[Title 42 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2017 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 42

Public Health


________________________

Parts 400 to 413

                         Revised as of October 1, 2017

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2017
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 42:
          Chapter IV--Centers for Medicare & Medicaid 
          Services, Department of Health and Human Services          3
  Finding Aids:
      Table of CFR Titles and Chapters........................     933
      Alphabetical List of Agencies Appearing in the CFR......     953
      List of CFR Sections Affected...........................     963

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

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

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

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                               EXPLANATION

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

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

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

LEGAL STATUS

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

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
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    To determine whether a Code volume has been amended since its 
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Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
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EFFECTIVE AND EXPIRATION DATES

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Register since the last revision of that volume of the Code. Source 
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inserted following the text.

OMB CONTROL NUMBERS

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

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Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
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PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
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INCORPORATION BY REFERENCE

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This material, like any other properly issued regulation, has the force 
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    What is a proper incorporation by reference? The Director of the 
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    (a) The incorporation will substantially reduce the volume of 
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    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
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this volume.

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    Oliver A. Potts,
    Director,
    Office of the Federal Register.
    October 1, 2017.

                                
                                      
                            

  

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                               THIS TITLE

    Title 42--Public Health is composed of five volumes. The parts in 
these volumes are arranged in the following order: Parts 1-399, parts 
400-413, parts 414-429, parts 430-481, and part 482 to end. The first 
volume (parts 1-399) contains current regulations issued under chapter 
I--Public Health Service (HHS). The second, third, and fourth volumes 
(parts 400-413, parts 414-429, and parts 430-481) include regulations 
issued under chapter IV--Centers for Medicare & Medicaid Services (HHS) 
and the fifth volume (part 482 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, 2017.

    For this volume, Bonnie Fritts was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of John Hyrum 
Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



                         TITLE 42--PUBLIC HEALTH




                  (This book contains parts 400 to 413)

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

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

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




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


  Editorial Note: Nomenclature changes to chapter IV appear at 62 FR 
46037, Aug. 29, 1997; 66 FR 39452, July 31, 2001; 67 FR 36540, May 24, 
2002; and 77 FR 29028, May 16, 2012

                    SUBCHAPTER A--GENERAL PROVISIONS
Part                                                                Page
400             Introduction; definitions...................           5
401             General administrative requirements.........           8
402             Civil money penalties, assessments, and 
                    exclusions..............................          38
403             Special programs and projects...............          58
                     SUBCHAPTER B--MEDICARE PROGRAM
405             Federal health insurance for the aged and 
                    disabled................................         119
406             Hospital insurance eligibility and 
                    entitlement.............................         308
407             Supplementary medical insurance (SMI) 
                    enrollment and entitlement..............         325
408             Premiums for supplementary medical insurance         335
409             Hospital insurance benefits.................         352
410             Supplementary medical insurance (SMI) 
                    benefits................................         382
411             Exclusions from Medicare and limitations on 
                    Medicare payment........................         461
412             Prospective payment systems for inpatient 
                    hospital services.......................         556
413             Principles of reasonable cost reimbursement; 
                    payment for end-stage renal disease 
                    services; prospectively determined 
                    payment rates for skilled nursing 
                    facilities; payment for acute kidney 
                    injury dialysis.........................         762

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                     SUBCHAPTER A_GENERAL PROVISIONS





PART 400_INTRODUCTION; DEFINITIONS--Table of Contents



Subpart A [Reserved]

                          Subpart B_Definitions

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

Subpart C [Reserved]

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

Subpart A [Reserved]



                          Subpart B_Definitions



Sec. 400.200  General definitions.

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

[[Page 6]]

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

[48 FR 12534, Mar. 25, 1983]

    Editorial Note: For Federal Register citations affecting 
Sec. 400.200, see the List of CFR Sections Affected, which appears in 
the Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 400.202  Definitions specific to Medicare.

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

[[Page 7]]

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

[48 FR 12534, Mar. 25, 1983]

    Editorial Note: For Federal Register citations affecting 
Sec. 400.202, see the List of CFR Sections Affected, which appears in 
the

[[Page 8]]

Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 400.203  Definitions specific to Medicaid.

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

[48 FR 12534, Mar. 25, 1983, as amended at 50 FR 33029, Aug. 16, 1985; 
56 FR 8852, Mar. 1, 1991; 57 FR 29155, June 30, 1992; 67 FR 41094, June 
14, 2002; 77 FR 29028, May 16, 2012]

Subpart C [Reserved]



PART 401_GENERAL ADMINISTRATIVE REQUIREMENTS--Table of Contents



Subpart A [Reserved]

                Subpart B_Confidentiality and Disclosure

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

Subpart C [Reserved]

[[Page 9]]

            Subpart D_Reporting and Returning of Overpayments

401.301  Basis and scope.
401.303  Definitions.
401.305  Requirements for reporting and returning of overpayments.

Subpart E [Reserved]

               Subpart F_Claims Collection and Compromise

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

   Subpart G_Availability of Medicare Data for Performance Measurement

401.701  Purpose and scope.
401.703  Definitions.
401.705  Eligibility criteria for qualified entities.
401.707  Operating and governance requirements for qualified entities.
401.709  The application process and requirements.
401.711  Updates to plans submitted as part of the application process.
401.713  Ensuring the privacy and security of data.
401.715  Selection and use of performance measures.
401.716  Non-public analyses.
401.717  Provider and supplier requests for error correction.
401.718  Dissemination of data.
401.719  Monitoring and sanctioning of qualified entities.
401.721  Terminating an agreement with a qualified entity.
401.722  Qualified clinical data registries.

    Authority: Secs. 1102, 1871, and 1874(e) of the Social Security Act 
(42 U.S.C. 1302, 1395hh, and 1395w-5) and sec. 105, Pub. L. 114-10, 129 
Stat. 87.

Subpart A [Reserved]



                Subpart B_Confidentiality and Disclosure

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



Sec. 401.101  Purpose and scope.

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



Sec. 401.102  Definitions.

    For purposes of this subpart:
    Act means the Social Security Act.
    Freedom of Information Act rules means the substantive mandatory 
disclosure provisions of the Freedom of Information Act, 5 U.S.C. 552 
(including the exemptions from mandatory disclosure, 5 U.S.C. 552(b), as 
implemented by the Department's public information regulation, 45 CFR 
part 5, subpart F

[[Page 10]]

and by Secs. 401.106 to 401.152 of this subpart.
    Person means a person as defined in the Administrative Procedure 
Act, 5 U.S.C. 551(2). This includes State or local agencies, but does 
not include Federal agencies or State or Federal courts.
    Record has the same meaning as that provided in 45 CFR 5.5.
    Subject individual means an individual whose record is maintained by 
the Department in a system of records, as the terms ``individual,'' 
``record'', and ``system of records'' are defined in the Privacy Act of 
1974, 5 U.S.C. 552a(a).



Sec. 401.105  Rules for disclosure.

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

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



Sec. 401.106  Publication.

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

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



Sec. 401.108  CMS rulings.

    (a) After September 1981, a precedent final opinion or order or a 
statement of policy or interpretation that has not been published in the 
Federal Register as a part of a regulation or of a notice implementing 
regulations, but which has been adopted by CMS as having precedent, may 
be published in the Federal Register as a CMS Ruling

[[Page 11]]

and will be made available in the publication entitled CMS Rulings.
    (b) Precedent final opinions and orders and statements of policy and 
interpretation that were adopted by CMS before October, 1981, and that 
have not been published in the Federal Register are available in CMS 
Rulings.
    (c) CMS Rulings are published under the authority of the 
Administrator, CMS. They are binding on all CMS components, on all HHS 
components that adjudicate matters under the jurisdiction of CMS, and on 
the Social Security Administration to the extent that components of the 
Social Security Administration adjudicate matters under the jurisdiction 
of CMS.

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



Sec. 401.109  Precedential Final Decisions of the Secretary.

    (a) The Chair of the Department of Health and Human Services 
Departmental Appeals Board (DAB Chair) may designate a final decision of 
the Secretary issued by the Medicare Appeals Council in accordance with 
part 405, subpart I; part 422, subpart M; part 423, subpart U; or part 
478, subpart B, of this chapter as precedential. In determining which 
decisions should be designated as precedential, the DAB Chair may take 
into consideration decisions that address, resolve, or clarify recurring 
legal issues, rules or policies, or that may have broad application or 
impact, or involve issues of public interest.
    (b) Precedential decisions are made available to the public, with 
personally identifiable information of the beneficiary removed, and have 
precedential effect from the date they are made available to the public. 
Notice of precedential decisions is published in the Federal Register.
    (c) Medicare Appeals Council decisions designated in accordance with 
paragraph (a) of this section have precedential effect and are binding 
on all CMS components, on all HHS components that adjudicate matters 
under the jurisdiction of CMS, and on the Social Security Administration 
to the extent that components of the Social Security Administration 
adjudicate matters under the jurisdiction of CMS.
    (d) Precedential effect, as used in this section, means that the 
Medicare Appeals Council's--
    (1) Legal analysis and interpretation of a Medicare authority or 
provision is binding and must be followed in future determinations and 
appeals in which the same authority or provision applies and is still in 
effect; and
    (2) Factual findings are binding and must be applied to future 
determinations and appeals involving the same parties if the relevant 
facts are the same and evidence is presented that the underlying factual 
circumstances have not changed since the issuance of the precedential 
final decision.

[82 FR 5105, Jan. 17, 2017]



Sec. 401.110  Publications for sale.

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



Sec. 401.112  Availability of administrative staff manuals.

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

[[Page 12]]



Sec. 401.116  Availability of records upon request.

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



Sec. 401.118  Deletion of identifying details.

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



Sec. 401.120  Creation of records.

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



Sec. 401.126  Information or records that are not available.

    (a) Specific exemptions from disclosure. Pursuant to paragraph (b) 
of 5 U.S.C. 552, certain classes of records are exempt from disclosure. 
For some examples of the kinds of materials which are exempt, see 
subpart F of the public information regulation of the Department of 
Health and Human Services (45 CFR part 5) and the appendix to that 
regulation.
    (b) Materials exempt from disclosure by statute. Pursuant to 
paragraph (b)(3) of 5 U.S.C. 552, as amended, which exempts from the 
requirement for disclosure matters that are exempted from disclosure by 
statute, provided that such statute requires that the matters be 
withheld from the public in such a manner as to leave no discretion on 
the issue, or establishes particular criteria for withholding or refers 
to particular types of matter to be withheld:
    (1) Reports described in sections 1106 (d) and (e) of the Social 
Security Act shall not be disclosed, except in accordance with the 
provisions of sections 1106 (d) and (e). Sections 1106 (d) and (e) 
provide for public inspection of certain official reports dealing with 
the operation of the health programs established by titles XVIII and XIX 
of the Social Security Act (Medicare and Medicaid), but require that 
program validation survey reports and other formal evaluations of 
providers of services shall not identify individual patients, individual 
health care practitioners, or other individuals. Section 1106(e) further 
requires that none of the reports shall be made public until the 
contractor or provider whose performance is being evaluated has had a 
reasonable opportunity to review that report and to offer comments. See 
Sec. 401.133 (b) and (c);
    (2)(i) Except as specified in paragraph (b)(2)(ii) of this section, 
CMS may not disclose any accreditation survey or any information 
directly related to the survey (including corrective action plans) made 
by and released to it by the Joint Commission on Accreditation of 
Healthcare Organizations, the American Osteopathic Association or any 
other national accreditation organization that meets the requirements of 
Sec. 488.5 or Sec. 493.506 of this chapter. Materials that are 
confidential include accreditation letters and accompanying 
recommendations and comments prepared by an accreditation organization 
concerning the entities it surveys.
    (ii) Exceptions. (A) CMS may release the accreditation survey of any 
home health agency; and
    (B) CMS may release the accreditation survey and other information 
directly related to the survey (including corrective action plans) to 
the extent the survey and information relate to an enforcement action 
(for example,

[[Page 13]]

denial of payment for new admissions, civil money penalties, temporary 
management and termination) taken by CMS; and
    (3) Tax returns and return information defined in section 6103 of 
the Internal Revenue Code, as amended by the Tax Reform Act of 1976, 
shall not be disclosed except as authorized by the Internal Revenue 
Code.
    (c) Effect of exemption. Neither 5 U.S.C. 552 nor this regulation 
directs the withholding of any record or information, except to the 
extent of the prohibitions in paragraph (b) of this section. Except for 
material required to be withheld under the statutory provisions 
incorporated in paragraph (b) of this section or under another statute 
which meets the standards in 5 U.S.C. 552(b)(3), materials exempt from 
mandatory disclosure will nevertheless be made available when this can 
be done consistently with obligations of confidentiality and 
administrative necessity. The disclosure of materials or records under 
these circumstances in response to a specific request, however, is of no 
precedent force with respect to any other request.

[46 FR 55696, Nov. 12, 1981, as amended at 58 FR 61837, Nov. 23, 1993; 
80 FR 29834, May 22, 2015]



Sec. 401.128  Where requests for records may be made.

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

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

Region I--John F. Kennedy Federal Building, Boston, MA 02203. 
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont.
Region II--26 Federal Plaza, New York, NY 10007. New York, New Jersey, 
Puerto Rico, Virgin Islands.
Region III--Gateway Building, 3535 Market Street, Philadelphia, PA 
19101. Delaware, Maryland, Pennsylvania, Virginia, West Virginia, 
District of Columbia.
Region IV--101 Marietta Street, Altanta, GA 30323. Alabama, Florida, 
Georgia, Kentucky, Mississippi, North Carolina, South Carolina, 
Tennessee.
Region V--300 South Wacker Drive, Chicago, IL 60606. Illinois, Indiana, 
Michigan, Minnesota, Ohio, Wisconsin.
Region VI--1200 Main Tower Building, Dallas, TX 75202. Arkansas, 
Louisiana, New Mexico, Oklahoma, Texas.
Region VII--601 East 12th Street, Kansas City, MO 64106. Iowa, Kansas, 
Missouri, Nebraska.
Region VIII--Federal Office Building, 19th and Stout Streets, Denver, CO 
80294. Colorado, Montana, North Dakota, South Dakota, Utah, Wyoming.
Region IX--Federal Office Building, 50 United Nations Plaza, San 
Francisco, CA 94102. Arizona, California, Hawaii, Nevada, Guam, Trust 
Territory of Pacific Islands, American Samoa.
Region X--Arcade Plaza Building, 1321 Second Avenue, Seattle, WA 98101. 
Alaska, Idaho, Oregon, Washington.

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

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

[[Page 14]]



Sec. 401.130  Materials available at social security district offices
and branch offices.

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

Intermediary Manual (Provider Services under Medicare CMS Pub. 13-2 and 
13-3).
    (4) Parts 2 and 3 of the Part B Intermediary Manual (Physician and 
Supplier Services).
    (5) Intermediary Letters Related to Parts 2 and 3 of the Part A and 
Part B Intermediary Manuals.
    (6) State Buy-In Handbook (State Enrollment of Eligible Individuals 
under the Supplementary Medical Insurance Program) and Letters.
    (7) Group Practice Prepayment Plan Manual (HIM-8) and Letters.
    (8) State Operations Manual (HIM-7).
    (9) CMS Letters to State Agencies on Medicare.
    (10) Skilled Nursing Facility Manual (CMS Pub. 12).
    (11) Hearing Officers Handbook (Supplementary Medical Insurance 
Program--HIM-21).
    (12) Hospital Manual (HIM-10).
    (13) Home Health Agency Manual (HIM-11).
    (14) Outpatient Physical Therapy Provider Manual (HIM-9).
    (15) Provider Reimbursement Manual (HIM-15).
    (16) Audit Program Manuals for Hospital (HIM-16), Home Health Agency 
(HIM-17), and Extended Care Facilities (HIM-18).
    (17) Statements of deficiencies based upon survey reports of health 
care institutions or facilities prepared after January 31, 1973, by a 
State agency, and such reports (including pertinent written statements 
furnished by such institution or facility on such statements of 
deficiencies), as set forth in Sec. 401.133(a). Except as otherwise 
provided for at Secs. 401.133 and 488.325 of this chapter for SNFs, such 
statements of deficiencies, reports, and pertinent written statements 
shall be available or made available only at the social security 
district office and regional office servicing the area in which the 
institution or facility is located, except that such statements of 
deficiencies and pertinent written statements shall also be available at 
the local public assistance offices servicing such area.
    (18) Indexes to the materials listed in paragraph (a) of this 
section and in this paragraph (b) and an index to the Bureau of Hearings 
and Appeals Handbook.

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



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

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

[[Page 15]]



Sec. 401.133  Availability of official reports on providers and 
suppliers of services, State agencies, intermediaries, and carriers
under Medicare.

    Except as otherwise provided for in Sec. 488.325 of this chapter for 
SNFs, the following must be made available to the public under the 
conditions specified:
    (a) Statements of deficiencies and survey reports on providers of 
services prepared by State agencies. (1) Statements of deficiencies 
based upon official survey reports prepared after January 31, 1973, by a 
State agency pursuant to its agreement entered into under section 1864 
of the Social Security Act and furnished to CMS, which relate to a State 
agency's findings on the compliance of a health care institution or 
facility with the applicable provisions in section 1861 of the Act and 
with the regulations, promulgated pursuant to those provisions, dealing 
with health and safety of patients in those institutions and facilities; 
and (2) State agency survey reports. The statement of deficiencies or 
report and any pertinent written statements furnished by the institution 
or facility on the statement of deficiencies shall be disclosed within 
90 days following the completion of the survey by the State agency, but 
not to exceed 30 days following the receipt of the report by CMS. (See 
Sec. 401.130(b)(17)) for places where statements of deficiencies, 
reports, and pertinent written statements will be available.)
    (b) CMS reports on providers of services. Upon request in writing, 
official reports and other formal evaluations (including followup 
reviews), excluding references to internal tolerance rules and practices 
contained therein, internal working papers or other informal memoranda, 
prepared and completed after January 31, 1973, which relate to the 
performance of providers of services under Medicare: Provided, That no 
information identifying individual patients, physicians, or other 
practitioners, or other individuals shall be disclosed under this 
paragraph. Those reports and other evaluations shall be disclosed within 
30 days following the final preparation thereof by CMS during which time 
the providers of services shall be afforded a reasonable opportunity to 
offer comments, and there shall be disclosed with those reports and 
evaluations any pertinent written statements furnished CMS by those 
providers on those reports and evaluations.
    (c) Contractor performance review reports. Upon request in writing, 
official contractor performance review reports and other formal 
evaluations (including followup reviews), excluding references to 
internal tolerance rules and practices contained therein, internal 
working papers or other informal memoranda, prepared and completed after 
January 31, 1973, which relate to the evaluation of the performance of 
(1) intermediaries and carriers under their agreements entered into 
pursuant to sections 1816 and 1842 of the Social Security Act and (2) 
State agencies under their agreements entered into pursuant to section 
1864 of the Act (including comparative evaluations of the performance of 
those intermediaries, carriers, and State agencies). The latest Contract 
Performance Review Report pertaining to a particular intermediary or 
carrier, prepared prior to February 1, 1973, may also be disclosed to 
any person upon request in writing. Those reports and evaluations shall 
be disclosed within 30 days following their final preparation by CMS (or 
30 days following the request therefor, in the case of the contract 
performance review report prepared prior to February 1, 1973), during 
which time those intermediaries, carriers, and State agencies, as the 
case may be, shall be afforded a reasonable opportunity to offer 
comments, and there shall be disclosed with those reports and 
evaluations any pertinent written statements furnished CMS by those 
intermediaries, carriers, on State agencies or those reports and 
evaluations.
    (d) Accreditation surveys. Upon written request, CMS will release 
the accreditation survey and related information from an accreditation 
organization meeting the requirements of Sec. 488.5 or Sec. 493.506 of 
this chapter to the extent the survey and information relate to an 
enforcement action taken (for example, denial of payment for new 
admission, civil money penalties, temporary management and termination) 
by CMS;

[[Page 16]]

    (e) Upon written request, CMS will release the accreditation survey 
of any home health agency.

