
enrollment in terms of enrollee attributes that can reasonably be used
to predict utilization, experience, costs, or risk. For each enrollee in
a given class established on the basis of those attributes, the employer
contributes an equal amount, regardless of the health benefits plan
chosen by the employee.
(iii) The employer contribution is a fixed percentage of the premium
for each of the alternatives offered.
(iv) The employer contribution is determined under a mutually
acceptable arrangement negotiated by the HMO and the employer. In
negotiating the arrangement, the employer may not insist on terms that
would cause the HMO to violate any of the requirements of this part.
(4) Adjustment of employer contribution. An employer contribution
determined by an acceptable method may in some cases be adjusted if it
would result in a nominal payment or no payment at all by HMO enrollees
(because the HMO premium is lower than the premiums for the other
alternatives offered). If, for example the employer has a policy of
requiring all employees to contribute to their health benefits plan, the
employer may require HMO enrollees who would otherwise pay little or
nothing at all, to make a payment that does not exceed 50 percent of the
employee contribution to the principal non-HMO alternative. The
principal non-HMO alternative is the one that covers the largest number
of enrollees from the particular employer.
(b) Administrative expenses. (1) In determining the amount of its
contribution to the HMO, the employing entity or designee may not
consider administrative expenses incurred in connection with offering
any alternative in the health benefits plan.
(2) However, if the employing entity or designee has special
requirements for other than standard solicitation brochures and
enrollment literature, it must, in the case of the HMO alternative,
determine and distribute any administrative costs attributable to those
requirements in a manner consistent with its method of determining
[[Page 110]]
and distributing those costs for the non-HMO alternatives.
(c) Exclusion for contribution for certain benefits. In determining
the amount of the employing entity's contribution or the designee's cost
for the HMO alternative, the employing entity or designee may exclude
those portions of the contribution allocable to benefits (such as life
insurance or insurance for supplemental health benefits)--
(1) For which eligible employees and their eligible dependents are
covered notwithstanding selection of the HMO alternative; and
(2) That are not offered on a prepayment basis by the HMO to the
employing entity's employees.
(d) Contributions determined by agreements or contracts or by law.
If the specific amount of the employing entity's contribution for health
benefits is fixed by an agreement or contract, or by law, that amount
constitutes the employing entity's obligation for contribution toward
the HMO premiums.
(e) Allocation of portion of a contribution determined by an
agreement. In some cases, the employing entity's contribution for health
benefits is determined by an agreement that also provides for benefits
other than health benefits. In that case, the employing entity must
determine, or instruct its designee to determine, what portion of its
contribution is applicable to health benefits.
(f) Retention and availability of data. Each employing entity or
designee must retain the following data for three years and make it
available to CMS upon request:
(1) The data used to compute the level of contribution for each of
the plans offered to employees.
(2) Related data about the employees who are eligible to enroll in a
plan.
(3) A description of the methodology for computation.
(g) CMS review of data. (1) CMS may request and review the data
specified in paragraph (f) of this section on its own initiative or in
response to requests from HMOs or employees.
(2) The purpose of CMS's review is to determine whether the
methodology and the level of contribution comply with the requirements
of this subpart.
(3) HMOs and employees that request CMS to review must set forth
reasonable grounds for making the request.
[61 FR 27287, May 31, 1996]
Sec. 417.158 Payroll deductions.
Each employing entity that provides payroll deductions as a means of
paying employees' contributions for health benefits or provides a health
benefits plan that does not require an employee contribution must, with
the consent of an employee who selects the HMO option, arrange for the
employee's contribution, if any, to be paid through payroll deductions.
[59 FR 49841, Sept. 30, 1994]
Sec. 417.159 Relationship of section 1310 of the Public Health Service Act to the National Labor Relations Act and the Railway Labor Act.
The decision of an employing entity subject to this subpart to
include the HMO alternative in any health benefits plan offered to its
eligible employees must be carried out consistently with the obligations
imposed on that employing entity under the National Labor Relations Act,
the Railway Labor Act, and other laws of similar effect.
[59 FR 49841, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]
Subpart F_Continued Regulation of Federally Qualified Health Maintenance
Organizations
Source: 43 FR 32255, July 25, 1978, unless otherwise noted.
Redesignated at 52 FR 36746, Sept. 30, 1987.
Sec. 417.160 Applicability.
This subpart applies to any entity that has been determined to be a
qualified HMO under subpart D of this part.
[59 FR 49841, Sept. 30, 1994]
Sec. 417.161 Compliance with assurances.
Any entity subject to this subpart must comply with the assurances
that it provided to CMS, unless compliance is waived under Sec.
417.166.
[58 FR 38071, July 15, 1993]
[[Page 111]]
Sec. 417.162 Reporting requirements.
Entities subject to this subpart must submit:
(a) The reports that may be required by CMS under Sec. 417.126, and
(b) Any additional reports CMS may reasonably require.
[58 FR 38071, July 15, 1993]
Sec. 417.163 Enforcement procedures.
(a) Complaints. Any person, group, association, corporation, or
other entity may file with CMS a written complaint with respect to an
HMO's compliance with assurances it gave under subpart D of this part. A
complaint must--
(1) State the grounds and underlying facts of the complaint;
(2) Give the names of all persons involved; and
(3) Assure that all appropriate grievance and appeals procedures
established by the HMO and available to the complainant have been
exhausted.
(b) Investigations. (1) CMS may initiate investigations when, based
on a report, a complaint, or any other information, CMS has reason to
believe that a Federally qualified HMO is not in compliance with any of
the assurances it gave under subpart D of this part.
(2) When CMS initiates an investigation, it gives the HMO written
notice that includes a full statement of the pertinent facts and of the
matters being investigated and indicates that the HMO may submit, within
30 days of the date of the notice, a written report concerning these
matters.
(3) CMS obtains any information it considers necessary to resolve
issues related to the assurances, and may use site visits, public
hearings, or any other procedures that CMS considers appropriate in
seeking this information.
(c) Determination and notice by CMS--(1) Determination. (i) On the
basis of the investigation, CMS determines whether the HMO has failed to
comply with any of the assurances it gave under subpart D of this part.
(ii) CMS publishes in the Federal Register a notice of each
determination of non-compliance.
(2) Notice of determination: Corrective action. (i) CMS gives the
HMO written notice of the determination.
(ii) The notice specifies the manner in which the HMO has not
complied with its assurances and directs the HMO to initiate the
corrective action that CMS considers necessary to bring the HMO into
compliance.
(iii) The HMO must initiate this corrective action within 30 days of
the date of the notice from CMS, or within any longer period that CMS
determines to be reasonable and specifies in the notice. The HMO must
carry out the corrective action within the time period specified by CMS
in the notice.
(iv) The notice may provide the HMO an opportunity to submit, for
CMS's approval, proposed methods for achieving compliance.
(d) Remedy: Revocation of qualification. If CMS determines that a
qualified HMO has failed to initiate or to carry out corrective action
in accordance with paragraph (c)(2) of this section--(1) CMS revokes the
HMO's qualification and notifies the HMO of this action.
(2) In the notice, CMS provides the HMO with an opportunity for
reconsideration of the revocation, including, at the HMO's election, a
fair hearing.
(3) The revocation of qualification is effective on the tenth
calendar day after the day of the notice unless CMS receives a request
for reconsideration by that date.
(4) If after reconsideration CMS again determines to revoke the
HMO's qualification, this revocation is effective on the tenth calendar
day after the date of the notice of reconsidered determination.
(5) CMS publishes in the Federal Register each determination it
makes under this paragraph (d).
(6) A revocation under this paragraph (d) has the effect described
in Sec. 417.164.
(e) Notice by the HMO. Within 15 days after the date CMS issues a
notice of revocation, the HMO must prepare a notice that explains, in
readily understandable language, the reasons for the determination that
it is not a qualified HMO, and send the notice to the following:
(1) The HMO's enrollees.
(2) Each employer or public entity that has offered enrollment in
the HMO in accordance with subpart E of this part.
[[Page 112]]
(3) Each lawfully recognized collective bargaining representative or
other representative of the employees of the employer or public entity.
(f) Reimbursement of enrollees for services improperly denied, or
for charges improperly imposed. (1) If CMS determines, under paragraph
(c)(1) of this section, that an HMO is out of compliance, CMS may
require the HMO to reimburse its enrollees for the following--
(i) Expenses for basic or supplemental health services that the
enrollee obtained from other sources because the HMO failed to provide
or arrange for them in accordance with its assurances.
(ii) Any amounts the HMO charged the enrollee that are inconsistent
with its assurances. (Rules applicable to charges for all enrollees are
set forth in Sec. Sec. 417.104 and 417.105. The additional rules
applicable to Medicare enrollees are in Sec. 415.454.)
(2) This paragraph applies regardless of when the HMO failed to
comply with the appropriate assurances.
(g) Remedy: Civil suit--(1) Applicability. This paragraph applies to
any HMO or other entity to which a grant, loan, or loan guarantee was
awarded, as set forth in subpart V of this part, on the basis of its
assurances regarding the furnishing of basic and supplemental services
or its operation and organization, as the case may be.
(2) Basis for action. If CMS determines that the HMO or other entity
has failed to initiate or refuses to carry out corrective action in
accordance with paragraph (c)(2) of this section, CMS may bring civil
action in the U.S. district court for the district in which the HMO or
other entity is located, to enforce compliance with the assurances it
gave in applying for the grant, loan, or loan guarantee.
[59 FR 49841, Sept. 30, 1994]
Sec. 417.164 Effect of revocation of qualification on inclusion in employee's health benefit plans.
When an HMO's qualification is revoked under Sec. 417.163(d), the
following rules apply:
(a) The HMO may not seek inclusion in employees health benefits
plans under subpart E of this part.
(b) Inclusion of the HMO in an employer's health benefits plan--
(1) Is disregarded in determining whether the employer is subject to
the requirements of subpart E of this part; and
(2) Does not constitute compliance with subpart E of this part by
the employer.
[59 FR 49842, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]
Sec. 417.165 Reapplication for qualification.
An entity whose qualification as an HMO has been revoked by CMS for
purposes of section 1310 of the PHS Act may, after completing the
corrective action required under Sec. 417.163(c)(2), reapply for a
determination of qualification in accordance with the procedures
specified in subpart D of this part.
[43 FR 32255, July 25, 1978. Redesignated at 52 FR 36746, Sept. 30,
1987, and amended at 58 FR 38078, July 15, 1993]
Sec. 417.166 Waiver of assurances.
(a) General rule. CMS may release an HMO from compliance with any
assurances the HMO gives under subpart D of this part if--
(1) The qualification requirements are changed by Federal law; or
(2) The HMO shows good cause, consistent with the purposes of title
XIII of the PHS Act.
(b) Basis for finding of good cause. (1) Grounds upon which CMS may
find good cause include but are not limited to the following:
(i) The HMO has filed for reorganization under Federal bankruptcy
provisions and the reorganization can only be approved with the waiver
of the assurances.
(ii) State laws governing the entity have been changed after it
signed the assurances so as to prohibit the HMO from being organized and
operated in a manner consistent with the signed assurances.
(2) Changes in State laws do not constitute good cause to the extent
that the changes are preempted by Federal law under section 1311 of the
PHS Act.
(c) Consequences of waiver. If CMS waives any assurances regarding
compliance with section 1301 of the PHS Act, CMS concurrently revokes
the
[[Page 113]]
HMO's qualification unless the waiver is based on paragraph (a)(1) of
this section.
[59 FR 49842, Sept. 30, 1994, as amended at 61 FR 27288, May 31, 1996]
Subparts G-I [Reserved]
Subpart J_Qualifying Conditions for Medicare Contracts
Source: 50 FR 1346, Jan. 10, 1985, unless otherwise noted.
Sec. 417.400 Basis and scope.
(a) Statutory basis. The regulations in this subpart implement
section 1876 of the Act, which authorizes Medicare payment to HMOs and
CMPs that contract with CMS to furnish covered services to Medicare
beneficiaries.
(b) Scope. (1) This subpart sets forth the requirements an HMO or
CMP must meet in order to enter into a contract with CMS under section
1876 of the Act. It also specifies the procedures that CMS follows to
evaluate applications and make determinations.
(2) The rules for payment to HMOs and CMPs are set forth in subparts
N, O, and P of this part.
(3) The rules for HCPP participation in Medicare under section
1833(a)(1)(A) of the Act are set forth in subpart U of this part.
[60 FR 45675, Sept. 1, 1995]
Sec. 417.401 Definitions.
As used in this subpart and subparts K through R of this part,
unless the context indicates otherwise--
Adjusted average per capita cost (AAPCC) means an actuarial estimate
made by CMS in advance of an HMO's or CMP's contract period that
represents what the average per capita cost to the Medicare program
would be for each class of the HMO's or CMP's Medicare enrollees if they
had received covered services other than through the HMO or CMP in the
same geographic area or in a similar area.
Adjusted community rate (ACR) is the equivalent of the premium that
a risk HMO or CMP would charge Medicare enrollees independently of
Medicare payments if the HMO or CMP used the same rates it charges non-
Medicare enrollees for a benefit package limited to covered Medicare
services.
Arrangement means a written agreement between an HMO or CMP and
another entity, under which--
(1) The other entity agrees to furnish specified services to the
HMO's or CMP's Medicare enrollees;
(2) The HMO or CMP retains responsibility for the services; and
(3) Medicare payment to the HMO or CMP discharges the beneficiary's
obligation to pay for the services.
Benefit stabilization fund means a fund established by CMS, at the
request of a risk HMO or CMP, to withhold a portion of the per capita
payments available to the HMO or CMP and pay that portion in a
subsequent contract period for the purpose of stabilizing fluctuations
in the availability of the additional benefits the HMO or CMP provides
to its Medicare enrollees.
Cost contract means a Medicare contract under which CMS pays the HMO
or CMP on a reasonable cost basis.
Cost HMO or CMP means an HMO or CMP that has in effect a cost
contract with CMS under section 1876 of the Act and subpart L of this
part.
Demonstration project means a demonstration project under section
402 of the Social Security Amendments of 1967 (42 U.S.C. 1395b-1) or
section 222(a) of the Social Security Amendments of 1972 (42 U.S.C.
1395b-1 (note)), relating to the provision of services for which payment
is made under Medicare on a prospectively determined basis.
Emergency services means covered inpatient or outpatient services
that are furnished by an appropriate source other than the HMO or CMP
and that meet the following conditions:
(1) Are needed immediately because of an injury or sudden illness.
(2) Are such that the time required to reach the HMO's or CMP's
providers or suppliers (or alternatives authorized by the HMO or CMP)
would mean risk of permanent damage to the enrollee's health.
Once initiated, the services continue to be considered emergency
services as long as transfer of the enrollee to the HMO's or CMP's
source of health care or authorized alternative is precluded because of
risk to the enrollee's health
[[Page 114]]
or because transfer would be unreasonable, given the distance and the
nature of the medical condition.
Geographic area means the area found by CMS to be the area within
which the HMO or CMP furnishes, or arranges for furnishing, the full
range of services that it offers to its Medicare enrollees.
Medicare enrollee means a Medicare beneficiary who has been
identified on CMS records as an enrollee of an HMO or CMP that has a
contract with CMS under section 1876 of the Act and subpart L of this
part.
New Medicare enrollee means a Medicare beneficiary who--
(1) Enrolls with an HMO or CMP after the date on which the HMO or
CMP first enters into a risk contract under subpart L of this part; and
(2) Was not enrolled with the HMO or CMP at the time he or she
became entitled to benefits under Part A or eligible to enroll in Part B
of Medicare.
Risk contract means a Medicare contract under which CMS pays the HMO
or CMP on a risk basis for Medicare covered services.
Risk HMO or CMP means an HMO or CMP that has in effect a risk
contract with CMS under section 1876 of the Act and subpart L of this
part.
Urgently needed services means covered services that are needed by
an enrollee who is temporarily absent from the HMO's or CMP's geographic
area and that--
(1) Are required in order to prevent serious deterioration of the
enrollee's health as a result of unforeseen injury or illness; and
(2) Cannot be delayed until the enrollee returns to the HMO's or
CMP's geographic area.
[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 51986, Oct. 17, 1991; 58
FR 38072, July 15, 1993; 60 FR 45675, Sept. 1, 1995]
Sec. 417.402 Effective date of initial regulations.
(a) The changes made to section 1876 of the Act by section 114 of
the Tax Equity and Fiscal Responsibility Act of 1982 became effective on
February 1, 1985, the effective date of the initial implementing
regulations.