[46 FR 55696, Nov. 12, 1981; 46 FR 59249, Dec. 4, 1981, as amended at 58 
FR 61838, Nov. 23, 1993; 59 FR 56232, Nov. 10, 1994; 80 FR 29834, May 
22, 2015]



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

    (a) Except as provided in paragraph (b) of this section, the 
following information may be released to an officer or employee of an 
agency of the Federal or a State government lawfully charged with the 
administration of a program receiving grants-in-aid under title V and 
XIX of the Social Security Act for the purpose of administration of 
those titles, or to any officer or employee of the Department of Army, 
Department of Defense, solely for the administration of its Civilian 
Health and Medical Program of the Uniformed Services (CHAMPUS):
    (1) Information, including the identification number, concerning 
charges made by physicians, other practitioners, or suppliers, and 
amounts paid under Medicare for services furnished to beneficiaries by 
such physicians, other practioners, or suppliers, to enable the agency 
to determine the proper amount of benefits payable for medical services 
performed in accordance with those programs; or
    (2) Information as to physicians or other practioners that has been 
disclosed under Sec. 401.105.
    (3) Information relating to the qualifications and certification 
status of hospitals and other health care facilities obtained in the 
process of determining whether, and certifying as to whether, 
institutions or agencies meet or continue to meet the conditions of 
participation of providers of services or whether other entities meet or 
continue to meet the conditions for coverage of services they furnish.
    (b) The release of such information shall not be authorized by a 
fiscal intermediary or carrier.
    (c) The following information may be released to any officer or 
employee of an agency of the Federal or a State government lawfully 
charged with the duty of conducting an investigation or prosecution with 
respect to possible fraud or abuse against a program receiving grants-
in-aid under Medicaid, but only for the purpose of conducting such an 
investigation or prosecution, or to any officer or employee of the 
Department of the Army, Department of Defense, solely for the 
administration of its Civilian Health and Medical Program of the 
Uniformed Services (CHAMPUS), provided that the agency has filed an 
agreement with CMS that the information will be released only to the 
agency's enforcement branch and that the agency will preserve the 
confidentiality of the information received and will not disclose that 
information for other than program purposes:
    (1) The name and address of any provider of medical services, 
organization, or other person being actively investigated for possible 
fraud in connection with Medicare, and the nature of such suspected 
fraud. An active investigation exists when there is significant evidence 
supporting an initial complaint but there is need for further 
investigation.
    (2) The name and address of any provider of medical services, 
organization, or other person found, after consultation with an 
appropriate professional association or a program review team, to have 
provided unnecessary services, or of any physician or other individual 
found to have violated the assignment agreement on at least three 
occasions.
    (3) The name and address of any provider of medical services, 
organization or other person released under paragraph (c)(1) or (2) of 
this section concerning which an active investigation is concluded with 
a finding that there is no fraud or other prosecutable offense.



Sec. 401.135  Release of Medicare information to the public.

    The following shall be made available to the public under the 
conditions specified:
    (a) Information as to amounts paid to providers and other 
organizations and facilities for services to beneficiaries under title 
XVIII of the Act: Provided, That no information identifying any 
particular beneficiaries shall be disclosed under this paragraph.

[[Page 17]]

    (b) The name of any provider of services or other person furnishing 
services to Medicare beneficiaries who--
    (1) Has been found by a Federal court to have been guilty of 
submitting false claims in connection with Medicare; or
    (2) Has been found by a carrier or intermediary, after consultation 
with a professional medical association functioning external to program 
administration or, if appropriate, the State medical authority, to have 
been engaged in a pattern of furnishing services to beneficiaries which 
are substantially in excess of their medical needs; except that the name 
of any provider or other person shall not be disclosed pursuant to a 
finding under this paragraph (b)(2) of this section, unless that 
provider or other person has first been afforded a reasonable 
opportunity to offer evidence on his behalf.
    (c) Upon request in writing, cost reports submitted by providers of 
services pursuant to section 1815 of the Act to enable the Secretary to 
determine amounts due the providers.



Sec. 401.136  Requests for information or records.

    (a) A request should reasonably identify the requested record by 
brief description. Requesters who have detailed information which would 
assist in identifying the records requested are urged to provide such 
information in order to expedite the handling of the request. Envelopes 
in which written requests are submitted should be clearly identified as 
Freedom of Information requests. The request should include the fee or 
request determination of the fee. When necessary, a written request will 
be promptly forwarded to the proper office, and the requester will be 
advised of the date of the receipt and identification and address of the 
proper office.
    (b) Determinations of whether records will be released or withheld 
will be made within 10 working days from date of receipt of the request 
in the office listed in Sec. 401.128 except where CMS extends this time 
and sends notice of such extension to the requester. Such extension may 
not exceed 10 additional working days and shall apply only where the 
following unusual circumstances exist:
    (1) The need to search for and collect the requested records from 
field facilities or other establishments that are separate from the 
office processing the requests;
    (2) The need to search for, collect, and appropriately examine a 
voluminous amount of separate and distinct records which are requested 
in a single request; or
    (3) The need for consultation, which shall be conducted with all 
practicable speed, with another agency having a substantial interest in 
the request or among two or more components of CMS having a substantial 
interest in the subject matter of the request.
    (c) If an extension is made, the requester will be notified in 
writing before the expiration of 10 working days from receipt of the 
request and will be given an explanation of why the extension was 
necessary and the date on which a determination will be made.
    (d) Authority to extend the time limit with respect to any request 
for information or records is granted to the Director, Office of Public 
Affairs, CMS and to the Director of Public Affairs in any HHS Regional 
Office. Those officers and employees of CMS who are listed in 
Sec. 401.144(a) as having authority to deny requests for information 
from records maintained on individuals are granted authority to extend 
the time limit for responding to requests for information from such 
records.



Sec. 401.140  Fees and charges.

    (a) Statement of policy. It is CMS's policy to comply with certain 
requests for information services without charge. Except as otherwise 
determined pursuant to paragraph (c) of this section, fees will be 
charged for the following services with respect to all other requests 
for information from records which are reasonably identified by the 
requesters:
    (1) Reproduction, duplication, or copying of records;
    (2) Searches for records; and
    (3) Certification or authentication of records.
    (b) Fee schedules. The fee schedule is as follows:
    (1) Search for records. Three dollars per hour: Provided, however, 
That no

[[Page 18]]

charge will be made for the first half hour.
    (2) Reproduction, duplication, or copying of records. Ten cents per 
page where such reproduction can be made by commonly available 
photocopying machines. The cost of reproducing records which cannot be 
so photocopied will be determined on an individual basis at actual cost.
    (3) Certification or authentication of records. Three dollars per 
certification or authentication.
    (4) Forwarding materials to destination. Any special arrangements 
for forwarding which are requested shall be charged at actual cost; 
however, no charge will be made for postage.
    (5) No charge will be made when the total amount does not exceed 
five dollars.
    (c) Waiver or reduction of fees. Waiver or reduction of the fees in 
paragraph (b) of this section may be made upon a determination that such 
waiver or reduction is in the public interest because furnishing the 
information can be considered as primarily benefiting the general 
public. Such determination may be made by the appropriate officer or 
employee identified in Sec. 401.144.
    (d) Sale of documents. On occasion, a previously printed document 
may be available for sale to the public; the cost of supplying the 
document is one cent per page unless the document is available for sale 
from the Superintendent of Documents, in which case the price shall be 
that determined by the Superintendent.



Sec. 401.144  Denial of requests.

    (a) General authority. Only the Director, Office of Public Affairs, 
CMS, and the Regional Directors of Public Affairs, HHS, are authorized 
to deny written requests to obtain, inspect or copy any CMS information 
or record.
    (b) Forms of denials. (1) Oral requests may be dealt with orally, 
but the requester should be advised that the oral response is not an 
official determination and that an official determination may be 
obtained only by submitting the request in writing. Appropriate 
available assistance will be offered.
    (2) Written Requests--Denials of written requests will be in writing 
and will contain the reasons for the denial including, as appropriate, a 
statement that a document requested is nonexistent or not reasonably 
described or is subject to one or more clearly described exemption(s). 
Denials will also provide the requester with appropriate information on 
how to exercise the right of appeal.



Sec. 401.148  Administrative review.

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

[[Page 19]]

limits set forth in Sec. 401.136 and this section constitutes an 
exhaustion of the requester's administrative remedies.



Sec. 401.152  Court review.

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

Subpart C [Reserved]



            Subpart D_Reporting and Returning of Overpayments

    Source: 81 FR 7683, Feb. 12, 2016, unless otherwise noted.



Sec. 401.301  Basis and scope.

    This subpart sets forth the policies and procedures for reporting 
and returning overpayments to the Medicare program for providers and 
suppliers of services under Parts A and B of title XVIII of the Act as 
required by section 1128J(d) of the Act.



Sec. 401.303  Definitions.

    For purposes of this subpart--
    Medicare contractor means a Part A/Part B Medicare Administrative 
Contractor (A/B MAC) or a Durable Medical Equipment Medicare 
Administrative Contractor (DME MAC).
    Overpayment means any funds that a person has received or retained 
under title XVIII of the Act to which the person, after applicable 
reconciliation, is not entitled under such title.
    Person means a provider (as defined in Sec. 400.202 of this chapter) 
or a supplier (as defined in Sec. 400.202 of this chapter).



Sec. 401.305  Requirements for reporting and returning of overpayments.

    (a) General. (1) A person that has received an overpayment must 
report and return the overpayment in the form and manner set forth in 
this section.
    (2) A person has identified an overpayment when the person has, or 
should have through the exercise of reasonable diligence, determined 
that the person has received an overpayment and quantified the amount of 
the overpayment. A person should have determined that the person 
received an overpayment and quantified the amount of the overpayment if 
the person fails to exercise reasonable diligence and the person in fact 
received an overpayment.
    (b) Deadline for reporting and returning overpayments. (1) A person 
who has received an overpayment must report and return the overpayment 
by the later of either of the following:
    (i) The date which is 60 days after the date on which the 
overpayment was identified.
    (ii) The date any corresponding cost report is due, if applicable.
    (2) The deadline for returning overpayments will be suspended when 
the following occurs:
    (i) OIG acknowledges receipt of a submission to the OIG Self-
Disclosure Protocol and will remain suspended until such time as a 
settlement agreement is entered, the person withdraws from the OIG Self-
Disclosure Protocol, or the person is removed from the OIG Self-
Disclosure Protocol.
    (ii) CMS acknowledges receipt of a submission to the CMS Voluntary 
Self-Referral Disclosure Protocol and will remain suspended until such 
time as a settlement agreement is entered, the person withdraws from the 
CMS Voluntary Self-Referral Disclosure Protocol, or the person is 
removed from the CMS Voluntary Self-Referral Disclosure Protocol.
    (iii) A person requests an extended repayment schedule as defined in 
Sec. 401.603 and will remain suspended until such time as CMS or one of 
its contractors rejects the extended repayment schedule request or the 
provider or supplier fails to comply with the terms of the extended 
repayment schedule.
    (c) Applicable reconciliation. (1) The applicable reconciliation 
occurs when a cost report is filed; and
    (2) In instances when the provider--
    (i) Receives more recent CMS information on the SSI ratio, the 
provider is not required to return any overpayment resulting from the 
updated information until the final reconciliation of the provider's 
cost report occurs; or
    (ii) Knows that an outlier reconciliation will be performed, the 
provider is

[[Page 20]]

not required to estimate the change in reimbursement and return the 
estimated overpayment until the final reconciliation of that cost 
report.
    (d) Reporting. (1) A person must use an applicable claims 
adjustment, credit balance, self-reported refund, or other reporting 
process set forth by the applicable Medicare contractor to report an 
overpayment, except as provided in paragraph (d)(2) of this section. If 
the person calculates the overpayment amount using a statistical 
sampling methodology, the person must describe the statistically valid 
sampling and extrapolation methodology in the report.
    (2) A person satisfies the reporting obligations of this section by 
making a disclosure under the OIG's Self-Disclosure Protocol or the CMS 
Voluntary Self-Referral Disclosure Protocol resulting in a settlement 
agreement using the process described in the respective protocol.
    (e) Enforcement. Any overpayment retained by a person after the 
deadline for reporting and returning the overpayment specified in 
paragraph (b) of this section is an obligation for purposes of 31 U.S.C. 
3729.
    (f) Lookback period. An overpayment must be reported and returned in 
accordance with this section if a person identifies the overpayment, as 
defined in paragraph (a)(2) of this section, within 6 years of the date 
the overpayment was received.

Subpart E [Reserved]



               Subpart F_Claims Collection and Compromise

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



Sec. 401.601  Basis and scope.

    (a) Basis. This subpart implements the following statutory 
provisions:
    (1) For CMS the Debt Collection Improvement Act of 1996 (Pub. L. 
104-134) (DCIA), 110 Stat. 1321, 1358 (April 26, 1996) (codified at 31 
U.S.C. 3711), and conforms to the regulations (31 CFR parts 900-904) 
issued jointly by the Department of the Treasury and the Department of 
Justice that generally prescribe claims collection standards and 
procedures under the DCIA for the Federal government.
    (2) Section 1893(f)(1) of the Act regarding the use of repayment 
plans.
    (b) Scope. Except as provided in paragraphs (c) through (f) of this 
section, the regulations in this subpart describe CMS's procedures and 
standards for the collection of claims in any amount, and the compromise 
of, or the suspension or termination of collection action on, all claims 
for money or property that do not exceed $100,000 or such higher amount 
as the Attorney General may from time to time prescribe, exclusive of 
interest, arising under any functions delegated to CMS by the Secretary.
    (c) Amount of claim. CMS refers all claims that exceed $100,000 or 
such higher amount as the Attorney General may from time to time 
prescribe, exclusive of interest, to the Department of Justice or the 
General Accounting Office for the compromise of claims, or the 
suspension or termination of collection action.
    (d) Related regulations--(1) Department regulations. DHHS 
regulations applicable to CMS that generally implement the FCCA for the 
Department are located at 45 CFR part 30. These regulations apply only 
to the extent CMS regulations do not address a situation.
    (2) CMS regulations. The following regulations govern specific debt 
management situations encountered by CMS and supplement this subpart:
    (i) Claims against Medicare beneficiaries for the recovery of 
overpayments are covered in 20 CFR 404.515.
    (ii) Adjustments in Railroad Retirement or Social Security benefits 
to recover Medicare overpayments to individuals are covered in 
Secs. 405.350-405.358 of this chapter.
    (iii) Claims against providers, physicians, or other suppliers of 
services for overpayments under Medicare and for assessment of interest 
are covered in Secs. 405.377 and 405.378 of this chapter, respectively.
    (iv) Claims against beneficiaries for unpaid hospital insurance or 
supplementary medical insurance premiums under Medicare are covered in 
Sec. 408.110 of this chapter.

[[Page 21]]

    (v) State repayment of Medicaid funds by installments is covered in 
Sec. 430.48 of this chapter.
    (e) Collection and compromise under other statutes and at common 
law. The regulations in this subpart do not--
    (1) Preclude disposition by CMS of claims under statutes, other than 
the FCCA, that provide for the collection or compromise of a claim, or 
suspension or termination of collection action.
    (2) Affect any rights that CMS may have under common law as a 
creditor.
    (f) Fraud. The regulations in this subpart do not apply to claims in 
which there is an indication of fraud, the presentation of a false 
claim, or misrepresentation on the part of a debtor or any other party 
having an interest in the claim. CMS forwards these claims to the 
Department of Justice for disposition under 4 CFR 105.1.
    (g) Enforced collection. CMS refers claims to the Department of 
Justice for enforced collection through litigation in those cases which 
cannot be compromised or on which collection action cannot be suspended 
or terminated in accordance with this subpart or the regulations issued 
jointly by the Attorney General and the Comptroller General.

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



Sec. 401.603  Definitions.

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

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



Sec. 401.605  Omissions not a defense.

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



Sec. 401.607  Claims collection.

    (a) General policy. CMS recovers amounts of claims due from debtors, 
including interest where appropriate, by--
    (1) Direct collections in lump sums or in installments; or
    (2) Offsets against monies owed to the debtor by the Federal 
government where possible.
    (b) Collection in lump sums. Whenever possible, CMS attempts to 
collect claims in full in one lump sum. However, if CMS determines that 
a debtor is unable to pay the claim in one lump sum, CMS may instead 
enter into an agreement to accept regular installment payments.
    (c) Collection in installments. Generally, CMS requires that all 
claims to be satisfied by installment payments must be liquidated in 
three years or less. If unusual circumstances exist, such as the 
possibility of debtor insolvency, an installment agreement that extends 
beyond three years may be approved.
    (1) Debtor request. If a debtor desires to repay a claim in 
installments, the debtor must submit--
    (i) A request to CMS; and
    (ii) Any information required by CMS to make a decision regarding 
the request.
    (2) Extended repayment schedule. (i) For purposes of this paragraph 
(c)(2), the following definitions apply:
    Extreme hardship exists when a provider or supplier qualifies as 
being in ``hardship'' as defined in this paragraph and the provider's or 
supplier's request for an extended repayment schedule (ERS) is approved 
under paragraph (c)(3) of this section.
    Hardship exists when the total amount of all outstanding outstanding 
overpayments (principal and interest and including overpayments reported 
in accordance with Secs. 401.301 through 401.305) not included in an 
approved, existing repayment schedule is 10 percent or greater than the 
total Medicare payments made for the cost reporting period covered by 
the most recently submitted cost report for a provider filing a cost 
report, or for the previous calendar year for a supplier or non cost-
report provider.

[[Page 22]]

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

[48 FR 39064, Aug. 29, 1983, as amended at 61 FR 49271, Sept. 19, 1996; 
61 FR 63748, Dec. 2, 1996; 73 FR 36447, June 27, 2008; 81 FR 7684, Feb. 
12, 2016]



Sec. 401.613  Compromise of claims.

    (a) Amount of compromise. HFCA requires that the amount to be 
recovered through a compromise of a claim must--
    (1) Bear a reasonable relation to the amount of the claim; and
    (2) Be recoverable through enforced collection procedures.
    (b) General factors. After considering the bases for a decision to 
compromise a claim under paragraph (c) of this section, CMS may further 
consider factors such as--
    (1) The age and health of the debtor if the debtor is an individual;
    (2) Present and potential income of the debtor; and
    (3) Whether assets have been concealed or improperly transferred by 
the debtor.
    (c) Basis for compromise. Bases on which CMS may compromise a claim 
include the following--
    (1) Inability to pay. CMS may compromise a claim if it determines 
that the debtor, or the estate of a deceased debtor, does not have the 
present or prospective ability to pay the full amount of the claim 
within a reasonable time.
    (2) Litigative probabilities. CMS may compromise a claim if it 
determines that it would be difficult to prevail in a case before a 
court of law as a result of the legal issues involved or inability of 
the parties to agree to the facts of

[[Page 23]]

the case. The amount that CMS accepts in compromise under this provision 
will reflect--
    (i) The likelihood that CMS would have prevailed on the legal 
question(s) involved;
    (ii) Whether and to what extent CMS would have obtained a full or 
partial recovery of a judgment, depending on the availability of 
witnesses, or other evidentiary support for CMS's claim; and
    (iii) The amount of court costs that would be assessed to CMS.
    (3) Cost of collecting the claim. CMS may compromise a claim if it 
determines that the cost of collecting the claim does not justify the 
enforced collection of the full amount. In this case, CMS may adjust the 
amount it accepts as a compromise to allow an appropriate discount for 
the costs of collection it would have incurred but for the compromise.
    (d) Enforcement policy. CMS may compromise statutory penalties, 
forfeitures, or debts established as an aid to enforcement or to compel 
compliance, if it determines that its enforcement policy, in terms of 
deterrence and securing compliance both present and future, is 
adequately served by acceptance of the compromise amount.



Sec. 401.615  Payment of compromise amount.

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



Sec. 401.617  Suspension of collection action.

    (a) General conditions. CMS may temporarily suspend collection 
action on a claim if the following general conditions are met--
    (1) Amount of future recovery. CMS determines that future collection 
action may result in a recovery of an amount sufficient to justify 
periodic review and action on the claim by CMS during the period of 
suspension.
    (2) Statute of limitations. CMS determines that--
    (i) The applicable statute of limitations has been tolled, waived or 
has started running anew; or
    (ii) Future collections may be made by CMS through offset despite an 
applicable statute of limitations.
    (b) Basis for suspension. Bases on which CMS may suspend collection 
action on a particular claim include the following--
    (1) A debtor cannot be located; or
    (2) A debtor--
    (i) Owns no substantial equity in property;
    (ii) Is unable to make payment on CMS's claim or is unable to effect 
a compromise; and
    (iii) Has future prospects that justify retention of the claim.
    (c) Locating debtors. CMS will make every reasonable effort to 
locate missing debtors sufficiently in advance of the bar of an 
applicable statute of limitations to permit timely filing of a lawsuit 
to recover the amount of the claim.
    (d) Effect of suspension on liquidation of security. CMS will 
liquidate security, obtained in partial recovery of a claim, despite a 
decision under this section to suspend collection action against the 
debtor for the remainder of the claim.



Sec. 401.621  Termination of collection action.

    (a) General factors. After considering the bases for a decision to 
terminate collection action under paragraph (b) of this section, CMS may 
further consider factors such as--
    (1) The age and health of the debtor if the debtor is an individual;
    (2) Present and potential income of the debtor; and

[[Page 24]]

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



Sec. 401.623  Joint and several liability.

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



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

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



   Subpart G_Availability of Medicare Data for Performance Measurement

    Source: 76 FR 76567, Dec. 7, 2011, unless otherwise noted.



Sec. 401.701  Purpose and scope.

    The regulations in this subpart implement section 1874(e) of the 
Social Security Act as it applies to Medicare data made available to 
qualified entities for the evaluation of the performance of providers 
and suppliers.



Sec. 401.703  Definitions.

    For purposes of this subpart:
    (a) Qualified entity means either a single public or private entity, 
or a lead entity and its contractors, that meets the following 
requirements:
    (1) Is qualified, as determined by the Secretary, to use claims data 
to evaluate the performance of providers and suppliers on measures of 
quality, efficiency, effectiveness, and resource use.
    (2) Agrees to meet the requirements described in this subpart at 
Secs. 401.705 through 401.721.
    (b) Provider of services (referred to as a provider) has the same 
meaning as the term ``provider'' in Sec. 400.202 of this chapter.
    (c) Supplier has the same meaning as the term ``supplier'' at 
Sec. 400.202 of this chapter.
    (d) Claim means an itemized billing statement from a provider or 
supplier that, except in the context of Part D prescription drug event 
data, requests

[[Page 25]]

payment for a list of services and supplies that were furnished to a 
Medicare beneficiary in the Medicare fee-for-service context, or to a 
participant in other insurance or entitlement program contexts. In the 
Medicare program, claims files are available for each institutional 
(inpatient, outpatient, skilled nursing facility, hospice, or home 
health agency) and non-institutional (physician and durable medical 
equipment providers and suppliers) claim type as well as Medicare Part D 
Prescription Drug Event (PDE) data.
    (e) Standardized data extract is a subset of Medicare claims data 
that the Secretary would make available to qualified entities under this 
subpart.
    (f) Beneficiary identifiable data is any data that contains the 
beneficiary's name, Medicare Health Insurance Claim Number (HICN), or 
any other direct identifying factors, including, but not limited to 
postal address or telephone number.
    (g) Encrypted data is any data that does not contain the 
beneficiary's name or any other direct identifying factors, but does 
include a unique CMS-assigned beneficiary identifier that allows for the 
linking of claims without divulging any direct identifier of the 
beneficiary.
    (h) Claims data from other sources means provider- or supplier-
identifiable claims data that an applicant or qualified entity has full 
data usage right to due to its own operations or disclosures from 
providers, suppliers, private payers, multi-payer databases, or other 
sources.
    (i) Clinical data is registry data, chart-abstracted data, 
laboratory results, electronic health record information, or other 
information relating to the care or services furnished to patients that 
is not included in administrative claims data, but is available in 
electronic form.
    (j) Authorized user is a third party and its contractors (including, 
where applicable, business associates as that term is defined at 45 CFR 
160.103) that need analyses or data covered by this section to carry out 
work on behalf of that third party (meaning not the qualified entity or 
the qualified entity's contractors) to whom/which the qualified entity 
provides or sells data as permitted under this subpart. Authorized user 
third parties are limited to the following entities:
    (1) A provider.
    (2) A supplier.
    (3) A medical society.
    (4) A hospital association.
    (5) An employer.
    (6) A health insurance issuer.
    (7) A healthcare provider and/or supplier association.
    (8) A state entity.
    (9) A federal agency.
    (k) Employer has the same meaning as the term ``employer'' as 
defined in section 3(5) of the Employee Retirement Insurance Security 
Act of 1974.
    (l) Health insurance issuer has the same meaning as the term 
``health insurance issuer'' as defined in section 2791 of the Public 
Health Service Act.
    (m) Medical society means a nonprofit organization or association 
that provides unified representation and advocacy for physicians at the 
national or state level and whose membership is comprised of a majority 
of physicians.
    (n) Hospital association means a nonprofit organization or 
association that provides unified representation and advocacy for 
hospitals or health systems at a national, state, or local level and 
whose membership is comprised of a majority of hospitals and health 
systems.
    (o) Healthcare Provider and/or Supplier Association means a 
nonprofit organization or association that provides unified 
representation and advocacy for providers and suppliers at the national 
or state level and whose membership is comprised of a majority of 
suppliers or providers.
    (p) State Entity means any office, department, division, bureau, 
board, commission, agency, institution, or committee within the 
executive branch of a state government.
    (q) Combined data means, at a minimum, a set of CMS claims data 
provided under this subpart combined with claims data, or a subset of 
claims data from at least one of the other claims data sources described 
in Sec. 401.707(d).
    (r) Patient means an individual who has visited the provider or 
supplier for

[[Page 26]]

a face-to-face or telehealth appointment at least once in the past 24 
months.
    (s) Marketing means the same as the term ``marketing'' at 45 CFR 
164.501 without the exception to the bar for ``consent'' based 
marketing.
    (t) Violation means a failure to comply with a requirement of a CMS 
DUA (CMS data use agreement) or QE DUA (qualified entity data use 
agreement).
    (u) Required by law means the same as the phrase ``required by law'' 
at 45 CFR 164.103.

[76 FR 76567, Dec. 7, 2011, as amended at 81 FR 44479, July 7, 2016]



Sec. 401.705  Eligibility criteria for qualified entities.

    (a) Eligibility criteria: To be eligible to apply to receive data as 
a qualified entity under this subpart, an applicant generally must 
demonstrate expertise and sustained experience, defined as 3 or more 
years, in the following three areas, as applicable and appropriate to 
the proposed use:
    (1) Organizational and governance criteria, including:
    (i) Expertise in the areas of measurement that they propose to use 
in accurately calculating quality, and efficiency, effectiveness, or 
resource use measures from claims data, including the following:
    (A) Identifying an appropriate method to attribute a particular 
patient's services to specific providers and suppliers.
    (B) Ensuring the use of approaches to ensure statistical validity 
such as a minimum number of observations or minimum denominator for each 
measure.
    (C) Using methods for risk-adjustment to account for variations in 
both case-mix and severity among providers and suppliers.
    (D) Identifying methods for handling outliers.
    (E) Correcting measurement errors and assessing measure reliability.
    (F) Identifying appropriate peer groups of providers and suppliers 
for meaningful comparisons.
    (ii) A plan for a business model that is projected to cover the 
costs of performing the required functions, including the fee for the 
data.
    (iii) Successfully combining claims data from different payers to 
calculate performance reports.
    (iv) Designing, and continuously improving the format of performance 
reports on providers and suppliers.
    (v) Preparing an understandable description of the measures used to 
evaluate the performance of providers and suppliers so that consumers, 
providers and suppliers, health plans, researchers, and other 
stakeholders can assess performance reports.
    (vi) Implementing and maintaining a process for providers and 
suppliers identified in a report to review the report prior to 
publication and providing a timely response to provider and supplier 
inquiries regarding requests for data, error correction, and appeals.
    (vii) Establishing, maintaining, and monitoring a rigorous data 
privacy and security program, including disclosing to CMS any 
inappropriate disclosures of beneficiary identifiable information, 
violations of applicable federal and State privacy and security laws and 
regulations for the preceding 10-year period (or, if the applicant has 
not been in existence for 10 years, the length of time the applicant has 
been an organization), and any corrective actions taken to address the 
issues.
    (viii) Accurately preparing performance reports on providers and 
suppliers and making performance report information available to the 
public in aggregate form, that is, at the provider or supplier level.
    (2) Expertise in combining Medicare claims data with claims data 
from other sources, including demonstrating to the Secretary's 
satisfaction that the claims data from other sources that it intends to 
combine with the Medicare data received under this subpart address the 
methodological concerns regarding sample size and reliability that have 
been expressed by stakeholders regarding the calculation of performance 
measures from a single payer source.
    (3) Expertise in establishing, documenting and implementing rigorous 
data privacy and security policies including enforcement mechanisms.
    (b) Source of expertise and experience: An applicant may demonstrate 
expertise and experience in any or all of the

[[Page 27]]

areas described in paragraph (a) of this section through one of the 
following:
    (1) Activities it has conducted directly through its own staff.
    (2) Contracts with other entities if the applicant is the lead 
entity and includes documentation in its application of the contractual 
arrangements that exist between it and any other entity whose expertise 
and experience is relied upon in submitting the application.



Sec. 401.707  Operating and governance requirements for qualified
entities.

    A qualified entity must meet the following operating and governance 
requirements:
    (a) Submit to CMS a list of all measures it intends to calculate and 
report, the geographic areas it intends to serve, and the methods of 
creating and disseminating reports. This list must include the following 
information, as applicable and appropriate to the proposed use:
    (1) Name of the measure, and whether it is a standard or alternative 
measure.
    (2) Name of the measure developer/owner.
    (3) If it is an alternative measure, measure specifications, 
including numerator and denominator.
    (4) The rationale for selecting each measure, including the 
relationship to existing measurement efforts and the relevancy to the 
population in the geographic area(s) the entity would serve, including 
the following:
    (i) A specific description of the geographic area or areas it 
intends to serve.
    (ii) A specific description of how each measure evaluates providers 
and suppliers on quality, efficiency, effectiveness, and/or resource 
use.
    (5) A description of the methodologies it intends to use in creating 
reports with respect to all of the following topics:
    (i) Attribution of beneficiaries to providers and/or suppliers.
    (ii) Benchmarking performance data, including the following:
    (A) Methods for creating peer groups.
    (B) Justification of any minimum sample size determinations made.
    (C) Methods for handling statistical outliers.
    (iii) Risk adjustment, where appropriate.
    (iv) Payment standardization, where appropriate.
    (b) Submit to CMS a description of the process it would establish to 
allow providers and suppliers to view reports confidentially, request 
data, and ask for the correction of errors before the reports are made 
public.
    (c) Submit to CMS a prototype report and a description of its plans 
for making the reports available to the public.
    (d) Submit to CMS information about the claims data it possesses 
from other sources, as defined at Sec. 401.703(h), and documentation of 
adequate rights to use the other claims data for the purposes of this 
subpart.
    (e) If requesting a 5 percent national sample to calculate 
benchmarks for the specific measures it is using, submit to CMS a 
justification for needing the file to calculate benchmarks.



Sec. 401.709  The application process and requirements.

    (a) Application deadline. CMS accepts qualified entity applications 
on a rolling basis after an application is made available on the CMS Web 
site. CMS reviews applications in the order in which they are received.
    (b) Selection criteria. To be approved as a qualified entity under 
this subpart, the applicant must meet one of the following:
    (1) Standard approval process: Meet the eligibility and operational 
and governance requirements, fulfill all of the application requirements 
to CMS' satisfaction, and agree to pay a fee equal to the cost of CMS 
making the data available. The applicant and each of its contractors 
that are anticipated to have access to the Medicare data must also 
execute a Data Use Agreement with CMS, that among other things, 
reaffirms the statutory ban on the use of Medicare data provided to the 
qualified entity by CMS under this subpart for purposes other than those 
referenced in this subpart.
    (2) Conditional approval process: Meet the eligibility and 
operational and governance requirements, and fulfill all of the 
application requirements to CMS' satisfaction, with the exception of 
possession of sufficient claims data from

[[Page 28]]

other sources. Meeting these requirements will result in a conditional 
approval as a qualified entity. Entities gaining a conditional approval 
as a qualified entity must meet the eligibility requirements related to 
claims data from other sources the entity intends to combine with the 
Medicare data, agree to pay a fee equal to the cost of CMS making the 
data available, and execute a Data Use Agreement with CMS, that among 
other things, reaffirms the statutory ban on the use of Medicare data 
provided to the qualified entity by CMS under this subpart for purposes 
other than those referenced in this subpart before receiving any 
Medicare data. If the qualified entity is composed of lead entity with 
contractors, any contractors that are anticipated to have access to the 
Medicare data must also execute a Data Use Agreement with CMS.
    (c) Duration of approval. CMS permits an entity to participate as a 
qualified entity for a period of 3 years from the date of notification 
of the application approval by CMS. The qualified entity must abide by 
all CMS regulations and instructions. If the qualified entity wishes to 
continue performing the tasks after the 3-year approval period, the 
entity may re-apply for qualified entity status following the procedures 
in paragraph (f) of this section.
    (d) Reporting period. A qualified entity must produce reports on the 
performance of providers and suppliers at least annually, beginning in 
the calendar year after they are approved by CMS.
    (e) The distribution of data--(1) Initial data release. Once CMS 
fully approves a qualified entity under this subpart, the qualified 
entity must pay a fee equal to the cost of CMS making data available. 
After the qualified entity pays the fee, CMS will release the applicable 
encrypted claims data, as well as a file that crosswalks the encrypted 
beneficiary ID to the beneficiary name and the Medicare HICN. The data 
will be the most recent data available, and will be limited to the 
geographic spread of the qualified entity's other claims data, as 
determined by CMS.
    (2) Subsequent data releases. After the first quarter of 
participation, CMS will provide a qualified entity with the most recent 
additional quarter of currently available data, as well as a table that 
crosswalks the encrypted beneficiary ID to the beneficiary's name and 
the Medicare HICN. Qualified entities are required to pay CMS a fee 
equal to the cost of making data available before CMS will release the 
most recent quarter of additional data to the qualified entity.
    (f) Re-application. A qualified entity that is in good standing may 
re-apply for qualified entity status. A qualified entity is considered 
to be in good standing if it has had no violations of the requirements 
in this subpart or if the qualified entity is addressing any past 
deficiencies either on its own or through the implementation of a 
corrective action plan. To re-apply a qualified entity must submit to 
CMS documentation of any changes to what was included in its previously-
approved application. A re-applicant must submit this documentation at 
least 6 months before the end of its 3-year approval period and will be 
able to continue to serve as a qualified entity until the re-application 
is either approved or denied by CMS. If the re-application is denied, 
CMS will terminate its relationship with the qualified entity and the 
qualified entity will be subject to the requirements for return or 
destruction of data at Sec. 401.721(b).



Sec. 401.711  Updates to plans submitted as part of the application
process.

    (a) If a qualified entity wishes to make changes to the following 
parts of its previously-approved application:
    (1) Its list of proposed measures--the qualified entity must send 
all the information referenced in Sec. 401.707(a) for the new measures 
to CMS at least 30 days before its intended confidential release to 
providers and suppliers.
    (2) Its proposed prototype report--the qualified entity must send 
the new prototype report to CMS at least 30 days before its intended 
confidential release to providers and suppliers.
    (3) Its plans for sharing the reports with the public--the qualified 
entity must send the new plans to CMS at least 30 days before its 
intended confidential release to providers and suppliers.

[[Page 29]]

    (b) CMS will notify the qualified entity when the entity's proposed 
changes are approved or denied for use, generally within 30 days of the 
qualified entity submitting the changes to CMS. If a CMS decision on 
approval or disapproval for a change is not forthcoming within 30 days 
and CMS does not request an additional 30 days for review, the change or 
modification shall be deemed to be approved.
    (c) If the amount of claims data from other sources available to a 
qualified entity decreases, the qualified entity must immediately inform 
CMS and submit documentation that the remaining claims data from other 
sources is sufficient to address the methodological concerns regarding 
sample size and reliability. Under no circumstances may a qualified 
entity use Medicare data to create a report, use a measure, or share a 
report after the amount of claims data from other sources available to a 
qualified entity decreases until CMS determines either that the 
remaining claims data is sufficient or that the qualified entity has 
collected adequate additional data to address any deficiencies.
    (1) If the qualified entity cannot submit the documentation required 
in paragraph (c) of this section, or if CMS determines that the 
remaining claims data is not sufficient, CMS will afford the qualified 
entity up to 120 days to obtain additional claims to address any 
deficiencies. If the qualified entity does not have access to sufficient 
new data after that time, CMS will terminate its relationship with the 
qualified entity.
    (2) If CMS determines that the remaining claims data is sufficient, 
the qualified entity may continue issuing reports, using measures, and 
sharing reports.



Sec. 401.713  Ensuring the privacy and security of data.