(b) No new cost plan contracts are accepted by CMS. CMS will,
however, accept and approve applications to modify cost plan contracts
in order to expand service areas, provided they are submitted on or
before September 1, 2006, and CMS determines that the organization
continues to meet regulatory requirements and the requirements in its
cost plan contract. Section 1876 cost plan contracts will not be
extended or renewed beyond December 31, 2007, where conditions in
paragraph (c) of this section are present.
(c) Mandatory HMO or CMP and contract non-renewal or service area
reduction. CMS will non-renew all or a portion of an HMO's or CMP's
contracted service area using procedures in Sec. 417.492(b) and Sec.
417.494(a) for any period beginning on or after January 1, 2008, where-
(1) There were two or more coordinated care plan-model MA regional
plans in the same service area or portion of a service area for the
entire previous calendar year meeting the conditions in paragraph (c)(3)
of this section; or
(2) There were two or more coordinated care plan-model MA local
plans in the same service area or portion of a service area for the
entire previous calendar year meeting the conditions in paragraph (c)(3)
of this section.
(3) Minimum enrollment requirements. (i) With respect to any service
area or portion of a service area that is within a Metropolitan
Statistical Area with a population of more than 250,000 and counties
contiguous to the Metropolitan Statistical Area, 5,000 enrolled
individuals.
(ii) With respect to any service area or portion of a service area
that is not within a Metropolitan Statistical Area described in
paragraph (c)(3)(i) of this section, 1,500 individuals.
[63 FR 35066, June 26, 1998, as amended at 65 FR 40314, June 29, 2000;
67 FR 13288, Mar. 22, 2002; 70 FR 4713, Jan. 28, 2005]
Sec. 417.404 General requirements.
(a) In order to contract with CMS under the Medicare program, an
entity must--
(1) Be determined by CMS to be an HMO or CMP (in accordance with
Sec. Sec. 117.142 and 417.407, respectively); and
[[Page 115]]
(2) Comply with the contract requirements set forth in subpart L of
this part.
(b) CMS enters into or renews a contract only if it determines that
action would be consistent with the effective and efficient
implementation of section 1876 of the Act.
[60 FR 45675, Sept. 1, 1995]
Sec. 417.406 Application and determination.
(a) Responsibility for making determinations. CMS is responsible for
determining whether an entity meets the requirements to be an HMO or
CMP.
(b) Application requirements. (1) The application requirements for
HMOs are set forth in Sec. 417.143.
(2) The requirements of Sec. 417.143 also apply to CMPs except that
there are no application fees.
(c) Determination. CMS uses the procedures set forth in Sec.
417.144(a) through (d) to determine whether an entity is an HMO or CMP.
(d) Oversight of continuing compliance. (1) CMS oversees an entity's
continued compliance with the requirements for an HMO as defined in
Sec. 417.1 or for a CMP as set forth in Sec. 417.407.
(2) If an entity no longer meets those requirements, CMS terminates
the contract of that entity in accordance with Sec. 417.494.
[60 FR 45675, Sept. 1, 1995]
Sec. 417.407 Requirements for a Competitive Medical Plan (CMP).
(a) General rule. To qualify as a CMP, an entity must be organized
under the laws of a State and must meet the requirements of paragraphs
(b) through (f) of this section.
(b) Required services--(1) Basic rule. Except as provided in
paragraph (b)(2) of this section, the entity furnishes to its enrollees
at least the following services:
(i) Physicians' services performed by physicians.
(ii) Laboratory, x-ray, emergency, and preventive services.
(iii) Out-of-area coverage.
(iv) Inpatient hospital services.
(2) Exception for Medicaid prepayment risk contracts. An entity that
had, before 1970, a Medicaid prepayment risk contract that did not
include provision of inpatient hospital services is not required to
provide those services.
(c) Compensation for services. The entity receives compensation
(except for deductibles, coinsurance, and copayments) for the health
care services it provides to enrollees on a periodic, prepaid capitation
basis regardless of the frequency, extent, or kind of services provided
to any enrollee.
(d) Source of physicians' services. The entity provides physicians'
services primarily through--
(1) Physicians who are employees or partners of the entity; or
(2) Physicians or groups of physicians (organized on a group or
individual practice basis) under contract with the entity to provide
physicians' services.
(e) Assumption of financial risk. The rules set forth in Sec.
417.120(b) for HMOs apply also to CMPs except that reference to ``basic
services'' must be read as reference to the required services listed in
paragraph (b) of this section.
(f) Protection of enrollees. The entity provides adequately against
the risk of insolvency by meeting the requirements of Sec. Sec.
417.120(a) and 417.122 for protection of enrollees against loss of
benefits and liability for payment of any fees that are the legal
responsibility of the entity.
[60 FR 45675, Sept. 1, 1995]
Sec. 417.408 Contract application process.
(a) Contents of application. (1) The application for a contract must
include supporting information in the form and detail required by CMS.
(2) Whenever feasible, CMS exempts the HMO or CMP from resubmittal of
information it has already submitted to CMS in connection with a
determination made under the provisions of Sec. 417.406.
(b) Approval of application. (1) If CMS approves the application, it
gives written notice to the HMO or CMP, indicating that it meets the
requirements for either a risk or reasonable cost contract or only for a
reasonable cost contract.
(2) If the HMO or CMP is dissatisfied with a determination that it
meets the requirements only for a reasonable cost
[[Page 116]]
contract, it may request reconsideration in accordance with the
procedures specified in subpart R of this part.
(c) Denial of application. If CMS denies the application, it gives
written notice to the HMO or CMP indicating--
(1) That it does not meet the contract requirements under section
1876 of the Act;
(2) The reasons why the HMO or CMP does not meet the contract
requirements; and
(3) The HMO's or CMP's right to request reconsideration in
accordance with the procedures specified in subpart R of this part.
[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 8853, Mar. 1, 1991; 58
FR 38078, July 15, 1993; 60 FR 45676, Sept. 1, 1995]
Sec. 417.410 Qualifying conditions: General rules.
(a) Basic requirement. In order to qualify for a contract with CMS
under this subpart, an HMO or CMP must demonstrate its ability to enroll
Medicare beneficiaries and other individuals and groups and to deliver a
specified comprehensive range of high quality services efficiently,
effectively, and economically to its Medicare enrollees.
(b) Other qualifying conditions. An HMO or CMP must meet qualifying
conditions that pertain to operating experience, enrollment, range of
services, furnishing of services, and a quality assurance program.
(c) Standards. Generally, each qualifying condition is interpreted
by a series of standards that are used in surveying an HMO or CMP to
determine its qualifications for a Medicare contract.
(d) Application of standards. Application of the standards enables
the surveyor to determine--
(1) The HMO's or CMP's activities;
(2) The extent to which the HMO or CMP complies with each condition;
(3) The nature and extent of any deficiencies; and
(4) The need for improvement if CMS should enter into a contract
with the HMO or CMP.
(e) Requirements for a risk contract. An HMO or CMP may enter into a
risk contract with CMS if it--
(1) Meets all the applicable requirements in the statute and
regulations;
(2) Has at least 5,000 enrollees or 1,500 enrollees if it serves a
primarily rural area as defined in Sec. 417.413(b)(3);
(3) Has at least 75 Medicare enrollees or has an acceptable plan to
achieve this Medicare membership within 2 years;
(4) Satisfies CMS that it can bear the potential losses of a risk
contract; and
(5) Has not previously terminated or failed to renew a risk contract
within the preceding 5 years, unless CMS determines that circumstances
warrant special consideration.
(f) Requirements for a reasonable cost sontract. An HMO or CMP may
enter into a reasonable cost contract if it meets one of the following:
(1) The HMO or CMP qualifies for a risk contract, but chooses a
reasonable cost contract.
(2) The HMO or CMP meets the conditions for entering into a risk
contract specified in paragraph (e) of this section except that CMS does
not judge the HMO or CMP capable of bearing the potential losses of a
risk contract.
(g) Regulations on reasonable cost and risk reimbursement are set
forth in subparts O and P of this part.
[50 FR 20570, May 17, 1985, as amended at 58 FR 38078, July 15, 1993; 60
FR 45676, Sept. 1, 1995]
Sec. 417.412 Qualifying condition: Administration and management.
The HMO or CMP must demonstrate that it--
(a) Has sufficient administrative capability to carry out the
requirements of the contract; and
(b) Does not have any agents or management staff or persons with
ownership or control interests who have been convicted of criminal
offenses related to their involvement in Medicaid, Medicare, or social
service programs under title XX of the Act.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60
FR 45676, Sept. 1, 1995]
Sec. 417.413 Qualifying condition: Operating experience and enrollment.