    (a) Data use agreement between CMS and a qualified entity. A 
qualified entity must comply with the data requirements in its data use 
agreement with CMS (hereinafter the CMS DUA). Contractors (including, 
where applicable, business associates) of qualified entities that are 
anticipated to have access to the Medicare claims data or beneficiary 
identifiable data in the context of this program are also required to 
execute and comply with the CMS DUA. The CMS DUA will require the 
qualified entity to maintain privacy and security protocols throughout 
the duration of the agreement with CMS, and will ban the use or 
disclosure of Medicare data or any derivative data for purposes other 
than those set out in this subpart. The CMS DUA will also prohibit the 
use of unsecured telecommunications to transmit such data, and will 
specify the circumstances under which such data must be stored and may 
be transmitted.
    (b) A qualified entity must inform each beneficiary whose 
beneficiary identifiable data has been (or is reasonably believed to 
have been) inappropriately accessed, acquired, or disclosed in 
accordance with the DUA.
    (c) Contractor(s) must report to the qualified entity whenever there 
is an incident where beneficiary identifiable data has been (or is 
reasonably believed to have been) inappropriately accessed, acquired, or 
disclosed.
    (d) Data use agreement between a qualified entity and an authorized 
user. In addition to meeting the other requirements of this subpart, and 
as a pre-condition of selling or disclosing any combined data or any 
Medicare claims data (or any beneficiary-identifiable derivative data of 
either kind) and as a pre-condition of selling or disclosing non-public 
analyses that include individually identifiable beneficiary data, the 
qualified entity must enter a DUA (hereinafter the QE DUA) with the 
authorized user. Among other things laid out in this subpart, such QE 
DUA must contractually bind the authorized user (including any 
contractors or business associates described in the definition of 
authorized user) to the following:
    (1)(i) The authorized user may be permitted to use such data and 
non-public analyses in a manner that a HIPAA Covered Entity could do 
under the following provisions:
    (A) Activities falling under paragraph (1) of the definition of 
``health care operations'' under 45 CFR 164.501: Quality improvement 
activities, including care coordination activities and efforts to track 
and manage medical costs; patient-safety activities; population-based 
activities such as

[[Page 30]]

those aimed at improving patient safety, quality of care, or population 
health, including the development of new models of care, the development 
of means to expand coverage and improve access to healthcare, the 
development of means of reducing healthcare disparities, and the 
development or improvement of methods of payment or coverage policies.
    (B) Activities falling under paragraph (2) of the definition of 
``health care operations'' under 45 CFR 164.501: Reviewing the 
competence or qualifications of health care professionals, evaluating 
practitioner and provider performance, health plan performance, 
conducting training programs in which students, trainees, or 
practitioners in areas of health care learn under supervision to 
practice or improve their skills as health care providers, training of 
non-health care professionals, accreditation, certification, licensing, 
or credentialing activities.
    (C) Activities that qualify as ``fraud and abuse detection or 
compliance activities'' under 45 CFR 164.506(c)(4)(ii).
    (D) Activities that qualify as ``treatment'' under 45 CFR 164.501.
    (ii) All other uses and disclosures of such data and/or such non-
public analyses must be forbidden except to the extent a disclosure 
qualifies as a ``required by law'' disclosure as defined at 45 CFR 
164.103.
    (2) The authorized user is prohibited from using or disclosing the 
data or non-public analyses for marketing purposes as defined at 
Sec. 401.703(s).
    (3) The authorized user is required to ensure adequate privacy and 
security protection for such data and non-public analyses. At a minimum, 
regardless of whether the authorized user is a HIPAA covered entity, 
such protections of beneficiary identifiable data must be at least as 
protective as what is required of covered entities and their business 
associates regarding protected health information (PHI) under the HIPAA 
Privacy and Security Rules. In all cases, these requirements must be 
imposed for the life of such beneficiary identifiable data or non-public 
analyses and/or any derivative data, that is until all copies of such 
data or non-public analyses are returned or destroyed. Such duties must 
be written in such a manner as to survive termination of the QE DUA, 
whether for cause or not.
    (4) Except as provided for in paragraph (d)(5) of this section, the 
authorized user must be prohibited from re-disclosing or making public 
any such data or non-public analyses.
    (5)(i) At the qualified entity's discretion, it may permit an 
authorized user that is a provider as defined in Sec. 401.703(b) or a 
supplier as defined in Sec. 401.703(c), to re-disclose such data and 
non-public analyses as a covered entity will be permitted to disclose 
PHI under 45 CFR 164.506(c)(4)(i), under 45 CFR 164.506(c)(2), or under 
45 CFR 164.502(e)(1).
    (ii) All other uses and disclosures of such data and/or such non-
public analyses is forbidden except to the extent a disclosure qualifies 
as a ``required by law'' disclosure.
    (6) Authorized users who/that receive the beneficiary de-identified 
combined data or Medicare data as contemplated under Sec. 401.718 are 
contractually prohibited from linking the beneficiary de-identified data 
to any other identifiable source of information, and must be 
contractually barred from attempting any other means of re-identifying 
any individual whose data is included in such data.
    (7) The QE DUA must bind authorized user(s) to notifying the 
qualified entity of any violations of the QE DUA, and it must require 
the full cooperation of the authorized user in the qualified entity's 
efforts to mitigate any harm that may result from such violations, or to 
comply with the breach provisions governing qualified entities under 
this subpart.

[76 FR 76567, Dec. 7, 2011, as amended at 81 FR 44479, July 7, 2016]



Sec. 401.715  Selection and use of performance measures.

    (a) Standard measures. A standard measure is a measure that can be 
calculated in full or in part from claims data from other sources and 
the standardized extracts of Medicare Parts A and B claims, and Part D 
prescription drug event data and meets the following requirements:
    (1) Meets one of the following criteria:

[[Page 31]]

    (i) Is endorsed by the entity with a contract under section 1890(a) 
of the Social Security Act.
    (ii) Is time-limited endorsed by the entity with a contract under 
section 1890(a) of the Social Security Act until such time as the full 
endorsement status is determined.
    (iii) Is developed under section 931 of the Public Health Service 
Act.
    (iv) Can be calculated from standardized extracts of Medicare Parts 
A or B claims or Part D prescription drug event data, was adopted 
through notice-and-comment rulemaking, and is currently being used in 
CMS programs that include quality measurement.
    (v) Is endorsed by a CMS-approved consensus-based entity. CMS will 
approve organizations as consensus-based entities based on review of 
documentation of the consensus-based entity's measure approval process. 
To receive approval as a consensus-based entity, an organization must 
submit information to CMS documenting its processes for stakeholder 
consultation and measures approval; an organization will only receive 
approval as a consensus-based entity if all measure specifications are 
publically available. An organization will retain CMS acceptance as a 
consensus-based entity for 3 years after the approval date, at which 
time CMS will review new documentation of the consensus-based entity's 
measure approval process for a new 3-year approval.
    (2) Is used in a manner that follows the measure specifications as 
written (or as adopted through notice-and-comment rulemaking), including 
all numerator and denominator inclusions and exclusions, measured time 
periods, and specified data sources.
    (b) Alternative measure. (1) An alternative measure is a measure 
that is not a standard measure, but that can be calculated in full, or 
in part, from claims data from other sources and the standardized 
extracts of Medicare Parts A and B claims, and Part D prescription drug 
event data, and that meets one of the following criteria:
    (i) Rulemaking process: Has been found by the Secretary, through a 
notice-and comment-rulemaking process, to be more valid, reliable, 
responsive to consumer preferences, cost-effective, or relevant to 
dimensions of quality and resource use not addressed by standard 
measures, and is used by a qualified entity in a manner that follows the 
measure specifications as adopted through notice-and-comment rulemaking, 
including all numerator and denominator inclusions and exclusions, 
measured time periods, and specified data sources.
    (ii) Stakeholder consultation approval process: Has been found by 
the Secretary, using documentation submitted by a qualified entity that 
outlines its consultation and agreement with stakeholders in its 
community, to be more valid, responsive to consumer preferences, cost-
effective, or relevant to dimensions of quality and resource use not 
addressed by standard measures, and is used by a qualified entity in a 
manner that follows the measure specifications as submitted, including 
all numerator and denominator inclusions and exclusions, measured time 
periods, and specified data sources. If a CMS decision on approval or 
disapproval of alternative measures submitted using the stakeholder 
consultation approval process is not forthcoming within 60 days of 
submission of the measure by the qualified entity, the measure will be 
deemed approved. However, CMS retains the right to disapprove a measure 
if, even after 60 days, we find it to not be ``more valid, reliable, 
responsive to consumer preferences, cost-effective, or relevant to 
dimensions of quality and resource'' than a standard measure.
    (2) An alternative measure approved under the process at paragraph 
(b)(1)(i) of this section may be used by any qualified entity. An 
alternative measure approved under the process at paragraph (b)(1)(ii) 
of this section may only be used by the qualified entity that submitted 
the measure for consideration by the Secretary. A qualified entity may 
use an alternative measure up until the point that an equivalent 
standard measure for the particular clinical area or condition becomes 
available at which point the qualified entity must switch to the 
standard measure within 6 months or submit additional scientific 
justification and receive approval, via either paragraphs (b)(1)(i) or 
(b)(1)(ii) of this section, from

[[Page 32]]

the Secretary to continue using the alternative measure.
    (3) To submit an alternative measure for consideration under the 
notice-and-comment-rulemaking process, for use in the calendar year 
following the submission, an entity must submit the following 
information by May 31st:
    (i) The name of the alternative measure.
    (ii) The name of the developer or owner of the alternative measure.
    (iii) Detailed specifications for the alternative measure.
    (iv) Evidence that use of the alternative measure would be more 
valid, reliable, responsive to consumer preferences, cost-effective, or 
relevant to dimensions of quality and resource use not addressed by 
standard measures.
    (4) To submit an alternative measure for consideration under the 
documentation of stakeholder consultation approval process described in 
paragraph (b)(1)(ii) of this section, for use once the measure is 
approved by the Secretary, an entity must submit the following 
information to CMS:
    (i) The name of the alternative measure.
    (ii) The name of the developer or owner of the alternative measure.
    (iii) Detailed specifications for the alternative measure.
    (iv) A description of the process by which the qualified entity 
notified stakeholders in the geographic region it serves of its intent 
to seek approval of an alternative measure. Stakeholders must include a 
valid cross representation of providers, suppliers, payers, employers, 
and consumers.
    (v) A list of stakeholders from whom feedback was solicited, 
including the stakeholders' names and roles in the community.
    (vi) A description of the discussion about the proposed alternative 
measure, including a summary of all pertinent arguments supporting and 
opposing the measure.
    (vii) Unless CMS has already approved the same measure for use by 
another qualified entity, no new scientific evidence on the measure is 
available, and the subsequent qualified entity wishes to rely upon the 
scientific evidence submitted by the previously approved applicant, an 
explanation backed by scientific evidence that demonstrates why the 
measure is more valid, reliable, responsive to consumer preferences, 
cost-effective, or relevant to dimensions of quality and resource use 
not addressed by a standard measure.



Sec. 401.716  Non-public analyses.

    (a) General. So long as it meets the other requirements of this 
subpart, and subject to the limits in paragraphs (b) and (c) of this 
section, the qualified entity may use the combined data to create non-
public analyses in addition to performance measures and provide or sell 
these non-public analyses to authorized users (including any contractors 
or business associates described in the definition of authorized user).
    (b) Limitations on a qualified entity. In addition to meeting the 
other requirements of this subpart, a qualified entity must comply with 
the following limitations as a pre-condition of dissemination or selling 
non-public analyses to an authorized user:
    (1) A qualified entity may only provide or sell a non-public 
analysis to a health insurance issuer as defined in Sec. 401.703(l), 
after the health insurance issuer or a business associate of that health 
insurance issuer has provided the qualified entity with claims data that 
represents a majority of the health insurance issuer's covered lives, 
using one of the four methods of calculating covered lives established 
at 26 CFR 46.4375-1(c)(2), for the time period and geographic region 
covered by the issuer-requested non-public analyses. A qualified entity 
may not provide or sell a non-public analysis to a health insurance 
issuer if the issuer does not have any covered lives in the geographic 
region covered by the issuer-requested non-public analysis.
    (2) Analyses that contain information that individually identifies 
one or more beneficiaries may only be disclosed to a provider or 
supplier (as defined at Sec. 401.703(b) and (c)) when both of the 
following conditions are met:
    (i) The analyses only contain identifiable information on 
beneficiaries with whom the provider or supplier have a patient 
relationship as defined at Sec. 401.703(r).

[[Page 33]]

    (ii) A QE DUA as defined at Sec. 401.713(d) is executed between the 
qualified entity and the provider or supplier prior to making any 
individually identifiable beneficiary information available to the 
provider or supplier.
    (3) Except as specified under paragraph (b)(2) of this section, all 
analyses must be limited to beneficiary de-identified data. Regardless 
of the HIPAA covered entity or business associate status of the 
qualified entity and/or the authorized user, de-identification must be 
determined based on the standards for HIPAA covered entities found at 45 
CFR 164.514(b).
    (4) Analyses that contain information that individually identifies a 
provider or supplier (regardless of the level of the provider or 
supplier, that is, individual clinician, group of clinicians, or 
integrated delivery system) may not be disclosed unless one of the 
following three conditions apply:
    (i) The analysis only individually identifies the provider or 
supplier that is being supplied the analysis.
    (ii) Every provider or supplier individually identified in the 
analysis has been afforded the opportunity to appeal or correct errors 
using the process at Sec. 401.717(f).
    (iii) Every provider or supplier individually identified in the 
analysis has notified the qualified entity, in writing, that analyses 
can be disclosed to the authorized user without first going through the 
appeal and error correction process at Sec. 401.717(f).
    (c) Non-public analyses agreement between a qualified entity and an 
authorized user for beneficiary de-identified non-public analyses 
disclosures. In addition to the other requirements of this subpart, a 
qualified entity must enter a contractually binding non-public analyses 
agreement with the authorized user (including any contractors or 
business associates described in the definition of authorized user) as a 
pre-condition to providing or selling de-identified analyses. Such non-
public analyses agreement must contain the following provisions:
    (1) The authorized user may not use the analyses or derivative data 
for the following purposes:
    (i) Marketing, as defined at Sec. 401.703(s).
    (ii) Harming or seeking to harm patients or other individuals both 
within and outside the healthcare system regardless of whether their 
data are included in the analyses.
    (iii) Effectuating or seeking opportunities to effectuate fraud and/
or abuse in the healthcare system.
    (2) If the authorized user is an employer as defined in 
Sec. 401.703(k), the authorized user may only use the analyses or 
derivative data for purposes of providing health insurance to employees, 
retirees, or dependents of employees or retirees of that employer.
    (3)(i) At the qualified entity's discretion, it may permit an 
authorized user that is a provider as defined in Sec. 401.703(b) or a 
supplier as defined in Sec. 401.703(c), to re-disclose the de-identified 
analyses or derivative data, as a covered entity will be permitted under 
45 CFR 164.506(c)(4)(i), or under 45 CFR 164.502(e)(1).
    (ii) All other uses and disclosures of such data and/or such non-
public analyses is forbidden except to the extent a disclosure qualifies 
as a ``required by law'' disclosure.
    (4) If the authorized user is not a provider or supplier, the 
authorized user may not re-disclose or make public any non-public 
analyses or derivative data except as required by law.
    (5) The authorized user may not link the de-identified analyses to 
any other identifiable source of information and may not in any other 
way attempt to identify any individual whose de-identified data is 
included in the analyses.
    (6) The authorized user must notify the qualified entity of any DUA 
violations, and it must fully cooperate with the qualified entity's 
efforts to mitigate any harm that may result from such violations.

[81 FR 44480, July 7, 2016]



Sec. 401.717  Provider and supplier requests for error correction.

    (a) A qualified entity must confidentially share measures, 
measurement methodologies, and measure results with providers and 
suppliers at least 60 calendar days before making reports public. The 60 
calendar days begin on the date on which qualified entities

[[Page 34]]

send the confidential reports to providers and suppliers. A qualified 
entity must inform providers and suppliers of the date the reports will 
be made public at least 60 calendar days before making the reports 
public.
    (b) Before making the reports public, a qualified entity must allow 
providers and suppliers the opportunity to make a request for the data, 
or to make a request for error correction, within 60 calendar days after 
sending the confidential reports to providers or suppliers.
    (c) During the 60 calendar days between sending a confidential 
report on measure results and releasing the report to the public, the 
qualified entity must, at the request of a provider or supplier and with 
appropriate privacy and security protections, release the Medicare 
claims data and beneficiary names to the provider or supplier. Qualified 
entities may only provide the Medicare claims and/or beneficiary names 
relevant to the particular measure or measure result the provider or 
supplier is appealing.
    (d) A qualified entity must inform providers and suppliers that 
reports will be made public, including information related to the status 
of any data or error correction requests, after the date specified to 
the provider or supplier when the report is sent for review and, if 
necessary, error correction requests (at least 60 calendar days after 
the report was originally sent to the providers and suppliers), 
regardless of the status of any requests for error correction.
    (e) If a provider or supplier has a data or error correction request 
outstanding at the time the reports become public, the qualified entity 
must, if feasible, post publicly the name of the appealing provider or 
supplier and the category of the appeal request.
    (f) A qualified entity must comply with the following requirements 
before disclosing non-public analyses, as defined at Sec. 401.716, which 
contain information that individually identifies a provider or supplier:
    (1) A qualified entity must confidentially notify a provider or 
supplier that non-public analyses that individually identify the 
provider or supplier are going to be released to an authorized user at 
least 65 calendar days before disclosing the analyses. This confidential 
notification must include a short summary of the analyses (including the 
measures calculated), the process for the provider or supplier to 
request the analyses, the authorized users receiving the analyses, and 
the date on which the qualified entity will release the analyses to the 
authorized user.
    (2) A qualified entity must allow providers and suppliers the 
opportunity to opt-in to the review and correction process as defined in 
paragraphs (a) through (e) of this section, anytime during the 65 
calendar days. If a provider or supplier chooses to opt-in to the review 
and correction process more than 5 days into the notification period, 
the time for the review and correction process is shortened from 60 days 
to the number of days between the provider or supplier opt-in date and 
the release date specified in the confidential notification.

[76 FR 76567, Dec. 7, 2011, as amended at 81 FR 44481, July 7, 2016]



Sec. 401.718  Dissemination of data.

    (a) General. Subject to the other requirements in this subpart, the 
requirements in paragraphs (b) and (c) of this section and any other 
applicable laws or contractual agreements, a qualified entity may 
provide or sell combined data or provide Medicare data at no cost to 
authorized users defined at Sec. 401.703(b), (c), (m), and (n).
    (b) Data--(1) De-identification. Except as specified in paragraph 
(b)(2) of this section, any data provided or sold by a qualified entity 
to an authorized user must be limited to beneficiary de-identified data. 
De-identification must be determined based on the de-identification 
standards for HIPAA covered entities found at 45 CFR 164.514(b).
    (2) Exception. If such disclosure will be consistent with all 
applicable laws, data that individually identifies a beneficiary may 
only be disclosed to a provider or supplier (as defined at 
Sec. 401.703(b) and (c)) with whom the identifiable individuals in such 
data have a current patient relationship as defined at Sec. 401.703(r).
    (c) Data use agreement between a qualified entity and an authorized 
user. A

[[Page 35]]

qualified entity must contractually require an authorized user to comply 
with the requirements in Sec. 401.713(d) prior to providing or selling 
data to an authorized user under Sec. 401.718.

[81 FR 44481, July 7, 2016]



Sec. 401.719  Monitoring and sanctioning of qualified entities.

    (a) CMS will monitor and assess the performance of qualified 
entities and their contractors using the following methods:
    (1) Audits.
    (2) Submission of documentation of data sources and quantities of 
data upon the request of CMS and/or site visits.
    (3) Analysis of specific data reported to CMS by qualified entities 
through annual reports (as described in paragraph (b) of this section) 
and reports on inappropriate disclosures or uses of beneficiary 
identifiable data (as described in paragraph (c) of this section).
    (4) Analysis of complaints from beneficiaries and/or providers or 
suppliers.
    (b) A qualified entity must provide annual reports to CMS containing 
information related to the following:
    (1) General program adherence, including the following information:
    (i) The number of Medicare and private claims combined.
    (ii) The percent of the overall market share the number of claims 
represent in the qualified entity's geographic area.
    (iii) The number of measures calculated.
    (iv) The number of providers and suppliers profiled by type of 
provider and supplier.
    (v) A measure of public use of the reports.
    (2) The provider and supplier data sharing, error correction, and 
appeals process, including the following information:
    (i) The number of providers and suppliers requesting claims data.
    (ii) The number of requests for claims data fulfilled.
    (iii) The number of error corrections.
    (iv) The type(s) of problem(s) leading to the request for error 
correction.
    (v) The amount of time to acknowledge the request for data or error 
correction.
    (vi) The amount of time to respond to the request for error 
correction.
    (vii) The number of requests for error correction resolved.
    (3) Non-public analyses provided or sold to authorized users under 
this subpart, including the following information:
    (i) A summary of the analyses provided or sold, including--
    (A) The number of analyses.
    (B) The number of purchasers of such analyses.
    (C) The types of authorized users that purchased analyses.
    (D) The total amount of fees received for such analyses.
    (E) QE DUA or non-public analyses agreement violations.
    (ii) A description of the topics and purposes of such analyses.
    (iii) The number of analyses disclosed with unresolved requests for 
error correction.
    (4) Data provided or sold to authorized users under this subpart, 
including the following information:
    (i) The entities who received data.
    (ii) The basis under which each entity received such data.
    (iii) The total amount of fees received for providing, selling, or 
sharing the data.
    (iv) QE DUA violations.
    (c) A qualified entity must inform CMS of inappropriate disclosures 
or uses of beneficiary identifiable data under the DUA.
    (d) CMS may take the following actions against a qualified entity if 
CMS determines that the qualified entity violated any of the 
requirements of this subpart, regardless of how CMS learns of a 
violation:
    (1) Provide a warning notice to the qualified entity of the specific 
concern, which indicates that future deficiencies could lead to 
termination.
    (2) Request a corrective action plan (CAP) from the qualified 
entity.
    (3) Place the qualified entity on a special monitoring plan.
    (4) Terminate the qualified entity.
    (5) In the case of a violation, as defined at Sec. 401.703(t), of 
the CMS DUA or

[[Page 36]]

the QE DUA, CMS will impose an assessment on a qualified entity in 
accordance with the following:
    (i) Amount of assessment. CMS will calculate the amount of the 
assessment of up to $100 per individual entitled to, or enrolled for, 
benefits under part A of title XVIII of the Social Security Act or 
enrolled for benefits under Part B of such title whose data was 
implicated in the violation based on the following:
    (A) Basic factors. In determining the amount per impacted 
individual, CMS takes into account the following:
    (1) The nature and the extent of the violation.
    (2) The nature and the extent of the harm or potential harm 
resulting from the violation.
    (3) The degree of culpability and the history of prior violations.
    (B) Criteria to be considered. In establishing the basic factors, 
CMS considers the following circumstances:
    (1) Aggravating circumstances. Aggravating circumstances include the 
following:
    (i) There were several types of violations occurring over a lengthy 
period of time.
    (ii) There were many of these violations or the nature and 
circumstances indicate a pattern of violations.
    (iii) The nature of the violation had the potential or actually 
resulted in harm to beneficiaries.
    (2) Mitigating circumstances. Mitigating circumstances include the 
following:
    (i) All of the violations subject to the imposition of an assessment 
were few in number, of the same type, and occurring within a short 
period of time.
    (ii) The violation was the result of an unintentional and 
unrecognized error and the qualified entity took corrective steps 
immediately after discovering the error.
    (C) Effects of aggravating or mitigating circumstances. In 
determining the amount of the assessment to be imposed under paragraph 
(d)(5)(i)(A) of this section:
    (1) If there are substantial or several mitigating circumstance, the 
aggregate amount of the assessment is set at an amount sufficiently 
below the maximum permitted by paragraph (d)(5)(i)(A) of this section to 
reflect the mitigating circumstances.
    (2) If there are substantial or several aggravating circumstances, 
the aggregate amount of the assessment is set at an amount at or 
sufficiently close to the maximum permitted by paragraph (d)(5)(i)(A) of 
this section to reflect the aggravating circumstances.
    (D) The standards set for the qualified entity in this paragraph are 
binding, except to the extent that--
    (1) The amount imposed is not less than the approximate amount 
required to fully compensate the United States, or any State, for its 
damages and costs, tangible and intangible, including but not limited to 
the costs attributable to the investigation, prosecution, and 
administrative review of the case.
    (2) Nothing in this section limits the authority of CMS to settle 
any issue or case as provided by part 1005 of this title or to 
compromise any assessment as provided by paragraph (d)(5)(ii)(E) of this 
section.
    (ii) Notice of determination. CMS must propose an assessment in 
accordance with this paragraph (d)(5), by notifying the qualified entity 
by certified mail, return receipt requested. Such notice must include 
the following information:
    (A) The assessment amount.
    (B) The statutory and regulatory bases for the assessment.
    (C) A description of the violations upon which the assessment was 
proposed.
    (D) Any mitigating or aggravating circumstances that CMS considered 
when it calculated the amount of the proposed assessment.
    (E) Information concerning response to the notice, including:
    (1) A specific statement of the respondent's right to a hearing in 
accordance with procedures established at Section 1128A of the Act and 
implemented in 42 CFR part 1005.
    (2) A statement that failure to respond within 60 days renders the 
proposed determination final and permits the imposition of the proposed 
assessment.
    (3) A statement that the debt may be collected through an 
administrative offset.

[[Page 37]]

    (4) In the case of a respondent that has an agreement under section 
1866 of the Act, notice that imposition of an exclusion may result in 
termination of the provider's agreement in accordance with section 
1866(b)(2)(C) of the Act.
    (F) The means by which the qualified entity may pay the amount if 
they do not intend to request a hearing.
    (iii) Failure to request a hearing. If the qualified entity does not 
request a hearing within 60 days of receipt of the notice of proposed 
determination, any assessment becomes final and CMS may impose the 
proposed assessment.
    (A) CMS notifies the qualified entity, by certified mail with return 
receipt requested, of any assessment that has been imposed and of the 
means by which the qualified entity may satisfy the judgment.
    (B) The qualified entity has no right to appeal an assessment for 
which the qualified entity has not requested a hearing.
    (iv) When an assessment is collectible. An assessment becomes 
collectible after the earliest of the following:
    (A) Sixty (60) days after the qualified entity receives CMS's notice 
of proposed determination under paragraph (d)(5)(ii) of this section, if 
the qualified entity has not requested a hearing.
    (B) Immediately after the qualified entity abandons or waives its 
appeal right at any administrative level.
    (C) Thirty (30) days after the qualified entity receives the ALJ's 
decision imposing an assessment under Sec. 1005.20(d) of this title, if 
the qualified entity has not requested a review before the DAB.
    (D) Sixty (60) days after the qualified entity receives the DAB's 
decision imposing an assessment if the qualified entity has not 
requested a stay of the decision under Sec. 1005.22(b) of this title.
    (v) Collection of an assessment. Once a determination by HHS has 
become final, CMS is responsible for the collection of any assessment.
    (A) The General Counsel may compromise an assessment imposed under 
this part, after consulting with CMS or OIG, and the Federal government 
may recover the assessment in a civil action brought in the United 
States district court for the district where the claim was presented or 
where the qualified entity resides.
    (B) The United States or a state agency may deduct the amount of an 
assessment when finally determined, or the amount agreed upon in 
compromise, from any sum then or later owing the qualified entity.
    (C) Matters that were raised or that could have been raised in a 
hearing before an ALJ or in an appeal under section 1128A(e) of the Act 
may not be raised as a defense in a civil action by the United States to 
collect an assessment.

[76 FR 76567, Dec. 7, 2011, as amended at 81 FR 44481, July 7, 2016]



Sec. 401.721  Terminating an agreement with a qualified entity.

    (a) Grounds for terminating a qualified entity agreement. CMS may 
terminate an agreement with a qualified entity if CMS determines the 
qualified entity or its contractor meets any of the following:
    (1) Engages in one or more serious violations of the requirements of 
this subpart.
    (2) Fails to completely and accurately report information to CMS or 
fails to make appropriate corrections in response to confidential 
reviews by providers and suppliers in a timely manner.
    (3) Fails to submit an approvable corrective action plan (CAP) as 
prescribed by CMS, fails to implement an approved CAP, or fails to 
demonstrate improved performance after the implementation of a CAP.
    (4) Improperly uses or discloses claims information received from 
CMS in violation of the requirements in this subpart.
    (5) Based on its re-application, no longer meets the requirements in 
this subpart.
    (6) Fails to maintain adequate data from other sources in accordance 
with Sec. 401.711(c).
    (7) Fails to ensure authorized users comply with their QE DUAs or 
analysis use agreements.
    (b) Return or destruction of CMS data upon voluntary or involuntary 
termination from the qualified entity program:
    (1) If CMS terminates a qualified entity's agreement, the qualified 
entity

[[Page 38]]

and its contractors must immediately upon receipt of notification of the 
termination commence returning or destroying any and all CMS data (and 
any derivative files). In no instance can this process exceed 30 days.
    (2) If a qualified entity voluntarily terminates participation under 
this subpart, it and its contractors must return to CMS, or destroy, any 
and all CMS data in its possession within 30 days of notifying CMS of 
its intent to end its participation.

[76 FR 76567, Dec. 7, 2011, as amended at 81 FR 44482, July 7, 2016]



Sec. 401.722  Qualified clinical data registries.

    (a) A qualified clinical data registry that agrees to meet all the 
requirements in this subpart, with the exception of Sec. 401.707(d), may 
request access to Medicare data as a quasi qualified entity in 
accordance with such qualified entity program requirements.
    (b) Notwithstanding Sec. 401.703(q) (generally defining combined 
data), for purposes of qualified clinical data registries acting as 
quasi qualified entities under the qualified entity program 
requirements, combined data means, at a minimum, a set of CMS claims 
data provided under this subpart combined with clinical data or a subset 
of clinical data.

[81 FR 44482, July 7, 2016]



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



                      Subpart A_General Provisions

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

             Subpart B_Civil Money Penalties and Assessments

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

                          Subpart C_Exclusions

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

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

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



                      Subpart A_General Provisions



Sec. 402.1  Basis and scope.

    (a) Basis. This part is based on the sections of the Act that are 
specified in paragraph (c) of this section.
    (b) Scope. This part--
    (1) Provides for the imposition of civil money penalties, 
assessments, and exclusions against persons that violate the provisions 
of the Act specified in paragraph (c), (d), or (e) of this section; and
    (2) Sets forth the appeal rights of persons subject to penalties, 
assessments, or exclusion and the procedures for reinstatement following 
exclusion.
    (c) Civil money penalties. CMS or OIG may impose civil money 
penalties against any person or other entity specified in paragraphs 
(c)(1) through (c)(34) of this section under the identified section of 
the Act. (The authorities that also permit imposition of an assessment 
or exclusion are noted in the applicable paragraphs.)

[[Page 39]]

    (1) Sections 1833(h)(5)(D) and 1842(j)(2)--Any person that knowingly 
and willfully, and on a repeated basis, bills for a clinical diagnostic 
laboratory test, other than on an assignment-related basis. This 
provision includes tests performed in a physician's office but excludes 
tests performed in a rural health clinic. (This violation may also 
include an assessment and cause exclusion.)
    (2) Section 1833(i)(6)--Any person that knowingly and willfully 
presents, or causes to be presented, a bill or request for payment for 
an intraocular lens inserted during or after cataract surgery for which 
the Medicare payment rate includes the cost of acquiring the class of 
lens involved.
    (3) Section 1833(q)(2)(B)--Any entity that knowingly and willfully 
fails to provide information about a referring physician, including the 
physician's name and unique physician identification number for the 
referring physician, when seeking payment on an unassigned basis. (This 
violation, if it occurs in repeated cases, may also cause an exclusion.)
    (4) Sections 1834(a)(11)(A) and 1842(j)(2)--Any durable medical 
equipment supplier that knowingly and willfully charges for a covered 
service that is furnished on a rental basis after the rental payments 
may no longer be made (except for maintenance and servicing) as provided 
in section 1834(a)(7)(A). (This violation may also include an assessment 
and cause exclusion.)
    (5) Sections 1834(a)(18)(B) and 1842(j)(2)--Any nonparticipating 
durable medical equipment supplier that knowingly and willfully, in 
violation of section 1834(a)(18)(A), fails to make a refund to Medicare 
beneficiaries for a covered service for which payment is precluded due 
to an unsolicited telephone contact from the supplier. (This violation 
may also include an assessment and cause exclusion.)
    (6) Sections 1834(b)(5)(C) and 1842(j)(2)--Any nonparticipating 
physician or supplier that knowingly and willfully charges a Medicare 
beneficiary more than the limiting charge, as specified in section 
1834(b)(5)(B), for radiologist services. (This violation may also 
include an assessment and cause exclusion.)
    (7) Sections 1834(c)(4)(C) and 1842(j)(2)--Any nonparticipating 
physician or supplier that knowingly and willfully charges a Medicare 
beneficiary more than the limiting charge, as specified in section 
1834(c)(4)(B), for mammography screening. (This violation may also 
include an assessment and cause exclusion.)
    (8) Sections 1834(h)(3) and 1842(j)(2)--Any supplier of prosthetic 
devices, orthotics, and prosthetics that knowingly and willfully charges 
for a covered prosthetic device, orthotic, or prosthetic that is 
furnished on a rental basis after the rental payment may no longer be 
made (except for maintenance and servicing). (This violation may also 
include an assessment and cause exclusion.)
    (9) Section 1834(j)(2)(A)(iii)--Any supplier of durable medical 
equipment, including a supplier of prosthetic devices, prosthetics, 
orthotics, or supplies, that knowingly and willfully distributes a 
certificate of medical necessity in violation of section 
1834(j)(2)(A)(i) or fails to provide the information required under 
section 1834(j)(2)(A)(ii).
    (10) Sections 1834(j)(4) and 1842(j)(2)--
    (i) Any supplier of durable medical equipment, including a supplier 
of prosthetic devices, prosthetics, orthotics, or supplies, that 
knowingly and willfully fails to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assignment-
related basis if--
    (A) The supplier does not possess a Medicare supplier number;
    (B) The service is denied in advance under section 1834(a)(15); or
    (C) The service is determined not to be medically necessary or 
reasonable.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (11) Sections 1842(b)(18)(B) and 1842(j)(2)--Any practitioner 
specified in section 1842(b)(18)(C) (physician assistants, nurse 
practitioners, clinical nurse specialists, certified registered nurse 
anesthetists, certified nurse-midwives, clinical social workers, and 
clinical psychologists) or other person that

[[Page 40]]

knowingly and willfully bills or collects for any services by the 
practitioners on other than an assignment-related basis. (This violation 
may also include an assessment and cause exclusion.)
    (12) Sections 1842(k) and 1842(j)(2)--Any physician who knowingly 
and willfully presents, or causes to be presented, a claim or bill for 
an assistant at cataract surgery performed on or after March 1, 1987 for 
which payment may not be made because of section 1862(a)(15). (This 
violation may also include an assessment and cause exclusion.)
    (13) Sections 1842(l)(3) and 1842(j)(2)--Any nonparticipating 
physician who does not accept payment on an assignment-related basis and 
who knowingly and willfully fails to refund on a timely basis any 
amounts collected for services that are not reasonable or medically 
necessary or are of poor quality, in accordance with section 
1842(l)(1)(A). (This violation may also include an assessment and cause 
exclusion.)
    (14) Sections 1842(m)(3) and 1842(j)(2)--(i) Any nonparticipating 
physician, who does not accept payment for an elective surgical 
procedure on an assignment-related basis and whose charge is at least 
$500, who knowingly and willfully fails to--
    (A) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (B) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare 
program.
    (ii) This violation may also include an assessment and cause 
exclusion.
    (15) Sections 1842(n)(3) and 1842(j)(2)--Any physician who knowingly 
and willfully, in repeated cases, bills one or more beneficiaries, for 
purchased diagnostic tests, any amount other than the payment amount 
specified in section 1842(n)(1)(A) or section 1842(n)(1)(B). (This 
violation may also include an assessment and cause exclusion.)
    (16) Section 1842(p)(3)(A)--Any physician or practitioner who 
knowingly and willfully fails promptly to provide the appropriate 
diagnosis code or codes upon request by CMS or a carrier on any request 
for payment or bill not submitted on an assignment-related basis for any 
service furnished by the physician. (This violation, if it occurs in 
repeated cases, may also cause exclusion.)
    (17) Sections 1848(g)(1)(B) and 1842(j)(2)--
    (i) Any nonparticipating physician, supplier, or other person that 
furnishes physicians' services and does not accept payment on an 
assignment-related basis, that--
    (A) Knowingly and willfully bills or collects in excess of the 
limiting charge (as defined in section 1848(g)(2)) on a repeated basis; 
or
    (B) Fails to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A)(iii) or (iv).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (18) Section 1848(g)(3)(B) and 1842(j)(2)--Any person that knowingly 
and willfully bills for State plan approved physicians' services, as 
defined in section 1848(j)(3), on other than an assignment-related basis 
for a Medicare beneficiary who is also eligible for Medicaid (these 
individuals include qualified Medicare beneficiaries). This provision 
applies to services furnished on or after April 1, 1990. (This violation 
may also include an assessment and cause exclusion.)
    (19) Section 1848(g)(4)(B)(ii), 1842(p)(3), and 1842(j)(2)(A)--
    (i) Any physician, supplier, or other person (except any person that 
has been excluded from the Medicare program) that, for services 
furnished after September 1, 1990, knowingly and willfully--
    (A) Fails to submit a claim on a standard claim form for services 
provided for which payment is made under Part B on a reasonable charge 
or fee schedule basis; or
    (B) Imposes a charge for completing and submitting the standard 
claims form.
    (ii) These violations, if they occur in repeated cases, may also 
cause exclusion.
    (20) Section 1862(b)(5)(C)--Any employer (other than a Federal or 
other governmental agency) that, before October 1, 1998, willfully or 
repeatedly

[[Page 41]]

fails to provide timely and accurate information requested relating to 
an employee's group health insurance coverage.
    (21) Section 1862(b)(6)(B)--Any entity that knowingly, willfully, 
and repeatedly--
    (i) Fails to complete a claim form relating to the availability of 
other health benefit plans in accordance with section 1862(b)(6)(A); or
    (ii) Provides inaccurate information relating to the availability of 
other health benefit plans on the claim form.
    (22) Section 1877(g)(5)--Any person that fails to report information 
required by HHS under section 1877(f) concerning ownership, investment, 
and compensation arrangements. (This violation may also include an 
assessment and cause exclusion.)
    (23) Sections 1879(h), 1834(a)(18), and 1842(j)(2)--
    (i) Any durable medical equipment supplier, including a supplier of 
prosthetic devices, prosthetics, orthotics, or supplies, that knowingly 
and willfully fails to make refunds in a timely manner to Medicare 
beneficiaries for services billed on an assignment-related basis if--
    (A) The supplier did not possess a Medicare supplier number;
    (B) The service is denied in advance under section 1834(a)(15) of 
the Act; or
    (C) The service is determined not to be payable under section 
1834(a)(17)(b) because of unsolicited telephone contacts.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (24) Section 1882(a)(2)--Any person that issues a Medicare 
supplemental policy that has not been approved by the State regulatory 
program or does not meet Federal standards on and after the effective 
date in section 1882(p)(1)(C). (This violation may also include an 
assessment and cause exclusion.)
    (25) Section 1882(p)(8)--Any person that sells or issues Medicare 
supplemental policies, on or after July 30, 1992, that fail to conform 
to the NAIC or Federal standards established under section 1882(p). 
(This violation may also include an assessment and cause exclusion.)
    (26) Section 1882(p)(9)(C)--
    (i) Any person that sells a Medicare supplemental policy and--
    (A) Fails to make available for sale the core group of basic 
benefits when selling other Medicare supplemental policies with 
additional benefits; or
    (B) Fails to provide the individual, before the sale of the policy, 
an outline of coverage describing the benefits provided by the policy.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (27) Section 1882(q)(5)(C)--
    (i) Any person that fails to--
    (A) Suspend a Medicare supplemental policy at the policyholder's 
request, if the policyholder applies for and is determined eligible for 
medical assistance, and the policyholder provides notice within 90 days 
of the eligibility determination; or
    (B) Automatically reinstate the policy as of the date of termination 
of medical assistance if the policyholder loses eligibility for medical 
assistance and the policyholder provides notice within 90 days of loss 
of eligibility.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (28) Section 1882(r)(6)(A)--Any person that fails to provide refunds 
or credits as required by section 1882(r)(1)(B). (This violation may 
also include an assessment and cause exclusion.)
    (29) Section 1882(s)(4)--
    (i) Any issuer of a Medicare supplemental policy that--
    (A) Does not waive any time periods applicable to preexisting 
conditions, waiting periods, elimination periods, or probationary 
periods if the time periods were already satisfied under a preceding 
Medicare supplemental policy; or
    (B) Denies a policy, conditions the issuance or effectiveness of the 
policy, or discriminates in the pricing of the policy based on health 
status or other criteria as specified in section 1882(s)(2)(A).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (30) Section 1882(t)(2)--
    (i) Any issuer of a Medicare supplemental policy that--
    (A) Fails substantially to provide medically necessary services to 
enrollees seeking the services through the issuer's network of entities;