(a) Condition. The HMO or CMP must demonstrate that it has operating
experience and an enrolled population
[[Page 117]]
sufficient to provide a reasonable basis for establishing a prospective
per capita reimbursement rate or a reasonable cost reimbursement rate,
as appropriate.
(b) Standard: Enrollment and operating experience for HMOs or CMPs
to contract on a risk basis. To be eligible to contract on a risk
basis--
(1) A nonrural HMO or CMP must currently have the following:
(i) At least 5,000 enrollees; and
(ii) At least 75 Medicare enrollees or a plan acceptable to CMS for
achieving a Medicare enrollment of 75 within 2 years from the beginning
of its initial contract period.
(2) A rural HMO or CMP must currently have--
(i) At least 1,500 enrollees; and
(ii) At least 75 Medicare enrollees or a plan acceptable to CMS for
achieving a Medicare enrollment of 75 within 2 years from the beginning
of its initial contract period.
(3) For purposes of this paragraph, an HMO or CMP is considered
rural if at least 50 percent of its enrollees reside in nonmetropolitan
areas. A nonmetropolitan area is an area--
(i) No part of which is within a metropolitan statistical area (MSA)
as designated by the Executive Office of Management and Budget; and
(ii) That does not contain a city whose population exceeds 50,000
individuals.
(4) A subdivision or subsidiary of an HMO or CMP that meets the
requirements of paragraph (b)(1) or (b)(2) of this section need not
demonstrate that it meets those requirements as an independent unit if
the HMO or CMP assumes responsibility for the financial risk, and
adequate management and supervision of health care services furnished by
its subdivision or subsidiary.
(c) Standard: Enrollment and operating experience for HMOs or CMPs
to contract on a cost basis. To be eligible to contract on a reasonable
cost basis, an HMO or CMP must currently have enrollees sufficient in
number to provide a reasonable basis for entering into a contract, as
follows:
(1) At least 1,500 enrollees.
(2) At least 75 Medicare enrollees, or a plan acceptable to CMS for
achieving--
(i) A Medicare enrollment of 75 within 2 years from the beginning of
its initial contract period; and
(ii) At least 250 Medicare enrollees by the beginning of its fourth
contract period.
(d) Standard: Composition of enrollment--(1) Requirement. Except as
specified in paragraphs (d)(2) and (e) of this section, not more than 50
percent of an HMO's or CMP's enrollment may be Medicare beneficiaries.
(2) Waiver of composition of enrollment standard. CMS may waive
compliance with the requirements of paragraph (d)(1) of this section if
the HMO or CMP has made and is making reasonable efforts to enroll
individuals who are not Medicare beneficiaries and it meets one of the
following requirements:
(i) The HMO or CMP serves a geographic area in which Medicare
beneficiaries and Medicaid recipients constitute more than 50 percent of
the population. (CMS does not grant a waiver that would permit the
percentage of Medicare and Medicaid enrollees to exceed the percentage
of Medicare beneficiaries and Medicaid recipients in the population of
the geographic area.)
(ii) The HMO or CMP is owned and operated by a government entity.
The waiver may be for a period up to three years after the date the HMO
or CMP first enters into a contract under this subpart, and may not be
extended.
(iii) The HMO or CMP requests waiver of the composition rule because
it is in the public interest. The organization provides documentation
that supports one of the following:
(A) The organization serves a medically underserved rural or urban
area.
(B) The organization demonstrates a long-term business and community
service commitment to the area.
(C) The organization believes that a waiver is necessary to promote
managed care choices in an area with limited or no managed care choices.
(3) Waiver granted on or before October 21, 1986. An HMO or CMP (or
a successor HMO or CMP) that as of October 21, 1986, had been granted an
exception, waiver, or modification of the requirements of paragraph
(d)(1) of this section, but that does not meet the requirements of
paragraph (d)(2) of this
[[Page 118]]
section, must make (and throughout the period of the exception, waiver,
or modification continue to make) reasonable efforts to meet scheduled
enrollment goals, consistent with a schedule of compliance approved by
CMS.
(i) If CMS determines that the HMO or CMP has complied, or made
significant progress toward compliance, with the approved schedule, and
that an extension is in the best interest of the Medicare program, CMS
may extend the waiver of modification.
(ii) If CMS determines that the HMO or CMP has not complied with the
approved schedule, CMS may apply the sanctions described in paragraphs
(d)(6) and (d)(7) of this section.
(4) Basis for application of sanctions. CMS may, as an alternative
to contract termination, apply the sanctions specified in paragraph
(d)(6) of this section if CMS determines that the HMO or CMP is not
complying with the requirements in paragraphs (d)(1), (d)(2), or (d)(3)
of this section, as applicable.
(5) Notice of sanction. Before applying the sanctions specified in
paragraph (d)(6) of this section, CMS sends a written notice to the HMO
or CMP stating the proposed action and its basis. CMS gives the HMO or
CMP 15 days after the date of the notice to provide evidence
establishing the HMO's or CMP's compliance with the requirements in
paragraph (d)(1), (d)(2), or (d)(3) of this section, as applicable.
(6) Sanctions. If, following review of the HMO's or CMP's timely
response to CMS's notice, CMS determines that an HMO or CMP does not
comply with the requirements of paragraphs (d)(1), (d)(2), or (d)(3) of
this section, CMS may apply either of the following sanctions:
(i) Require the HMO or CMP to stop accepting new enrollment
applications after a date specified by CMS.
(ii) Deny payment for individuals who are formally added or
``accreted'' to CMS's records as Medicare enrollees after a date
specified by CMS.
(7) Termination by CMS. In addition to the sanctions described in
paragraph (d)(6) of this section. CMS may decline to renew an HMO's or
CMP's contract in accordance with Sec. 417.492(b), or terminate its
contract in accordance with Sec. 417.494(b) if CMS determines that the
HMO or CMP no longer substantially meets the requirements of paragraphs
(d)(1), (d)(2), or (d)(3) of this section.
(8) Termination of composition standard. The 50 percent composition
of Medicare beneficiaries terminates for all managed care plans on
December 31, 1998.
(e) Standard: Open enrollment. (1) Except as specified in paragraph
(e)(2) of this section, an HMO or CMP must enroll Medicare beneficiaries
on a first-come, first-served basis to the limit of its capacity and
provide annual open enrollment periods of at least 30 days duration for
Medicare beneficiaries.
(2) CMS may waive the requirement of paragraph (e)(1) of this
section if compliance would prevent compliance with the limitation on
enrollment of Medicare beneficiaries and Medicaid recipients (paragraph
(d) of this section) or result in an enrollment substantially
nonrepresentative of the population of the HMO's or CMP's geographic
area. The enrollment would be ``substantially nonrepresentative'' if the
proportion of a subgroup to the total enrollment exceeded, by 10 percent
or more, its proportion of the population in the HMO's or CMP's
geographic area, as shown by census data or other data acceptable to
CMS. For purposes of this paragraph, a subgroup means a class of
Medicare enrollees as defined in Sec. 417.582.
[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 46570, Sept. 13, 1991;
58 FR 38082, July 15, 1993; 60 FR 45676, Sept. 1, 1995; 63 FR 35066,
June 26, 1998]
Sec. 417.414 Qualifying condition: Range of services.
(a) Condition. The HMO or CMP must demonstrate that it is capable of
delivering to Medicare enrollees the range of services required in
accordance with this section.
(b) Standard: Range of services furnished by eligible HMOs or CMPs--
(1) Basic requirement. Except as specified in paragraph (b)(3) of this
section, an HMO or CMP must furnish to its Medicare enrollees (directly
or through arrangements with others) all the Medicare services to which
those enrollees are entitled to the extent that they are available to
Medicare beneficiaries who
[[Page 119]]
reside in the HMO's or CMP's geographic area but are not enrolled in the
HMO or CMP.
(2) Criteria for availability. The services are considered available
if--
(i) The sources are located within the HMO's or CMP's geographic
area; or
(ii) It is common practice to refer patients to sources outside that
geographic area.
(3) Exception for hospice care. An HMO or CMP is not required to
furnish hospice care as described in part 418 of this chapter. However,
HMOs or CMPs must inform their Medicare enrollees about the availability
of hospice care if--
(i) A hospice participating in Medicare is located within the HMO's
or CMP's geographic area; or
(ii) It is common practice to refer patients to hospices outside the
geographic area.