[[Page 42]]

    (B) Imposes premiums on enrollees in excess of the premiums approved 
by the State;
    (C) Acts to expel an enrollee for reasons other than nonpayment of 
premiums; or
    (D) Does not provide each enrollee at the time of enrollment with 
the specific information provided in section 1882(t)(1)(E)(i) or fails 
to obtain a written acknowledgment from the enrollee of receipt of the 
information (as required by section 1882(t)(1)(E)(ii)).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (31) Sections 1834(k)(6) and 1842(j)(2)--Any person or entity who 
knowingly and willfully bills or collects for any outpatient therapy 
services or comprehensive outpatient rehabilitation services on other 
than an assignment-related basis. (This violation may also include an 
assessment and cause exclusion.)
    (32) Sections 1834(l)(6) and 1842(j)(2)--Any supplier of ambulance 
services who knowingly and willfully bills or collects for any services 
on other than an assignment-related basis. (This violation may also 
include an assessment and cause exclusion.)
    (33) Section 1806(b)(2)(B)--Any person who knowingly and willfully 
fails to furnish a beneficiary with an itemized statement of items or 
services within 30 days of the beneficiary's request.
    (34) Section 1128G (b) (1) and (2)--Any applicable manufacturer or 
applicable group purchasing organization that fails to timely, 
accurately, or completely report a payment or other transfer of value or 
an ownership or investment interest to CMS, as required under part 403, 
subpart I, of this chapter.
    (d) Assessments. CMS or OIG may impose assessments in addition to 
civil money penalties for violations of the following statutory 
sections:
    (1) Section 1833: Paragraph (h)(5)(D).
    (2) Section 1834: Paragraphs (a)(11)(A), (a)(18)(B), (b)(5)(C), 
(c)(4)(C), (h)(3), (j)(4), (k)(6), and (l)(6).
    (3) Section 1842: Paragraphs (k), (l)(3), (m)(3), and (n)(3).
    (4) Section 1848: Paragraph (g)(1)(B).
    (5) Section 1877: Paragraph (g)(5).
    (6) Section 1879: Paragraph (h).
    (7) Section 1882: Paragraphs (a)(2), (p)(8), (p)(9)(C), (q)(5)(C), 
(r)(6)(A), (s)(3), and (t)(2).
    (e) Exclusions. (1) CMS or OIG may exclude any person from 
participation in the Medicare program on the basis of any of the 
following violations of the statute:
    (i) Section 1833: Paragraphs (h)(5)(D) and, in repeated cases, 
(q)(2)(B).
    (ii) Section 1834: Paragraphs (a)(11)(A), (a)(18)(B), (b)(5)(C), 
(c)(4)(C), (h)(3), (j)(4), (k)(6), and (l)(6).
    (iii) Section 1842: Paragraphs (b)(18)(B), (k), (l)(3), (m)(3), 
(n)(3), and, in repeated cases, (p)(3)(B).
    (iv) Section 1848: Paragraphs (g)(1)(B), (g)(3)(B), and, in repeated 
cases, (g)(4)(B)(ii).
    (v) Section 1877: Paragraph (g)(5).
    (vi) Section 1879: Paragraph (h).
    (vii) Section 1882: Paragraphs (a)(2), (p)(8), (p)(9)(C), (q)(5)(C), 
(r)(6)(A), (s)(4), and (t)(2).
    (2) CMS or OIG must exclude from participation in the Medicare 
program any of the following, under the identified section of the Act:
    (i) Section 1834(a)(17)(C)--Any supplier of durable medical 
equipment and supplies that are covered under section 1834(a)(13) that 
knowingly contacts Medicare beneficiaries by telephone regarding the 
furnishing of covered services in violation of section 1834(a)(17)(A) 
and whose conduct establishes a pattern of prohibited contacts as 
described under section 1834(a)(17)(A).
    (ii) Section 1834(h)(3)--Any supplier of prosthetic devices, 
orthotics, and prosthetics that knowingly contacts Medicare 
beneficiaries by telephone regarding the furnishing of prosthetic 
devices, orthotics, or prosthetics in the same manner as in the 
violation under section 1834(a)(17)(A) and whose conduct establishes a 
pattern of prohibited contacts in the same manner as described in 
section 1834(a)(17)(C).
    (f) Responsible persons. (1) If CMS or OIG determines that more than 
one person is responsible for any of the violations described in 
paragraph (c) or paragraph (d) of this section, it may impose a civil 
money penalty or a civil money penalty and assessment against any one of 
those persons or jointly and severally against two or more of those

[[Page 43]]

persons. However, the aggregate amount of the assessments collected may 
not exceed the amount that could be assessed if only one person were 
responsible.
    (2) A principal is liable for penalties and assessments for the 
actions of his or her agent acting within the scope of the agency.
    (g) Time limits. Neither CMS nor OIG initiates an action to impose a 
civil money penalty, assessment, or proceeding to exclude a person from 
participation in the Medicare program unless it begins the action within 
6 years from the date on which the claim was presented, the request for 
payment was made, or the incident occurred.

[63 FR 68690, Dec. 14, 1998, as amended at 66 FR 49546, Sept. 28, 2001; 
78 FR 9520, Feb. 8, 2013]



Sec. 402.3  Definitions.

    For purposes of this part:
    Assessment means the amount described in Sec. 402.107 and includes 
the plural of that term.
    Assignment-related basis means that the claim submitted by a 
physician, supplier or other person is paid on the basis of an 
assignment, whereby the physician, supplier or other person agrees to 
accept the Medicare payment as payment in full for the services 
furnished to the beneficiary and is precluded from charging the 
beneficiary more than the deductible and coinsurance based upon the 
approved Medicare fee amount. Additional obligations, including 
obligations to make refunds in certain circumstances, are established at 
section 1842(b)(3) of the Act.
    Claim means an application for payment for a service for which the 
Medicare or Medicaid program may pay.
    Covered means that a service is described as reasonable and 
necessary for the diagnosis or treatment of illness or injury or to 
improve the functioning of a malformed body member. A service is not 
covered if it is specifically identified as excluded from Medicare Part 
B coverage or is not a defined Medicare Part B benefit.
    Exclusion means the temporary or permanent barring of a person or 
other entity from participation in the Medicare or State health care 
program and that services furnished or ordered by that person are not 
paid for under either program.
    General Counsel means the General Counsel of HHS or his or her 
designees.
    Initiating agency means whichever agency (CMS or the OIG) initiates 
the interaction with the person.
    Knowingly or knowingly and willfully means that a person, with 
respect to information--
    (1) Has actual knowledge of the information;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
information; or
    (3) Acts in reckless disregard of the truth or falsity of the 
information; and
    (4) No proof of specific intent is required.
    Medicare supplemental policy means a policy guaranteeing that a 
health plan will pay a policyholder's coinsurance and deductible and 
will cover other limitations on payment imposed under title XVIII of the 
Act and will provide additional health plan or non-Medicare coverage for 
services up to a predefined benefit limit.
    NAIC stands for the National Association of Insurance Commissioners.
    Nonparticipating describes a physician, supplier, or other person 
(excluding any provider of services) that, at the time of furnishing the 
services to Medicare Part B beneficiaries, is not a participating 
physician or supplier.
    Participating describes a physician or supplier (excluding any 
provider of services) that, before the beginning of any given year, 
enters into an agreement with HHS that provides that the physician or 
supplier will accept payment under the Medicare program on an 
assignment-related basis for all services furnished to Medicare Part B 
beneficiaries.
    Penalty means the amount described in Sec. 402.105 and includes the 
plural of that term.
    Person means an individual, trust or estate, partnership, 
corporation, professional association or corporation, or other entity, 
public or private.
    Physicians' services means the following Medicare covered 
professional services:
    (1) Surgery, consultation, home, office and institutional calls, and 
other professional services performed by physicians.

[[Page 44]]

    (2) Services and supplies furnished ``incident to'' a physician's 
professional services.
    (3) Outpatient physical and occupational therapy services.
    (4) Diagnostic x-ray tests and other diagnostic tests (excluding 
clinical diagnostic laboratory tests).
    (5) X-ray, radium, and radioactive isotope therapy, including 
materials and services of technicians.
    (6) Antigens prepared by a physician.
    Radiologist service means radiology services performed only by, or 
under the direction of, a physician who is certified, or eligible to be 
certified, by the American Board of Radiology or for whom radiology 
services account for at least 50 percent of the total amount of charges 
made under part B of title XVIII of the Act.
    Request for payment means an application submitted by a person to 
any person for payment for a service.
    Respondent means the person upon which CMS or OIG has imposed, or 
proposes to impose, a civil money penalty, assessment, or exclusion.
    Service includes--
    (1) Any item, device, medical supply, or service claimed to have 
been furnished to a patient and listed in an itemized claim for program 
payment; or
    (2) In the case of a claim based on costs, any entry or omission in 
a cost report, books of account or other documents supporting the claim.
    State includes the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, the Northern Mariana Islands, and the 
Trust Territory of the Pacific Islands.
    Timely basis means that the adjustment to a bill or a refund is 
considered ``on a timely basis'' if the physician, supplier, or other 
person makes the adjustment or refund to the appropriate party no later 
than 30 days after the date the physician, supplier, or other person is 
notified by the Medicare Part B contractor of the violation and the 
requirement to refund any excess collections.

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



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

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



Sec. 402.7  Notice of proposed determination.

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

[[Page 45]]

    (iii) A statement that the debt may be collected through an 
administrative offset.
    (7) In the case of a respondent that has an agreement under section 
1866 of the Act, notice that imposition of an exclusion may result in 
termination of the provider's agreement in accordance with section 
1866(b)(2)(C) of the Act.



Sec. 402.9  Failure to request a hearing.

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



Sec. 402.11  Notice to other agencies and other entities.

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



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

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



Sec. 402.15  Collateral estoppel.

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



Sec. 402.17  Settlement.

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



Sec. 402.19  Hearings and appeals.

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



Sec. 402.21  Judicial review.

    After exhausting all available administrative remedies, a respondent 
may seek judicial review of a penalty, assessment, or exclusion that has 
become final. The respondent may seek review only with respect to a 
penalty, assessment, or exclusion with respect to

[[Page 46]]

which the respondent filed an exception under Sec. 1005.21(c) of this 
title unless the court excuses the failure or neglect to urge the 
exception in accordance with section 1128A(e) of the Act because of 
extraordinary circumstances.



             Subpart B_Civil Money Penalties and Assessments



Sec. 402.105  Amount of penalty.

    (a) $2,000. Except as provided in paragraphs (b) through (h) of this 
section, CMS or OIG may impose a penalty of not more than $2,000 as 
adjusted annually under 45 CFR part 102 for each service, bill, or 
refusal to issue a timely refund that is subject to a determination 
under this part and for each incident involving the knowing, willful, 
and repeated failure of an entity furnishing a service to submit a 
properly completed claim form or to include on the claim form accurate 
information regarding the availability of other health insurance benefit 
plans (Sec. 402.1(c)(21)).
    (b) $1,000. CMS or OIG may impose a penalty of not more than $1,000 
as adjusted annually under 45 CFR part 102 for the following:
    (1) Per certificate of medical necessity knowingly and willfully 
distributed to physicians on or after December 31, 1994 that--
    (i) Contains information concerning the medical condition of the 
patient; or
    (ii) Fails to include cost information.
    (2) Per individual about whom information is requested, for willful 
or repeated failure of an employer to respond to an intermediary or 
carrier about coverage of an employee or spouse under the employer's 
group health plan (Sec. 402.1(c)(20)).
    (c) $5,000. CMS or OIG may impose a penalty of not more than $5,000 
as adjusted annually under 45 CFR part 102 for each violation resulting 
from the following:
    (1) The failure of a Medicare supplemental policy issuer, on a 
replacement policy, to waive any time periods applicable to pre-existing 
conditions, waiting periods, elimination periods, or probationary 
periods that were satisfied under a preceding policy 
(Sec. 402.1(c)(29)); and
    (2) Any issuer of any Medicare supplemental policy denying a policy, 
conditioning the issuance or effectiveness of the policy, or 
discriminating in the pricing of the policy based on health status or 
other criteria as specified in section 1882(s)(2)(A). 
(Sec. 402.1(c)(29)).
    (d) $10,000. (1) CMS or OIG may impose a penalty of not more than 
$10,000 as adjusted annually under 45 CFR part 102 for each day that 
reporting entity ownership arrangements is late (Sec. 402.1(c)(22)).
    (2) CMS or OIG may impose a penalty of not more than $10,000 as 
adjusted annually under 45 CFR part 102 for the following violations 
that occur on or after January 1, 1997:
    (i) Knowingly and willfully, and on a repeated basis, billing for a 
clinical diagnostic laboratory test, other than on an assignment-related 
basis (Sec. 402.1(c)(1)).
    (ii) By any durable medical equipment supplier, knowingly and 
willfully charging for a covered service that is furnished on a rental 
basis after the rental payments may no longer be made (except for 
maintenance and servicing) as provided in section 1834(a)(7)(A) 
(Sec. 402.1(c)(4)).
    (iii) By any durable medical equipment supplier, knowingly and 
willfully, in violation of section 1834(a)(18)(A), failing to make a 
refund to Medicare beneficiaries for a covered service for which payment 
is precluded due to an unsolicited telephone contact from the supplier 
(Sec. 402.1(c)(5)).
    (iv) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge, 
as specified in section 1834(b)(5)(B), for radiologist services 
(Sec. 402.1(c)(6)).
    (v) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge, 
as specified in section 1834(c)(3), for mammography screening 
(Sec. 402.1(c)(7)).
    (vi) By any supplier of prosthetic devices, orthotics, and 
prosthetics, knowingly and willfully charging for a covered prosthetic 
device, orthotic, or prosthetic that is furnished on a rental basis 
after the rental payment may no longer be made (except for maintenance 
and servicing) (Sec. 401.2(c)(8)).

[[Page 47]]

    (vii) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assigned-
related basis if--
    (A) The supplier does not possess a Medicare supplier number;
    (B) The service is denied in advance; or
    (C) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(10)).
    (viii) Knowingly and willfully billing or collecting for any 
services on other than an assignment-related basis for practitioners 
specified in section 1842(b)(18)(B) (Sec. 402.1(c)(11)).
    (ix) By any physician, knowingly and willfully presenting, or 
causing to be presented, a claim or bill for an assistant at cataract 
surgery performed on or after March 1, 1987 for which payment may not be 
made because of section 1862(a)(15) (Sec. 402.1(c)(12)).
    (x) By any nonparticipating physician who does not accept payment on 
an assignment-related basis, knowingly and willfully failing to refund 
on a timely basis any amounts collected for services that are not 
reasonable or medically necessary or are of poor quality, in accordance 
with section 1842(l)(1)(A) (Sec. 402.1(c)(13)).
    (xi) By any nonparticipating physician, who does not accept payment 
for an elective surgical procedure on an assignment-related basis and 
whose charge is at least $500, knowingly and willfully failing to--
    (A) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (B) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare program 
(Sec. 402.1(c)(14)).
    (xii) By any physician, in repeated cases, knowingly and willfully 
billing one or more beneficiaries, for purchased diagnostic tests, any 
amount other than the payment amount specified in section 1842(n)(1)(A) 
or section 1842(n)(1)(B) (Sec. 402.1(c)(15)).
    (xiii) By any nonparticipating physician, supplier, or other person 
that furnishes physicians' services and does not accept payment on an 
assignment-related basis--
    (A) Knowingly and willfully billing or collecting in excess of the 
limiting charge (as defined in section 1843(g)(2)) on a repeated basis; 
or
    (B) Failing to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A)(iii) or (iv) (Sec. 402.1(c)(17)).
    (xiv) Knowingly and willfully billing for State plan approved 
physicians' services on other than an assignment-related basis for a 
Medicare beneficiary who is also eligible for Medicaid 
(Sec. 402.1(c)(18)).
    (xv) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed on an assignment-related 
basis if--
    (A) The supplier did not possess a Medicare supplier number;
    (B) The service is denied in advance; or
    (C) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(23)).
    (3) CMS or OIG may impose a penalty of not more than $10,000 as 
adjusted annually under 45 CFR part 102 for each violation, if a person 
or entity knowingly and willfully bills or collects for outpatient 
therapy or comprehensive rehabilitation services other than on an 
assignment-related basis.
    (4) CMS or OIG may impose a penalty of not more than $10,000 as 
adjusted annually under 45 CFR part 102 for each violation, if a person 
or entity knowingly and willfully bills or collects for outpatient 
ambulance services other than on an assignment-related basis.
    (5) CMS or OIG may impose a penalty of not more than $10,000 as 
adjusted annually under 45 CFR part 102 for each failure of an 
applicable manufacturer or an applicable group purchasing organization 
to report timely, accurately, or completely a payment or other transfer 
of value or an ownership or investment interest (Sec. 402.1(c)(34)). The 
total penalty imposed with respect to failures to report in an annual 
submission of information will not exceed

[[Page 48]]

$150,000 as annually adjusted under 45 CFR part 102.
    (e) $15,000. CMS or OIG may impose a penalty of not more than 
$15,000 as adjusted annually under 45 CFR part 102 for if the seller of 
a Medicare supplemental policy is not the issuer, for each violation 
described in paragraphs (f)(2) and (f)(3) of this section (Sec. 402.1 
(c)(25) and (c)(26)).
    (f) $25,000. CMS or OIG may impose a penalty of not more than 
$25,000 as adjusted annually under 45 CFR part 102 for each of the 
following violations:
    (1) Issuance of a Medicare supplemental policy that has not been 
approved by an approved State regulatory program or does not meet 
Federal standards on and after the effective date in section 
1882(p)(1)(C) of the Act (Sec. 402.1(c)(23)).
    (2) Sale or issuance after July 30, 1992, of a Medicare supplemental 
policy that fails to conform with the NAIC or Federal standards 
established under section 1882(p) of the Act (Sec. 402.1(c)(25)).
    (3) Failure to make the core group of basic benefits available for 
sale when selling other Medicare supplemental plans with additional 
benefits (Sec. 402.1(c)(26)).
    (4) Failure to provide, before sale of a Medicare supplemental 
policy, an outline of coverage describing the benefits provided by the 
policy (Sec. 402.1(c)(26)).
    (5) Failure of an issuer of a policy to suspend or reinstate a 
policy, based on the policy holder's request, during entitlement to or 
upon loss of eligibility for medical assistance (Sec. 402.1(c)(27)).
    (6) Failure to provide refunds or credits for Medicare supplemental 
policies as required by section 1882(r)(1)(B) (Sec. 402.1(c)(28)).
    (7) By an issuer of a Medicare supplemental policy--
    (i) Substantial failure to provide medically necessary services to 
enrollees seeking the services through the issuer's network of entities;
    (ii) Imposition of premiums on enrollees in excess of the premiums 
approved by the State;
    (iii) Action to expel an enrollee for reasons other than nonpayment 
of premiums; or
    (iv) Failure to provide each enrollee, at the time of enrollment, 
with the specific information provided in section 1882(t)(1)(E)(i) or 
failure to obtain a written acknowledgment from the enrollee of receipt 
of the information (as required by section 1882(t)(1)(E)(ii)) (section 
1882(t)(2)).
    (g) $100. CMS or OIG may impose a penalty of not more than $100 as 
adjusted annually under 45 CFR part 102 for each violation if the person 
or entity does not furnish an itemized statement to a Medicare 
beneficiary within 30 days of the beneficiary's request.
    (h) $100,000. CMS or OIG may impose a penalty of not more than 
$10,000 as adjusted annually under 45 CFR part 102 for each knowing 
failure of an applicable manufacturer or an applicable group purchasing 
organization to report timely, accurately or completely a payment or 
other transfer of value or an ownership or investment interest 
(Sec. 402.1(c)(34)). The total penalty imposed with respect to knowing 
failures to report in an annual submission of information will not 
exceed $1,000,000 as annually adjusted under 45 CFR part 102.

[63 FR 68690, Dec. 14, 1998, as amended at 66 FR 49546, Sept. 28, 2001; 
72 FR 39752, July 20, 2007; 72 FR 46175, Aug. 17, 2007; 78 FR 9520, Feb. 
8, 2013; 81 FR 61561, Sept. 6, 2016]



Sec. 402.107  Amount of assessment.

    A person subject to civil money penalties specified in Sec. 402.1(c) 
may be subject, in addition, to an assessment. An assessment is a 
monetary payment in lieu of damages sustained by HHS or a State agency.
    (a) The assessment may not be more than twice the amount claimed for 
each service that was a basis for the civil money penalty, except for 
the violations specified in paragraph (b) of this section that occur 
before January 1, 1997.
    (b) For the violations specified in this paragraph occurring after 
January 1, 1997, the assessment may not be more than three times the 
amount claimed for each service that was the basis for a civil money 
penalty. The violations are the following:
    (1) Knowingly and willfully billing, and on a repeated basis, for a 
clinical diagnostic laboratory test, other than on an assignment-related 
basis (Sec. 402.1(c)(1)).

[[Page 49]]

    (2) By any durable medical equipment supplier, knowingly and 
willfully charging for a covered service that is furnished on a rental 
basis after the rental payments may no longer be made (except for 
maintenance and servicing) as provided in section 1834(a)(7)(A) 
(Sec. 402.1(c)(4)).
    (3) By any durable medical equipment supplier, knowingly and 
willfully failing, in violation of section 1834(a)(18)(A), to make a 
refund to Medicare beneficiaries for a covered service for which payment 
is precluded due to an unsolicited telephone contact from the supplier 
(Sec. 402.1(c)(5)).
    (4) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge, 
as specified in section 1834(b)(5)(B), for radiologist services 
(Sec. 402.1(c)(6)).
    (5) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge 
as specified in section 1834(c)(3), for mammography screening 
(Sec. 402.1(c)(7)).
    (6) By any supplier of prosthetic devices, orthotics, and 
prosthetics, knowingly and willfully charging for a covered prosthetic 
device, orthotic, or prosthetic that is furnished on a rental basis 
after the rental payment may no longer be made (except for maintenance 
and servicing) (Sec. 401.2(c)(8)).
    (7) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assignment-
related basis if--
    (i) The supplier does not possess a Medicare supplier number;
    (ii) The service is denied in advance; or
    (iii) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(10)).
    (8) Knowingly and willfully billing or collecting for any services 
on other than an assignment-related basis for a person or entity 
specified in sections 1834(k)(6), 1834(l)(6), or 1842(b)(18)(B) 
(Sec. 402.1(c)(11), (c)(31), or (c)(32)).
    (9) By any physician, knowingly and willfully presenting, or causing 
to be presented, a claim or bill for an assistant at cataract surgery 
performed on or after March 1, 1987 for which payment may not be made 
because of section 1862(a)(15) (Sec. 402.1(c)(12)).
    (10) By any nonparticipating physician who does not accept payment 
on an assignment-related basis, knowingly and willfully failing to 
refund on a timely basis any amounts collected for services that are not 
reasonable or medically necessary or are of poor quality, in accordance 
with section 1842(l)(1)(A) (Sec. 402.1(c)(13)).
    (11) By any nonparticipating physician, who does not accept payment 
for an elective surgical procedure on an assignment-related basis and 
whose charge is at least $500, knowingly and willfully failing to--
    (i) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (ii) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare program 
(Sec. 402.1(c)(14)).
    (12) By any physician, in repeated cases, knowingly and willfully 
billing one or more beneficiaries, for purchased diagnostic tests, any 
amount other than the payment amount specified in section 1842(n)(1)(A) 
or section 1842(n)(1)(B) (Sec. 402.1(c)(15)).
    (13) By any nonparticipating physician, supplier, or other person 
that furnishes physicians' services and does not accept payment on an 
assignment-related basis--
    (i) Knowingly and willfully billing or collecting in excess of the 
limiting charge (as defined in section 1843(g)(2)) on a repeated basis; 
or
    (ii) Failing to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A) (iii) or (iv) (Sec. 402.1(c)(17)).
    (14) Knowingly and willfully billing for State plan approved 
physicians' services on other than an assignment-related basis for a 
Medicare beneficiary who is also eligible for Medicaid 
(Sec. 402.1(c)(18)).
    (15) By any supplier of durable medical equipment, including 
suppliers of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a

[[Page 50]]

timely manner to Medicare beneficiaries for services billed on an 
assignment-related basis if--
    (i) The supplier did not possess a Medicare supplier number;
    (ii) The service is denied in advance; or
    (iii) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(23)).

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



Sec. 402.109  Statistical sampling.

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



Sec. 402.111  Factors considered in determinations regarding the
amount of penalties and assessments.

    (a) Basic factors. In determining the amount of any penalty or 
assessment, CMS or OIG takes into account the following:
    (1) The nature of the claim, request for payment, or information 
given and the circumstances under which it was presented or given.
    (2) The degree of culpability, history of prior offenses, and 
financial condition of the person submitting the claim or request for 
payment or giving the information.
    (3) The resources available to the person submitting the claim or 
request for payment or giving the information.
    (4) Such other matters as justice may require.
    (b) Criteria to be considered. As guidelines for taking into account 
the factors listed in paragraph (a) of this section, CMS or OIG 
considers the following circumstances:
    (1) Aggravating circumstances of the incident. An aggravating 
circumstance is any of the following:
    (i) The services or incidents were of several types, occurring over 
a lengthy period of time.
    (ii) There were many of these services or incidents or the nature 
and circumstances indicate a pattern of claims or requests for payment 
for these services or a pattern of incidents.
    (iii) The amount claimed or requested for these services was 
substantial.
    (iv) Before the incident or presentation of any claim or request for 
payment subject to imposition of a civil money penalty, the respondent 
was held liable for criminal, civil, or administrative sanctions in 
connection with a program covered by this part or any other public or 
private program of payment for medical services.
    (v) There is proof that a respondent engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to government programs or in connection with the delivery of a health 
care service. (The statute of limitations governing civil money penalty 
proceedings does not apply to proof of other wrongful conduct as an 
aggravating circumstance.)
    (2) Mitigating circumstances. The following circumstances are 
mitigating circumstances:
    (i) All the services or incidents subject to a civil money penalty 
were few in number and of the same type, occurred within a short period 
of time, and the total amount claimed or requested for the services was 
less than $1,000.
    (ii) The claim or request for payment for the service was the result 
of an unintentional and unrecognized error in the process of presenting 
claims or requesting payment and the respondent took corrective steps 
promptly after discovering the error.
    (iii) Imposition of the penalty or assessment without reduction 
would jeopardize the ability of the respondent to continue as a health 
care provider.

[[Page 51]]

    (3) Other matters as justice may require. Other circumstances of an 
aggravating or mitigating nature are taken into account if, in the 
interests of justice, they require either a reduction of the penalty or 
assessment or an increase in order to ensure the achievement of the 
purposes of this part.
    (c) Effect of aggravating or mitigating circumstances. In 
determining the amount of the penalty and assessment to be imposed for 
every service or incident subject to a determination under 
Sec. 402.1(c)--
    (1) If there are substantial or several mitigating circumstances, 
the aggregate amount of the penalty and assessment is set at an amount 
sufficiently below the maximum permitted by Secs. 402.105(a) and 402.107 
to reflect that fact.
    (2) If there are substantial or several aggravating circumstances, 
the aggregate amount of the penalty and assessment is set at an amount 
at or sufficiently close to the maximum permitted by Secs. 402.105(a) 
and 402.107 to reflect that fact.
    (d)(1) The standards set forth in this section are binding, except 
to the extent that their application would result in imposition of an 
amount that would exceed limits imposed by the United States 
Constitution.
    (2) The amount imposed is not less than the approximate amount 
required to fully compensate the United States, or any State, for its 
damages and costs, tangible and intangible, including but not limited to 
the costs attributable to the investigation, prosecution, and 
administrative review of the case.
    (3) Nothing in this section limits the authority of CMS or OIG to 
settle any issue or case as provided by Sec. 402.19 or to compromise any 
penalty and assessment as provided by Sec. 402.115.



Sec. 402.113  When a penalty and assessment are collectible.

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



Sec. 402.115  Collection of penalty or assessment.

    (a) Once a determination by HHS has become final, CMS is responsible 
for the collection of any penalty or assessment.
    (b) The General Counsel may compromise a penalty or assessment 
imposed under this part, after consultation with CMS or OIG, and the 
Federal government may recover the penalty or assessment in a civil 
action brought in the United States district court for the district 
where the claim was presented or where the respondent resides.
    (c) The United States or a State agency may deduct the amount of a 
penalty and assessment when finally determined, or the amount agreed 
upon in compromise, from any sum then or later owing to the respondent.
    (d) Matters that were raised or that could have been raised in a 
hearing before an ALJ or in an appeal under section 1128A(e) of the Act 
may not be raised as a defense in a civil action by the United States to 
collect a penalty under this part.

[[Page 52]]



                          Subpart C_Exclusions

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



Sec. 402.200  Basis and purpose.

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



Sec. 402.205  Length of exclusion.

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

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

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

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

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



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

    (a) General factors. In determining whether to exclude a person and 
the length of exclusion, the initiating agency considers the following:
    (1) The nature of the claims and the circumstances under which they 
were presented.
    (2) The degree of culpability, the history of prior offenses, and 
the financial condition of the person presenting the claims.
    (3) The total number of acts in which the violation occurred.
    (4) The dollar amount at issue (Medicare Trust Fund dollars or 
beneficiary out-of-pocket expenses).
    (5) The prior history of the person insofar as its willingness or 
refusal to comply with requests to correct said violations.
    (6) Any other facts bearing on the nature and seriousness of the 
person's misconduct.
    (7) Any other matters that justice may require.
    (b) Criteria to be considered. As a guideline for taking into 
account the general factors listed in paragraph (a)

[[Page 53]]

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

[[Page 54]]

those circumstances require either a reduction or increase in the 
sanction to ensure achievement for the purposes of this subpart.
    (4) Initiating agency authority. Nothing in this section limits the 
authority of the initiating agency to settle any issue or case as 
provided by Sec. 402.17, or to compromise any penalty and assessment as 
provided by Sec. 402.115.



Sec. 402.209  Scope and effect of exclusion.

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



Sec. 402.210  Notices.

    (a) Notice of proposed determination to exclude. When the initiating 
agency proposes to exclude a person from participation in a Federal 
health care program in accordance with this part, notice of the proposed 
determination to exclude must be given in writing, and delivered or sent 
by certified mail, return receipt requested. The written notice must 
include, at a minimum--
    (1) Reference to the statutory basis for the exclusion.
    (2) A description of the claims, requests for payment, or incidents 
for which the exclusion is proposed.
    (3) The reason why those claims, requests for payments, or incidents 
subject the person to an exclusion.
    (4) The length of the proposed exclusion.
    (5) A description of the circumstances that were considered when 
determining the period of exclusion.
    (6) Instructions for responding to the notice, including a specific 
statement

[[Page 55]]

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



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

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



Sec. 402.214  Appeal of exclusion.

    (a) The procedures in part 1005 of this title apply to all appeals 
of exclusions. References to the Inspector General in that part apply to 
the initiating agency.
    (b) A person excluded under this subpart may file a request for a 
hearing before an administrative law judge (ALJ) only on the issues of 
whether--
    (1) The basis for the imposition of the exclusion exists; and
    (2) The duration of the exclusion is unreasonable.
    (c) When the initiating agency imposes an exclusion for a period of 
1 year or less, paragraph (b)(2) of this section does not apply.
    (d) The excluded person must file a request for a hearing within 60 
days from the receipt of notice of exclusion. The effective date of an 
exclusion is not delayed beyond the date stated in the notice of 
exclusion simply because a request for a hearing is timely filed (see 
paragraph (g) of this section).
    (e) A timely filed written request for a hearing must include--
    (1) A statement as to the specific issues or findings of fact and 
conclusions of law in the notice of exclusion with which the person 
disagrees.
    (2) Basis for the disagreement.

[[Page 56]]

    (3) The general basis for the defenses that the person intends to 
assert.
    (4) Reasons why the proposed length of exclusion should be modified.
    (5) Reasons, if applicable, why the health or safety of Medicare 
beneficiaries receiving items or services does not warrant the exclusion 
going into or remaining in effect before the completion of an ALJ 
proceeding in accordance with part 1005 of this title.
    (f) If the excluded person does not file a written request for a 
hearing as provided in paragraph (d) of this section, the initiating 
agency notifies the excluded person, by certified mail, return receipt 
requested, that the exclusion goes into effect or continues in 
accordance with the notice of exclusion. The excluded person has no 
right to appeal the exclusion other than as described in this section.
    (g) If the excluded person files a written request for a hearing, 
and asserts in the request that the health or safety of Medicare 
beneficiaries does not warrant the exclusion going into or remaining in 
effect before completion of an ALJ hearing, then the initiating agency 
may make a determination as to whether the exclusion goes into effect or 
continues pending the outcome of the ALJ hearing.



Sec. 402.300  Request for reinstatement.

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



Sec. 402.302  Basis for reinstatement.

    (a) The initiating agency authorizes reinstatement if it determines 
that--
    (1) The period of exclusion has expired;
    (2) There are reasonable assurances that the types of actions that 
formed the basis for the original exclusion did not recur and will not 
recur; and
    (3) There is no additional basis under title XVIII of the Act that 
justifies the continuation of the exclusion.
    (b) The initiating agency does not authorize reinstatement if it 
determines that submitting claims or causing claims to be submitted or 
payments to be made by the Medicare program for items or services 
furnished, ordered, or prescribed, may serve as a basis for denying 
reinstatement. This section applies regardless of whether the excluded 
person has obtained a Medicare provider number (or equivalent), either 
as an individual or as a member of a group, before being reinstated.
    (c) In making a determination regarding reinstatement, the 
initiating agency considers the following:
    (1) Conduct of the excluded person occurring before the date of the 
notice of the exclusion, if that conduct was not known to the initiating 
agency at the time of the exclusion;
    (2) Conduct of the excluded person after the date of the exclusion;
    (3) Whether all fines and all debts due and owing (including 
overpayments) to any Federal, State, or local government that relate to 
Medicare, Medicaid, or, where applicable, any Federal, State, or local 
health care program are paid in full, or satisfactory arrangements are 
made to fulfill these obligations;

[[Page 57]]

    (4) Whether the excluded person complies with, or has made 
satisfactory arrangements to fulfill, all of the applicable conditions 
of participation or conditions of coverage under the Medicare statutes 
and regulations; and
    (5) Whether the excluded person has, during the period of exclusion, 
submitted claims, or caused claims to be submitted or payment to be made 
by Medicare, Medicaid, and, where applicable, any other Federal health 
care program, for items or services furnished, ordered, or prescribed, 
and the conditions under which these actions occurred.
    (d) Reinstatement is not effective until the initiating agency 
grants the request and provides notices under Sec. 402.304. 
Reinstatement is effective as provided in the notice.
    (e) A determination for a denial of reinstatement is not appealable 
or reviewable except as provided in Sec. 402.306.
    (f) An ALJ may not require reinstatement of an excluded person in 
accordance with this chapter.



Sec. 402.304  Approval of request for reinstatement.

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



Sec. 402.306  Denial of request for reinstatement.

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



Sec. 402.308  Waivers of exclusions.

    (a) Basis. Section 1128(c)(3)(B) of the Act specifies that in the 
case of an exclusion from participation in the Medicare program based 
upon section 1128(a)(1), (a)(3), or (a)(4) of the Act, the individual 
may request that CMS present, on his or her behalf, a request to the OIG 
for a waiver of the exclusion.
    (b) Definitions. For purposes of this section:
    Excluded person has the same meaning as a ``person'' as defined in 
Sec. 402.3 who meets for the purposes of this subpart, the definition of 
the term ``exclusion'' in Sec. 402.3.
    Hardship for purposes of this section means something that 
negatively affects Medicare beneficiaries and results from the 
imposition of an exclusion because the excluded person is the sole 
community physician or sole source of

[[Page 58]]

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



PART 403_SPECIAL PROGRAMS AND PROJECTS--Table of Contents



Subpart A [Reserved]

                Subpart B_Medicare Supplemental Policies

Sec.
403.200  Basis and scope.

                           General Provisions

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

                        State Regulatory Programs

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

           Voluntary Certification Program: General Provisions

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

         Voluntary Certification Program: Loss Ratio Provisions

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

      Subpart C_Recognition of State Reimbursement Control Systems

403.300  Basis and purpose.
403.302  Definitions.

[[Page 59]]

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

Subparts D--F [Reserved]

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

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

  Subpart H_Medicare Prescription Drug Discount Card and Transitional 
                           Assistance Program

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

 Subpart I_Transparency Reports and Reporting of Physician Ownership or 
                          Investment Interests

403.900  Purpose and scope.
403.902  Definitions.
403.904  Reports of payments or other transfers of value.
403.906  Reports of physician ownership and investment interests.
403.908  Procedures for electronic submission of reports.
403.910  Delayed publication for payments made under product research or 
          development agreements and clinical investigations.
403.912  Penalties for failure to report.
403.914  Preemption of State laws.

 Subpart K_Access to Identifiable Data for the Center for Medicare and 
                             Medicaid Models

403.1100  Purpose and scope.
403.1105  Definitions.
403.1110  Evaluation of models.

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

Subpart A [Reserved]

[[Page 60]]



                Subpart B_Medicare Supplemental Policies

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



Sec. 403.200  Basis and scope.

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

                           General Provisions



Sec. 403.201  State regulation of insurance policies.

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



Sec. 403.205  Medicare supplemental policy.

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

[70 FR 4525, Jan. 28, 2005]



Sec. 403.206  General standards for Medicare supplemental policies.

    (a) For purposes of the voluntary certification program described in 
this subpart, a policy must meet--
    (1) The National Association of Insurance Commissioners (NAIC) model 
standards as defined in Sec. 405.210; and
    (2) The loss ratio standards specified in Sec. 403.215.

[[Page 61]]

    (b) Except as specified in paragraph (c) of this section, the 
standards specified in paragraph (a) of this section must be met in a 
single policy.
    (c) In the case of a nonprofit hospital or a medical association 
where State law prohibits the inclusion of all benefits in a single 
policy, the standards specified in paragraph (a) of the section must be 
met in two or more policies issued in conjunction with one another.



Sec. 403.210  NAIC model standards.

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

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



Sec. 403.215  Loss ratio standards.

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

                        State Regulatory Programs



Sec. 403.220  Supplemental Health Insurance Panel.

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



Sec. 403.222  State with an approved regulatory program.

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

           Voluntary Certification Program: General Provisions



Sec. 403.231  Emblem.

    (a) The emblem is a graphic symbol, approved by HHS, that indicates 
that

[[Page 62]]

CMS has certified a policy as meeting the requirements of the voluntary 
certification program, specified in Sec. 403.232.
    (b) Unless prohibited by the State in which the policy is marketed, 
the insuring organization may display the emblem on policies certified 
under the voluntary certification program.
    (c) The manner in which the emblem may be displayed and the 
conditions and restrictions relating to its use will be stated in the 
letter with which CMS notifies the insuring organization that a policy 
has been certified. The insuring organization must comply with these 
conditions and restrictions.
    (d) If a certified policy is issued in a State that later has an 
approved regulatory program, as provided for in Sec. 403.222, the 
insuring organization may display the emblem on the policy until the 
earliest of the following--
    (1) When prohibited by State law or regulation.
    (2) When the policy no longer meets the requirements for Medicare 
supplemental policies specified in Sec. 403.206.
    (3) The date the insuring organization would be required to submit 
material to CMS for annual review in order to retain certification, if 
the State did not have an approved program (see Sec. 403.239).