(c) Standard: Financial responsibility for services furnished
outside the HMO or CMP. (1) An HMO or CMP must assume financial
responsibility and provide reasonable reimbursement for emergency
services and urgently needed services (as defined in Sec. 417.401) that
are obtained by its Medicare enrollees from providers and suppliers
outside the HMO or CMP even in the absence of the HMO's or CMP's prior
approval.
(2) An HMO or CMP must assume financial responsibility for services
that the Medicare enrollee attempted to obtain from the HMO or CMP, but
that the HMO or CMP failed to furnish or unreasonably denied, and that
are found, upon appeal by the enrollee under subpart Q of this part, to
be services that the enrollee was entitled to have furnished to him or
her by the HMO or CMP.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38078, July 15, 1993; 60
FR 45677, Sept. 1, 1995]
Sec. 417.416 Qualifying condition: Furnishing of services.
(a) Condition. The HMO or CMP must furnish the required services to
its Medicare enrollees through providers and suppliers that meet
applicable Medicare statutory definitions and implementing regulations.
The HMO or CMP must also ensure that the required services, additional
services, and any other supplemental services for which the Medicare
enrollee has contracted are available and accessible and are furnished
in a manner that ensures continuity.
(b) Standard: Conformance with conditions of participation,
conditions for coverage, and conditions for certification. (1)
Hospitals, SNFs, HHAs, CORFs, and providers of outpatient physical
therapy or speech-language pathology services must meet the applicable
conditions of participation in Medicare, as set forth elsewhere in this
chapter.
(2) Suppliers must meet the conditions for coverage or conditions
for certification of their services, as set forth elsewhere in this
chapter.
(3) If more than one type of practitioner is qualified to furnish a
particular service, the HMO or CMP may select the type of practitioner
to be used.
(c) Standard: Physician supervision. The HMO or CMP must provide for
supervision by a physician of other health care professionals who are
directly involved in the provision of health care as generally
authorized under section 1861 of the Act. Except as specified in
paragraph (d) of this section, with respect to medical services
furnished in an HMO's or CMP's clinic or the office of a physician with
whom the HMO or CMP has a service agreement, the HMO or CMP must ensure
that--
(1) Services furnished by paramedical, ancillary, and other
nonphysician personnel are furnished under the direct supervision of a
physician;
(2) A physician is present to perform medical (as opposed to
administrative) services whenever the clinics or offices are open; and
(3) Each patient is under the care of a physician.
(d) Exceptions to physician supervision requirement. The following
services may be furnished without the direct personal supervision of a
physician:
(1) Services of physician assistants and nurse practitioners (as
defined in Sec. 491.2 of this chapter), and the services and supplies
incident to their services. The conditions for payment, as set forth in
Sec. Sec. 405.2414 and 405.2415 of this chapter for services furnished
by rural health clinics and Federally qualified health centers,
respectively, also apply
[[Page 120]]
when those services are furnished by an HMO or CMP.
(2) When furnished by an HMO or CMP, services of clinical
psychologists who meet the qualifications specified in Sec. 410.71(d)
of this chapter, and the services and supplies incident to their
professional services.
(3) When an HMO or CMP contracts on--
(i) A risk basis, the services of a clinical social worker (as
defined at Sec. 410.73 of this chapter) and the services and supplies
incident to their professional services; or
(ii) A cost basis, the services of a clinical social worker (as
defined in Sec. 410.73 of this chapter). Services incident to the
professional services of a clinical social worker furnished by an HMO or
CMP contracting on a cost basis are not covered by Medicare and payment
will not be made for these services.
(e) Standard: Accessibility and continuity. (1) The HMO or CMP must
ensure that the required services and any other services for which
Medicare enrollees have contracted are accessible, with reasonable
promptness, to the enrollees with respect to geographic location, hours
of operation, and provision of after hours service. Medically necessary
emergency services must be available twenty-four hours a day, seven days
a week.
(2) The HMO or CMP must maintain a health (including medical)
recordkeeping system through which pertinent information relating to the
health care of its Medicare enrollees is accumulated and is readily
available to appropriate professionals.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60
FR 45677, Sept. 1, 1995; 63 FR 20130, Apr. 23, 1998]
Sec. 417.418 Qualifying condition: Quality assurance program.
(a) Condition. The HMO or CMP must make arrangements for a quality
assurance program that meets the requirements of this section.
(b) Standard. An HMO or CMP must have an ongoing quality assurance
program that meets the requirements set forth in Sec. 417.106(a).
[58 FR 38072, July 15, 1993]
Subpart K_Enrollment, Entitlement, and Disenrollment under Medicare
Contract
Source: 50 FR 1346, Jan. 10, 1985, unless otherwise noted.
Sec. 417.420 Basic rules on enrollment and entitlement.
(a) Enrollment. Individuals who are entitled to benefits under both
Part A and Part B of Medicare or only Part B may elect to receive those
benefits through an HMO or CMP that has in effect a contract with CMS
under subpart L of this part.
(b) Entitlement. If a Medicare beneficiary enrolls with an HMO or
CMP, CMS pays the HMO or CMP on his or her behalf for the services to
which he or she is entitled.
(c) Beneficiary liability. (1) The HMO or CMP may require payment,
in the form of premiums or otherwise, from individuals for services not
covered under Medicare, as well as deductible and coinsurance amounts
attributable to Medicare covered services.
(2) As described in Sec. 417.448, Medicare enrollees of risk HMOs
or CMPs are liable for services that they obtain from sources other than
the HMO or CMP, unless the services are--
(i) Emergency or urgently needed; or
(ii) Determined, on appeal under subpart Q of this part, to be
services that should have been furnished by the HMO or CMP.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38078, July 15, 1993; 60
FR 45677, Sept. 1, 1995]
Sec. 417.422 Eligibility to enroll in an HMO or CMP.
Except as specified in Sec. Sec. 417.423 and 417.424, an HMO or CMP
must enroll, either for an indefinite period or for a specified period
of at least 12 months, any individual who--
(a) Is entitled to Medicare benefits under Parts A and B or under
Part B only;
(b) Lives within the geographic area served by the HMO or CMP;
(c) Is not enrolled in any other HMO or CMP that has entered into a
contract under subpart L of this part;
(d) During an enrollment period of the HMO or CMP, completes and
signs
[[Page 121]]
the HMO's or CMP's application form and gives whatever information is
required for enrollment;
(e) Agrees to abide by the HMO's or CMP's rules after they are
disclosed to him or her in connection with the enrollment process;
(f) Is not denied enrollment by the HMO or CMP under a selection
policy, if any, that has been approved by CMS under Sec. 417.424(b);
and
(g) Is not denied enrollment by the HMO or CMP on the basis of any
of the administrative criteria concerning denial of enrollment in Sec.
417.424(a).
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38078, July 15, 1993; 60
FR 45677, Sept. 1, 1995]
Sec. 417.423 Special rules: ESRD and hospice patients.
(a) ESRD patients. (1) A Medicare beneficiary who has been medically
determined to have end-stage renal disease is not eligible to enroll in
an HMO or CMP.
(2) However, if a beneficiary is already enrolled in an HMO or CMP
when he or she is determined to have end-stage renal disease, the HMO or
CMP--
(i) Must reenroll the beneficiary as required by Sec. 417.434; and
(ii) May not disenroll the beneficiary except as provided in Sec.
417.460.
(b) Hospice patients. A Medicare beneficiary who elects hospice care
under Sec. 418.24 of this chapter is not eligible to enroll in an HMO
or CMP as long as the hospice election remains in effect.
[60 FR 45677, Sept. 1, 1995]
Sec. 417.424 Denial of enrollment.
(a) Basis for denial. An HMO or CMP may deny enrollment to an
individual who meets the criteria of Sec. 417.422 if acceptance would--
(1) Cause the number of enrollees who are Medicare or Medicaid
beneficiaries to exceed 50 percent of the HMO's or CMP's total
enrollment;
(2) Prevent the HMO or CMP from complying with any of the other
contract qualifying conditions set forth in subpart J of this part;
(3) Require the HMO or CMP to exceed its enrollment capacity; or
(4) Cause the enrollment to become substantially nonrepresentative
of the general population in the HMO's or CMP's geographic area.
(b) Selection policies. (1) Denial under paragraph (a)(4) of this
section must be in accordance with written selection policies approved
by CMS. (2) Enrollment of individuals will not be considered to make the
enrollment of the HMO or CMP substantially nonrepresentative of the
general population in the HMO's or CMP's geographic area unless, as a
result of the enrollment, the proportion of the subgroup of enrollees to
which the enrollee belongs as compared to the HMO's or CMP's total
enrollment exceeds by at least ten percent the subgroup's proportion of
the general population in the geographic area of the HMO or CMP. (A
subgroup is a class of Medicare enrollees of an HMO or CMP that CMS
constructs on the basis of actuarial factors.)
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 58
FR 38078, July 15, 1993; 60 FR 45677, Sept. 1, 1995]
Sec. 417.426 Open enrollment requirements.
(a) Basic requirements. (1) HMOs or CMPs must provide open
enrollment for Medicare beneficiaries for at least 30 consecutive days
during each contract year.
(2) During open enrollment, the HMO or CMP must enroll eligible
Medicare beneficiaries in the order in which their applications are
received and until its enrollment capacity is reached.
(3) The HMO or CMP may accept applications from Medicare
beneficiaries after it has reached capacity if it places those
individuals on a waiting list and enrolls them in chronological order as
vacancies occur.
(4) An HMO or CMP with a risk contract must accept applications from
eligible Medicare beneficiaries during the month of November 1998.
(b) Capacity to accept new enrollees. (1) If an HMO or CMP chooses
to limit enrollments because of its capacity, it must notify CMS at
least 90 days before the beginning of its open enrollment period and, at
that time, provide CMS with its reasons for limiting enrollment.
[[Page 122]]
(2) CMS evaluates the HMO's or CMP's submittal under paragraph
(b)(1) of this section.
(3) The HMO or CMP must promptly notify CMS if there is any change
in its enrollment capacity.
(c) Reserved vacancies. (1) Subject to CMS's approval, an HMO or CMP
may set aside a reasonable number of vacancies for an anticipated new
group contract or for anticipated new enrollees under an existing group
contract that will have its enrollment period after the Medicare open
enrollment period during the contract year.
(2) Any set aside vacancies that are not filled within a reasonable
time after the beginning of the group contract enrollment period must be
made available to Medicare beneficiaries and other nongroup applicants
under the requirements of this subpart.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 60
FR 45677, Sept. 1, 1995; 63 FR 35066, June 26, 1998]
Sec. 417.428 Marketing activities.
(a) Required marketing activities. An HMO or CMP must meet the
following requirements:
(1) Offer its plan to Medicare beneficiaries and provide to those
interested in enrolling, adequate written descriptions of the HMO's or
CMP's rules, procedures, benefits, fees and other charges, services, and
other information necessary for beneficiaries to make an informed
decision about enrollment.
(2) Notify the general public of its enrollment period (whether time
limited or continuous) in an appropriate manner through appropriate
media, throughout its enrollment area.
(3) Submit all marketing materials to CMS at least 45 days before
their planned distribution.
(4) Include in the HMO's or CMP's written materials provided to
prospective enrollees prior to enrollment, notice that the HMO or CMP is
authorized by law to terminate or refuse to renew its contract with CMS,
that CMS may also choose to terminate or refuse to renew its contact
with the HMO or CMP and that termination or nonrenewal may result in
termination of the individual's enrollment in the HMO or CMP.
(b) Prohibited marketing activities--general. In offering its plan
to Medicare beneficiaries, an HMO or CMP may not engage in any of the
following practices or activities:
(1) Practices that are discriminatory. For example, the HMO or CMP
may not engage in any activity intended to recruit Medicare
beneficiaries from higher income areas (usually an indicator of better
health) without making a comparable effort to enroll Medicare
beneficiaries from lower income areas.
(2) Activities that could mislead or confuse Medicare beneficiaries,
or misrepresent the HMO or CMP its marketing representatives, or CMS.
For example, the HMO or CMP may not claim that it is recommended or
endorsed by CMS or that CMS recommends that the beneficiary enroll in
the HMO or CMP. It may, however, explain that the entity is approved as
an HMO or CMP for purposes of participation in Medicare.
(3) Offers of gifts or payment as an inducement to enroll in the HMO
or CMP. This does not prohibit the explanation of any legitimate
benefits the beneficiary might obtain as an enrollee of the HMO or CMP
such as eligibility to enroll in a supplemental benefit plan that covers
deductibles and coinsurance or preventive services.
(4) Door-to-door solicitation of Medicare beneficiaries.
(5) Distribution of marketing materials if, before the expiration of
the 45-day period described in paragraph (a)(3) of this section, the HMO
or CMP receives written notice from CMS that CMS has disapproved the
material because it is inaccurate or misleading or it misrepresents the
HMO or CMP, its marketing representatives or CMS.
(c) Marketing activities of risk HMOs or CMPs In addition to the
generally permitted or prohibited marketing activities described in
paragraphs (a) and (b) of this section, a risk HMO or CMP must provide
potential Medicare enrollees with adequate written descriptions of the
additional benefits or services, or reductions in premiums, deductible
or copayments that may pertain under payment on a risk basis.
[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 8901, Mar. 20, 1987; 56
FR 46570, Sept. 13, 1991; 58 FR 38082, July 15, 1993; 60 FR 45677, Sept.
1, 1995]
[[Page 123]]
Sec. 417.430 Application procedures.
(a) Application forms. (1) The application form must comply with CMS
instructions regarding format and content and must include the
beneficiary's signature and authorization for disclosure and exchange of
necessary information between CMS and the HMO or CMP.
(2) The HMO or CMP must file and retain application forms for the
period specified in CMS instructions.
(b) Handling of applications. An HMO or CMP must have an effective
system for receiving, controlling, and processing applications from
Medicare beneficiaries. The system must meet the following conditions
and requirements:
(1) Each application is dated as of the day it is received.
(2) Applications are processed in chronological order by date of
receipt.
(3) The HMO or CMP gives the beneficiary prompt written notice of
acceptance or rejection of the application.
(4) The notice of acceptance--
(i) Specifies the date on which the HMO or CMP will request CMS to
make the enrollment effective; or
(ii) If the HMO or CMP is currently enrolled to capacity, explains
the procedures that will be followed when vacancies occur.
(5) The notice of denial explains the reason for denial.
(6) The HMO or CMP transmits the information necessary for CMS to
add the beneficiary to its records of the HMO's or CMP's Medicare
enrollees--
(i) Within 30 days from the date of application or from the date a
vacancy occurs for an applicant who was accepted (for future enrollment)
while there were no vacancies; or
(ii) Within an additional period of time approved by CMS on a
showing by the HMO or CMP that it needs more time.
(7) The HMO or CMP promptly notifies the beneficiary of the
effective month of his or her enrollment as a Medicare enrollee, when it
receives that information from CMS.
(8) If the HMO or CMP accepts applications while it is enrolled to
capacity, its procedures ensure that vacancies are filled in
chronological order by date of application of beneficiaries who are
still eligible to enroll, unless that would result in failure to comply
with any of the qualifying conditions set forth in Sec. 417.413.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60
FR 45677, Sept. 1, 1995]
Sec. 417.432 Conversion of enrollment.
(a) Basic rule. An HMO or CMP must accept as a Medicare enrollee any
individual who is enrolled in the HMO or CMP for the month immediately
before the month in which he or she is entitled to both Medicare Parts A
and B or Part B only.
(b) Effective date of conversion. Unless the individual chooses to
disenroll from the HMO or CMP the individual's conversion to a Medicare
enrollee is effective the month in which he or she is entitled to both
Medicare Parts A and B or Part B only.
(c) Prohibition against disenrollment. An HMO or CMP may not
disenroll an individual who is converting under the provisions of
paragraph (a) of this section unless one of the conditions specified in
Sec. 417.460 is met.
(d) Application form. The individual who is converting must sign an
application form as described in Sec. 417.430(a).
(e) Expedited submittal of information to CMS. The HMO or CMP must
notify CMS, within the following time frames, of the enrollee's
authorization for disclosure and exchange of information and the
information necessary for CMS to include the enrollee in its records as
a Medicare enrollee of the HMO or CMP:
(1) At least 30, but no earlier than 90, days before the enrollee--
(i) Attains age 65; or
(ii) Reaches his or her 25th month of entitlement to social security
disability benefits under title II of the Act or railroad retirement
disability benefits under section 7(d) of the Railroad Retirement Act of
1974.
(2) Within 30 days after the enrollee initiates a course of renal
dialysis, or on or before the day he or she enters a hospital in
anticipation of a kidney transplant.
[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 46570, Sept. 13, 1991;
58 FR 38082, July 15, 1993; 60 FR 45677, Sept. 1, 1995]
[[Page 124]]
Sec. 417.434 Reenrollment.
If an HMO or CMP requires periodic reenrollment, it must reenroll
Medicare enrollees unless there is a basis for disenrollment as set
forth in Sec. 417.460.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]
Sec. 417.436 Rules for enrollees.
(a) Maintaining rules. An HMO or CMP must maintain written rules
that deal with, but need not be limited to the following:
(1) All benefits provided under the contract, as described in Sec.
417.440.
(2) How and where to obtain services from or through the HMO or CMP.
(3) The restrictions on coverage for services furnished from sources
outside a risk HMO or CMP, other than emergency services and urgently
needed services (as defined in Sec. 417.401).
(4) The obligation of the HMO or CMP to assume financial
responsibility and provide reasonable reimbursement for emergency
services and urgently needed services as required by Sec. 417.414(c).
(5) Any services other than the emergency or urgently needed
services that the HMO or CMP chooses to provide as permitted by this
part, from sources outside the HMO or CMP. A cost HMO or CMP must
disclose that the enrollee may receive services through any Medicare
providers and suppliers.
(6) Premium information, including the amount (or if the amount
cannot be included, the telephone number of the source from which this
information may be obtained) and the procedures for paying premiums and
other charges for which enrollees may be liable.
(7) Grievance and appeal procedures.
(8) Disenrollment rights.
(9) The obligation of an enrollee who is leaving the HMO's or CMP's
geographic area for more than 90 days to notify the HMO or CMP of the
move or extended absence and the HMO's or CMP's policies concerning
retention of enrollees who leave the geographic area for more than 90
days, as described in Sec. 417.460(a)(2).
(10) The expiration date of the Medicare contract with CMS and
notice that both CMS and the HMO or CMP are authorized by law to
terminate or refuse to renew the contract, and that termination or
nonrenewal of the contract may result in termination of the individual's
enrollment in the HMO or CMP.
(11) Advance directives as specified in paragraph (d) of this
section.
(12) Any other matters that CMS may prescribe.
(b) Availability of rules. The HMO or CMP must furnish a copy of the
rules to each Medicare enrollee at the time of enrollment and at least
annually thereafter.
(c) Changes in rules. If an HMO or CMP changes its rules, it must
submit the changes to CMS in accordance with Sec. 417.428(a)(3), and
notify its Medicare enrollees of the changes at least 30 days before the
effective date of the changes.
(d) Advance directives. (1) An HMO or CMP must maintain written
policies and procedures concerning advance directives, as defined in
Sec. 489.100 of this chapter, with respect to all adult individuals
receiving medical care by or through the HMO or CMP and are required to:
(i) Provide written information to those individuals concerning--
(A) Their rights under the law of the State in which the
organization furnishes services (whether statutory or recognized by the
courts of the State) to make decisions concerning such medical care,
including the right to accept or refuse medical or surgical treatment
and the right to formulate, at the individual's option, advance
directives. Providers are permitted to contract with other entities to
furnish this information but are still legally responsible for ensuring
that the requirements of this section are met. Such information must
reflect changes in State law as soon as possible, but no later than 90
days after the effective date of the State law; and
(B) The HMO's or CMP's written policies respecting the
implementation of those rights, including a clear and precise statement
of limitation if the HMO or CMP cannot implement an advance directive as
a matter of conscience. At a minimum, this statement should:
[[Page 125]]
(1) Clarify any differences between institution-wide conscience
objections and those that may be raised by individual physicians;
(2) Identify the state legal authority permitting such objection;
and
(3) Describe the range of medical conditions or procedures affected
by the conscience objection.
(ii) Provide the information specified in paragraphs (d)(1)(i) of
this section to each enrollee at the time of initial enrollment. If an
enrollee is incapacitated at the time of initial enrollment and is
unable to receive information (due to the incapacitating condition or a
mental disorder) or articulate whether or not he or she has executed an
advance directive, the HMO or CMP may give advance directive information
to the enrollee's family or surrogate in the same manner that it issues
other materials about policies and procedures to the family of the
incapacitated enrollee or to a surrogate or other concerned persons in
accordance with State law. The HMO or CMP is not relieved of its
obligation to provide this information to the enrollee once he or she is
no longer incapacitated or unable to receive such information. Follow-up
procedures must be in place to ensure that the information is given to
the individual directly at the appropriate time.
(iii) Document in the individual's medical record whether or not the
individual has executed an advance directive;
(iv) Not condition the provision of care or otherwise discriminate
against an individual based on whether or not the individual has
executed an advance directive;
(v) Ensure compliance with requirements of State law (whether
statutory or recognized by the courts of the State) regarding advance
directives;
(vi) Provide for education of staff concerning its policies and
procedures on advance directives; and
(vii) Provide for community education regarding advance directives
that may include material required in paragraph (d)(1)(i)(A) of this
section, either directly or in concert with other providers or entities.
Separate community education materials may be developed and used, at the
discretion of the HMO or CMP. The same written materials are not
required for all settings, but the material should define what
constitutes an advance directive, emphasizing that an advance directive
is designed to enhance an incapacitated individual's control over
medical treatment, and describe applicable State law concerning advance
directives. An HMO or CMP must be able to document its community
education efforts.
(2) The HMO or CMP--(i) Is not required to provide care that
conflicts with an advance directive.
(ii) Is not required to implement an advance directive if, as a
matter of conscience, the HMO or CMP cannot implement an advance
directive and State law allows any health care provider or any agent of
such provider to conscientiously object.
(3) The HMO or CMP must inform individuals that complaints
concerning non-compliance with the advance directive requirements may be
filed with the State survey and certification agency.
[58 FR 38072, July 15, 1993, as amended at 59 FR 49843, Sept. 30, 1994;
60 FR 33292, June 27, 1995]
Sec. 417.440 Entitlement to health care services from an HMO or CMP.
(a) Basic rules. (1) Subject to the conditions and limitations set
forth in this subpart, a Medicare enrollee of an HMO or CMP is entitled
to receive health care services and supplies directly from, or through
arrangements made by, the HMO or CMP as specified in this section and
Sec. Sec. 417.442-417.446.
(2) A Medicare enrollee is also entitled to receive timely and
reasonable payment directly (or have payment made on his or her behalf)
for services he or she obtained from a provider or supplier outside the
HMO or CMP if those services are--
(i) Emergency services or urgently needed services as defined Sec.
417.401;
(ii) Services denied by the HMO or CMP and found (upon appeal under
subpart Q of this part) to be services the enrollee was entitled to have
furnished by the HMO or CMP.
(b) Scope of services--(1) Part A and Part B services. Except as
specified in paragraphs (c), (d), and (e) of this section, a Medicare
enrollee is entitled to
[[Page 126]]
receive from an HMO or CMP all the Medicare-covered services that are
available to individuals residing in the HMO's or CMP's geographic area,
as follows:
(i) Medicare Part A and Part B services if the enrollee is entitled
to benefits under both programs.
(ii) Medicare Part B services if the enrollee is entitled only under
that program.
(2) Supplemental services elected by an enrollee. (i) Except as
provided under paragraph (b)(2)(ii) of this section, a Medicare enrollee
of an HMO or CMP may elect to pay for optional services that are offered
by the HMO or CMP in addition to the covered Part A and Part B services.
(ii) An HMO or CMP may elect to provide qualified prescription drug
coverage (as defined at Sec. 423.104 of this chapter) as an optional
supplemental service in accordance with the applicable requirements
under part 423 of this chapter, including Sec. 423.104(f)(4) of this
chapter.
(iii) The HMO or CMP may not set health status standards for those
enrollees whom it accepts for these optional supplemental services.
(3) Supplemental services imposed by a risk HMO or CMP. (i) Subject
to CMS's approval, a risk HMO or CMP may require Medicare enrollees to
accept and pay for services in addition to those covered by Medicare.
(ii) If the HMO or CMP elects this option, it must impose the
requirement on all Medicare enrollees, without regard to health status.
(iii) CMS approves supplemental benefits of this type if CMS determines
that imposition of the requirements will not discourage other Medicare
beneficiaries from enrolling in the risk HMO or CMP.
(4) Additional benefits from risk HMOs or CMPs required by statute.
Subject to the conditions stated in Sec. 417.442, a new Medicare
enrollee or a current nonrisk Medicare enrollee who converts to risk
reimbursement under Sec. 417.444 is eligible to receive, in addition to
the covered Part A and Part B benefits for which he or she is eligible,
benefits consisting of one or both of the following:
(i) A reduction in the HMO's or CMP's premium rate or in other
charges for services furnished to Medicare enrollees.
(ii) Provision of health benefits or services beyond the required
Part A and Part B coverage.
(5) Special supplemental benefits. Under conditions described in
Sec. 417.444(c), current nonrisk Medicare enrollees who are not
converted to the risk portion of the contract, may enroll in a special
supplemental plan, if offered by the HMO or CMP, for some or all of the
additional benefits described in paragraph (b)(4) of this section.
(c) Limitation on hospice care--(1) Extent of limitation. (i) Basic
rule. Except as provided in paragraph (c)(1)(ii) of this section, a
Medicare enrollee who elects to receive hospice care under Sec. 418.24
of this chapter waives the right to receive from the HMO or CMP any
Medicare services (including services equivalent to hospice care) that
are related to the terminal condition for which the enrollee elected
hospice care, or to a related condition.
(ii) Exception. An enrollee who elects hospice care retains the
right to services furnished by his or her attending physician if that
physician--
(A) Is an employee or contractor of the HMO or CMP; and
(B) Is not an employee of the designated hospice and does not
receive compensation from the hospice for those services.
(2) Effective date of limitation. The limitation in paragraph (c)(1)
of this section begins on the effective date of the beneficiary's
election of hospice care and remains in effect until the earlier of the
following:
(i) The effective date of the enrollee's revocation of the election
of hospice care as described in Sec. 418.28 of this chapter.
(ii) The date the enrollee exhausts his or her hospice benefits.
(3) Payment to HMO or CMP. For the period that the Medicare
enrollee's election of hospice care is in effect, CMS pays a cost HMO or
CMP only as described in Sec. 417.585.
(d) Limitation on provision of inpatient hospital services. If a
beneficiary's effective date of coverage, as specified in Sec. 417.450,
in a risk HMO or CMP occurs during an inpatient stay in a hospital
[[Page 127]]
paid for under part 412 of this chapter, the HMO or CMP--
(1) Is not responsible for the provision of any of the inpatient
hospital services under Part A during the stay and is not required to
pay for those services;
(2) Must assume responsibility for payment for or provision of
inpatient hospital services under Part A on the day after the day of
discharge from the inpatient stay; and
(3) Is responsible for the full scope of services under paragraph
(b) of this section, other than inpatient hospital services under Part
A, beginning on the effective date of enrollment.
(e) Extension of provision of inpatient hospital services. If an
enrollee's effective date of disenrollment, as defined by Sec. 417.460,
occurs during an inpatient stay in a hospital paid for under part 412 of
this chapter and the stay is provided or arranged for by the HMO or CMP,
or the HMO or CMP is financially responsible for the hospitalization
under paragraph (a)(2) of this section, the HMO or CMP--
(1) Is financially responsible for payment of the inpatient services
under Part A through the date the beneficiary is discharged from the
inpatient stay; and
(2) Is not responsible for the provision of services, furnished on
or after the effective date of disenrollment, other than inpatient
hospital services under Part A.
(f) Notice of noncoverage of inpatient hospital care. (1) If an
enrollee is an inpatient of a hospital, entitlement to inpatient
hospital care continues until he or she receives notice of noncoverage
of that care.
(2) Before giving notice of noncoverage, the HMO or CMP must obtain
the concurrence of its affiliated physician responsible for the hospital
care of the enrollee, or other physician as authorized by the HMO or
CMP.
(3) The HMO or CMP must give the enrollee written notice that
includes the following:
(i) The reason why inpatient hospital care is no longer needed.
(ii) The effective date of the enrollee's liability for continued
inpatient care.
(iii) The enrollee's appeal rights.
(4) If the HMO or CMP delegates to the hospital the determination of
noncoverage of inpatient care, the hospital obtains the concurrence of
the HMO- or CMP-affiliated physician responsible for the hospital care
of the enrollee, or other physician as authorized by the HMO or CMP, and
sends notice, following the procedures set forth in Sec. 412.42(c)(3)
of this chapter.
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 52
FR 8901, Mar. 20, 1987; 58 FR 38079, July 15, 1993; 59 FR 59941, Nov.
21, 1994; 60 FR 45678, Sept. 1, 1995; 70 FR 4525, Jan. 28, 2005]
Sec. 417.442 Risk HMO's and CMP's: Conditions for provision of additional benefits.
(a) General rule. Except as provided in paragraph (b) of this
section, a risk HMO or CMP must, during any contract period, provide to
its Medicare enrollees the additional benefits described in Sec.
417.440(b)(4) if its ACRs (calculated in accordance with Sec. 417.594)
are less than the average per capita rates that CMS pays for the
Medicare enrollees during the contract period.
(b) Exceptions--(1) Reduced payment election. An HMO or CMP is not
obligated to furnish additional services under paragraph (a) of this
section if it has requested a reduction in its monthly payment from CMS
under Sec. 417.592(e), and it--
(i) Elects to receive reduced payment so that there is no difference
between the average of its per capita rates of payment and its ACR; or
(ii) Elects to receive partially reduced payment and furnish
Medicare enrollees with additional benefits described in Sec. 417.440
(b)(4) so that the combined value of benefits and reduced payment is
equivalent to the difference between the average of its per capita rates
of payment and its ACR.
(2) Benefit stabilization fund. An HMO or CMP may elect to have a
part of the value of the additional benefits it must provide under
paragraph (a) of this section withheld in a benefit stabilization fund
as described in Sec. 417.596.
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985; 58 FR 38082, July
15, 1993; 60 FR 45678, Sept. 1, 1995]
[[Page 128]]
Sec. 417.444 Special rules for certain enrollees of risk HMOs and CMPs.
(a) Applicability. This section applies to any Medicare enrollee of
a risk HMO or CMP who meets the following conditions:
(1) On February 1, 1985, was enrolled--
(i) In an HMO or CMP that had in effect a cost contract entered into
under section 1876 of the Act in accordance with regulations in effect
before February 1, 1985; or
(ii) In an HCPP that was being reimbursed on a reasonable cost basis
under section 1833(a)(1)(A) of the Act.
(2) Has continued enrollment in the same entity without interruption
or disenrolled after February 1, 1985, and later reenrolled in the same
entity.
(b) Retention of nonrisk status--(1) A ``nonrisk'' enrollee is a
Medicare beneficiary who meets the conditions of paragraph (a) of this
section and is enrolled in an entity that enters into a risk contract as
an HMO or CMP. A ``nonrisk'' enrollee may retain nonrisk status
indefinitely unless CMS determines under paragraph (c)(1) of this
section, that the enrollee's status must be changed, or the enrollee
requests the change, as provided in paragraph (c)(2) of this section.
(2) A nonrisk enrollee of a risk HMO or CMP is not entitled to
additional benefits under Sec. 417.442.
(c) Conversion to risk status--(1) Conversion based on CMS
determination. If CMS determines that, for administrative reasons or
because there are fewer than 75 current nonrisk Medicare enrollees
remaining in the HMO or CMP, all of its nonrisk Medicare enrollees must
be covered under the risk provisions of the contract, the conversion
process is as follows:
(i) CMS notifies each affected enrollee of the decision at least 90
days prior to the effective date.
(ii) The nonrisk Medicare enrollees complete and sign forms stating
that they understand and accept the new rules and benefits that will be
applicable to them.
(iii) The HMO or CMP notifies each affected enrollee, in writing, at
least 30 days in advance, of the date upon which his or her coverage
under the risk portion of the contract takes effect.
(2) Conversion based on enrollee's request. A nonrisk Medicare
enrollee requests, using a form identical or similar to the form
described in paragraph (c)(1) of this section, that he or she be covered
under the risk portion of the contract.
(d) Notification. An HMO or CMP converting from a cost contract to a
risk contract must, within 60 days of signing the risk contract, inform
nonrisk enrollees of their right to remain nonrisk Medicare enrollees or
to convert to risk enrollment at any time in accordance with paragraph
(c)(2) of this section.
[58 FR 38073, July 15, 1993]
Sec. 417.446 [Reserved]