Sec. 403.232  Requirements and procedures for obtaining certification.

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



Sec. 403.235  Review and certification of policies.

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

[[Page 63]]

Superintendents of Insurance of that fact.



Sec. 403.239  Submittal of material to retain certification.

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



Sec. 403.245  Loss of certification.

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



Sec. 403.248  Administrative review of CMS determinations.

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

[[Page 64]]

    (c) If the insuring organization requests an administrative review, 
CMS will conduct the review as follows--
    (1) A CMS official, not involved in the initial CMS determination, 
will initiate and complete an administrative review within 90 days of 
the date of the notice provided for in paragraph (b) of this section.
    (2) The official will consider--
    (i) The original material submitted to CMS for review, as specified 
in Sec. 403.232(b) or Sec. 403.239(a); and
    (ii) Any additional information, that the insuring organization 
submits to CMS.
    (3) Within 15 days after the administrative review is completed, CMS 
will inform the insuring organization in writing of the final decision, 
with an explanation of the final decision.
    (4) If the final decision is that a policy lose its certification, 
the loss of certification will go into effect 15 days after the date of 
CMS's notice informing the insuring organization of the final decision.

         Voluntary Certification Program: Loss Ratio Provisions



Sec. 403.250  Loss ratio calculations: General provisions.

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



Sec. 403.251  Loss ratio date and time frame provisions.

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



Sec. 403.253  Calculation of benefits.

    (a) General provisions. (1) Except as provided for in paragraph 
(a)(2) of this section, calculate the amount of ``benefits'' by--
    (i) Adding the present values on the initial calculation date of--
    (A) Expected incurred benefits in the loss ratio calculation period, 
to--
    (B) The total policy reserve at the last day of the loss ratio 
calculation period: and
    (ii) Subtracting the total policy reserve on the initial calculation 
date from the sum of these values.
    (2) To calculate the amount of ``benefits'' in the case of community 
or pool rated individual or group policies rerated on an annual basis, 
calculate the expected incurred benefits in the loss ratio calculation 
period.
    (b) Calculation of total policy reserve--(1) Option for calculation. 
The insuring organization must calculate ``total policy reserve'' 
according to the provisions of paragraph (b) (2) or (3) of this section.
    (2) Total policy reserve: Federal provisions. (i) ``Total policy 
reserve'' means the sum of--
    (A) Additional reserve; and
    (B) The reserve for future contingent benefits.
    (ii) Additional reserve means the amount calculated on a net level 
reserve basis, using appropriate values to account for lapse, mortality, 
morbidity, and interest, that on the valuation date represents--
    (A) The present value of expected incurred benefits over the loss 
ratio calculation period; less--
    (B) The present value of expected net premiums over the loss ratio 
calculation period.
    (iii) Net premium means the level portion of the gross premium used 
in calculating the additional reserve. On the day the policy is issued, 
the present

[[Page 65]]

value of the series of those portions equals the present value of the 
expected incurred claims over the period that the gross premiums are 
computed to provide coverage.
    (iv) Reserve for future contingent benefits means the amounts, not 
elsewhere included, that provide for the extension of benefits after 
insurance coverage terminates. These benefits--
    (A) Are predicated on a health condition existing on the date 
coverage ends;
    (B) Accrue after the date coverage ends; and
    (C) Are payable after the valuation date.
    (3) Total policy reserve: State provisions. ``Total policy reserve'' 
means the total policy reserve calculated according to appropriate State 
law or regulation.



Sec. 403.254  Calculation of premiums.

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



Sec. 403.256  Loss ratio supporting data.

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

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    (b) For purposes of requesting continued CMS certification under 
Sec. 403.239(a), the insuring organization must submit the following to 
CMS--
    (1) A description of all changes in the loss ratio data, specified 
in paragraph (a) of this section, that occurred since CMS last reviewed 
the policy.
    (2) The past loss ratio experience for the policy, including the 
experience of all riders and endorsements issued under the policy. The 
loss ratio experience data must include earned premiums, incurred 
claims, and total policy reserves that the insuring organization 
calculates--
    (i) For all years of issue combined; and
    (ii) Separately for each calendar year since CMS first certified the 
policy.



Sec. 403.258  Statement of actuarial opinion.

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



      Subpart C_Recognition of State Reimbursement Control Systems

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



Sec. 403.300  Basis and purpose.

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



Sec. 403.302  Definitions.

    For purposes of this subpart--
    Chief executive officer of a State means the Governor of the State 
or the Governor's designee.
    Existing demonstration project refers to demonstration projects 
approved by CMS under the authority of section 402(a) of the Social 
Security Amendments of 1967 (42 U.S.C. 1395b-1) or section 222(a) of the 
Social Security Amendments of 1972 (42 U.S.C. 1395b-1 (note)) and in 
effect on April 20, 1983 (the date of the enactment of Pub. L. 98-21 
(Social Security Amendments of 1983)).
    Federal hospital means a hospital that is administered by, or that 
is under exclusive contract with, the Department of Defense, the 
Veterans Administration, or the Indian Health Service.
    State system or system refers to a State reimbursement control 
system that is approved by CMS under the authority of section 1886(c) of 
the Act and that satisfies the requirements described in this subpart.



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

    (a) Discretionary approval by CMS. CMS may approve Medicare payments 
under a State system, if CMS determines that the system meets the 
requirements in paragraphs (b) and (c) of this section and, if 
applicable paragraph (d) of this section.
    (b) Requirements for State system. (1) An application for approval 
of the system must be submitted to CMS by the Chief Executive Officer of 
the State.
    (2) The State system must apply to substantially all non-Federal 
acute care hospitals in the State.

[[Page 67]]

    (3) All hospitals covered by the system must have and maintain a 
utilization and quality control review agreement with a Quality 
Improvement Organization, as required under section 1866(a)(1)(F) of the 
Act and Sec. 466.78(a) of this chapter.
    (4) Federal hospitals must be excluded from the State system.
    (5) Nonacute care or specialty hospital (such as rehabilitation, 
psychiatric, or children's hospitals) may, at the option of the State, 
be excluded from the State system.
    (6) The State system must apply to at least 75 percent of all 
revenues or expenses--
    (i) For inpatient hospital services in the State; and
    (ii) For inpatient hospital services under the State's Medicaid 
plan.
    (7) Under the system, HMOs and competitive medical plans (CMPs), as 
defined by section 1876(b) of the Act and part 417 of this chapter, must 
be allowed to negotiate payment rates with hospitals.
    (8) The system must limit hospital charges for Medicare 
beneficiaries to deductibles, coinsurance or non-covered services.
    (9) Unless a waiver is granted by CMS under Sec. 489.23 of this 
chapter, the system must prohibit payment, as required under section 
1862(a)(14) of the Act and Sec. 405.310(m) of this chapter, for 
nonphysician services provided to hospital inpatients under Part B of 
Medicare.
    (10) The system must require hospitals to submit Medicare cost 
reports or approved reports in lieu of Medicare cost reports as 
required.
    (11) The system must require--
    (i) Preparation, collection, or retention by the State of reports 
(such as financial, administrative, or statistical reports) that may be 
necessary, as determined by CMS, to review and monitor the State's 
assurances; and
    (ii) Submission of the reports to CMS upon request.
    (12) The system must provide hospitals an opportunity to appeal 
errors that they believe have been made in the determination of their 
payment rates. The system, if it is prospective may not permit providers 
to file administrative appeals that would result in a retroactive 
revision of prospectively determined payment rates.
    (c) Satisfactory assurances. The State must provide to CMS 
satisfactory assurance as to the following:
    (1) The system provides for equitable treatment of hospital patients 
and hospital employees.
    (2) The system provides for equitable treatment of all entities that 
pay hospitals for inpatient hospital services, including Federal and 
State programs. Under the requirement, the following conditions must be 
met:
    (i) Both the Medicare and Medicaid programs must participate under 
the system.
    (ii) The State must assure equitable and uniform treatment under the 
system of third-party payors of inpatient hospital services in terms of 
opportunity. Equitable opportunity must include, but need not be limited 
to, participation in the system and availability of discounts. Criteria 
under which discounts are made available must be equitably and uniformly 
applied to all payors, except for discounts negotiated by HMOs and CMPs. 
Discounts available to HMOs and CMPs as result of their statutory right 
to negotiate payment rates independently of a State system, as described 
in paragraph (b)(7) of this section, need not be available to other 
payors.
    (iii) The State must assure that all third-party payors that 
participate under the system share in the system's risks and benefits.
    (3) The amount of Medicare payments made under the system over 36-
month periods may not exceed the amount of Medicare payment that would 
otherwise have been made under the Medicare principles of reimbursement 
for Medicare items and services had the State system not been in effect. 
States must submit the assurance and supporting data as required by 
Sec. 403.320 to document that the payment limit is not exceeded. States 
that have an existing Medicare demonstration project in effect on April 
20, 1983, and that have requested approval of a State system under 
section 1886(c)(4) of the Act, may elect to have the effectiveness of 
the State system under this paragraph judged on the basis of the State 
system's rate of increase or inflation in

[[Page 68]]

Medicare inpatient hospital payments as compared to the national rate of 
increase or inflation for such payments during the three cost reporting 
periods of the hospitals in the State beginning on or after October 1, 
1983.
    (d) Additional cost-effectiveness assurance. If the assurances and 
supporting data required under paragraph (c)(3) of this section are 
insufficient to provide assurance satisfactory to CMS regarding the 
cost-effectiveness of a State system, the State may additionally submit 
one of the following assurances in order to meet the cost-effectiveness 
test:
    (1) State responsibility for excess payments. The State must agree 
that each month Medicare intermediaries will disburse to the State's 
hospital Federal funds that in the aggregate equal no more than would 
have been disbursed in the absence of the State system. Any additional 
funds necessary to pay hospitals for Medicare services required by the 
State system will be paid to the intermediaries by the State. These 
additional amounts will be refunded to the State by the intermediaries 
to the extent that, in subsequent months, the State system requires a 
smaller aggregate payment for Medicare services than would have been 
paid in the absence of the State system.
    (2) Limitations on payments. (i) The State must agree that if its 
projections exceed what Medicare would pay in any particular period, the 
State and CMS will establish and agreed upon payment schedule that will 
limit payments under the State system based on a predetermined 
percentage relationship between projected State payments and what 
payments would have been under Medicare.
    (ii) If deviation from the predetermined relationship described in 
paragraph (d)(2)(i) of this section occurs, the State must further agree 
that--
    (A) Medicare payments would be capped automatically at payment 
levels based on the rates used for the Medicare prospective payment 
system and the State would be required to pay the difference to 
individual hospitals in its system; or
    (B) The State may provide by legislation or legally binding 
regulations that any reduced payments to hospitals under the system that 
result from this cost-effectiveness assurance will constitute full and 
final payment for hospital services furnished to Medicare beneficiaries 
for the period covered by these reduced payments.



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

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

[[Page 69]]

    (C) A refusal to admit patients who would be expected to require 
unusually costly or prolonged treatment for reasons other than those 
related to the appropriateness of the care available at the hospital; or
    (D) A refusal to provide emergency services to any person who is in 
need of emergency services, if the hospital provides the services.
    (ii) Consultation with local government officials. The State must 
provide documentation that it has consulted with local government 
officials concerning the impact of the system on publicly owned or 
operated hospitals.



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

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



Sec. 403.310  Reduction in payments.

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

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



Sec. 403.312  Submittal of application.

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



Sec. 403.314  Evaluation of State systems.

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

[[Page 70]]



Sec. 403.316  Reconsideration of certain denied applications.

    (a) Request for reconsideration. If CMS denies an application for a 
State system, the State may request that CMS reconsider the denial if 
the State believes that its system meets all of the requirements for 
mandatory approval under Secs. 403.304 and 403.306 or, in the case of a 
State with a system operating under an existing demonstration project, 
the applicable requirements of Secs. 403.304 and 403.308.
    (b) Time limit. (1) The State must submit its request for 
reconsideration within 60 days after the date of CMS's notice that the 
application was denied.
    (2) CMS will notify the State of the results of its reconsideration 
within 60 days after it receives the request for reconsideration.



Sec. 403.318  Approval of State systems.

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



Sec. 403.320  CMS review and monitoring of State systems.

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

[[Page 71]]

over a 36-month period. The estimates and projections of what Medicare 
would have otherwise paid must take into account all the Medicare 
reimbursement principles in effect at the time and, for any period in 
which payments either exceed or are less than Medicare levels, the 
values of interest the Medicare Trust Fund earned, or would have earned, 
on these amounts. Upon application for approval, the State must submit 
projections for each hospital for the first 12-month period covered by 
the assurance, in both the aggregate and on a per discharge basis, of 
Medicare inpatient expenditures under Medicare principles of 
reimbursement and parallel projections of Medicare inpatient 
expenditures under the State's system and the resulting cost or savings 
to Medicare. The State must also submit separate statewide projections 
for each year of the 36-month period, in both the aggregate and on a 
weighted average discharge basis, of inpatient expenditures under the 
State system and under the Medicare principles of reimbursement.
    (3) The projection submitted under paragraph (b)(2) of this section 
must include a detailed description of the methodology and assumptions 
used to derive the expenditure amounts under both systems. In instances 
where the assumptions are different under the projections cited in 
paragraph (b)(2) of this section, the State must provide a detailed 
explanation of the reasons for the differences. At a minimum, the 
following separate data and assumptions are to be included in the 
projections for the Medicare principles and for the State's system.
    (i) The State system base year and the Medicare allowable and 
reimbursable cost of each hospital that the State used to develop the 
projections, including the amount of estimated pass through costs.
    (ii) The categories of costs that are included in the State system 
and are reimbursed differently under the State system than under the 
Medicare system.
    (iii) The number of Medicare and total base year discharges and 
admissions for each hospital.
    (iv) The rate of change factor (and the method of application of 
this factor) used to project the base year costs over the 36-month 
period to which the assurance would apply.
    (v) Any allowance for anticipated growth in the amount of services 
from the base year (if applicable, the allowance must be presented in 
separate estimates for population increases or for increases in rates of 
admissions or both).
    (vi) Any adjustment in which the State is permitted by CMS to take 
into account previous reductions in the Medicare payment amounts that 
were the result of the effectiveness of the State's system even though 
Medicare was not a part of that system.
    (vii) Appropriate recognition and projection of the time value of 
trust fund expenditures for the period the State system expenditures 
were either less than or exceeded the Medicare system payments.
    (viii) States applying under a rate of increase effectiveness test 
under Sec. 403.304(c)(3) must also submit data projecting the parallel 
rates of increase during the requisite period.
    (4) The projections must include both the aggregate payments and the 
payments per discharge for the individual hospitals and for the State as 
a whole.
    (5) On a case-by-case basis. CMS may require additional data and 
documentation as needed to complete its review and monitoring.
    (6) For existing Medicare demonstration projects in effect on April 
20, 1983, the assurance and data as required by paragraphs (a) and (b) 
of this section, if appropriate, may be based on aggregate payments or 
payments per inpatient admission or discharge. CMS will judge the 
effectiveness of these systems on the basis of the rate of increase or 
inflation in Medicare inpatient hospital payments compared to the 
national rate of increase or inflation for such payments during the 
State's hospitals' three cost reporting periods beginning on or after 
October 1, 1983. The data submitted by the State for the period subject 
to the rate of increase test must include the rate of increase 
projection for that particular period of time. For the subsequent period 
of time, the State must assure that payments under its system will not 
exceed

[[Page 72]]

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



Sec. 403.321  State systems for hospital outpatient services.

    CMS may approve a State's application for approval of an outpatient 
system if the following conditions are met:
    (a) The State's inpatient system is approved.
    (b) The State's outpatient application meets the requirements and 
assurances for an inpatient system described in Secs. 403.304 (b) and 
(c), and 403.306 (b)(1) and (b)(2)(ii).
    (c) The State submits a separate application that provides separate 
assurances and estimates and data in further support of its assurance 
submitted under paragraph (b)(1) of Sec. 403.320, as follows:
    (1) Upon application for approval, the State must submit estimates 
and data that include, but are not limited to, projections for the first 
12-month period covered by the assurance for each hospital, in both the 
aggregate and on

[[Page 73]]

an average cost per service and payment basis, of Medicare outpatient 
expenditures under Medicare principles of reimbursement; parallel 
projections of Medicare outpatient expenditures under the State system; 
and the resulting cost or savings to Medicare independent of the State 
system for hospital inpatient services.
    (2) The State must submit separate statewide projections for each 
year of the 36-month period of the aggregate outpatient expenditures for 
each system. The projections submitted under this paragraph must--
    (i) Comply with the requirements of paragraphs (b) (3) and (5) of 
Sec. 403.320 regarding a detailed description of the methodology used to 
derive the expenditure amounts:
    (ii) Include the data and assumptions set forth in paragraphs (b)(3) 
(i), (ii), (iii), (iv), and (v) of Sec. 403.320; and
    (iii) Include any assumption the State has adopted for establishing 
the number of Medicare and total base year outpatient services for each 
hospital.
    (3) The State must provide a detailed explanation of the reasons for 
any difference between the data or assumptions used for the separate 
projections.



Sec. 403.322  Termination of agreements for Medicare recognition 
of State systems.

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

Subparts D--F [Reserved]



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

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



Sec. 403.700  Basis and purpose.

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



Sec. 403.702  Definitions and terms.

    For purposes of this subpart, the following definitions and terms 
apply:
    Election means a written statement signed by the beneficiary or the 
beneficiary's legal representative indicating the beneficiary's choice 
to receive nonmedical care or treatment for religious reasons.
    Excepted medical care means medical care that is received 
involuntarily or required under Federal, State, or local laws.
    FFY stands for Federal fiscal year.
    Medical care or treatment means health care furnished by or under 
the direction of a licensed physician that can involve diagnosing, 
treating, or preventing disease and other damage to the mind and body. 
It may involve the use of pharmaceuticals, diet, exercise, surgical 
intervention, and technical procedures.
    Nonexcepted medical care means medical care (other than excepted 
medical care) that is sought by or for a beneficiary who has elected 
religious nonmedical health care institution services.
    Religious nonmedical care or religious method of healing means 
health care furnished under established religious

[[Page 74]]

tenets that prohibit conventional or unconventional medical care for the 
treatment of a beneficiary, and the sole reliance on these religious 
tenets to fulfill a beneficiary's total health care needs.
    RNHCI stands for ``religious nonmedical health care institution,'' 
as defined in section 1861(ss)(1) of the Act.
    Religious nonmedical nursing personnel means individuals who are 
grounded in the religious beliefs of the RNHCI, trained and experienced 
in the principles of nonmedical care, and formally recognized as 
competent in the administration of care within their religious 
nonmedical health care group.



Sec. 403.720  Conditions for coverage.

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

[[Page 75]]



Sec. 403.724  Valid election requirements.

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



Sec. 403.730  Condition of participation: Patient rights.

    An RNHCI must protect and promote each patient's rights.
    (a) Standard: Notice of rights. The RNHCI must do the following:
    (1) Inform each patient of his or her rights in advance of 
furnishing patient care.
    (2) Have a process for prompt resolution of grievances, including a 
specific person within the facility whom a patient may contact to file a 
grievance. In addition, the facility must provide patients with 
information about the facility's process as well as with contact 
information for appropriate State and Federal resources.
    (b) Standard: Exercise of rights. The patient has the right to:
    (1) Be informed of his or her rights and to participate in the 
development and implementation of his or her plan of care.
    (2) Make decisions regarding his or her care, including transfer and 
discharge from the RNHCI. (See Sec. 403.736 for discharge and transfer 
requirements.)
    (3) Formulate advance directives and expect staff who furnish care 
in the RNHCI to comply with those directives, in accordance with part 
489, subpart I of this chapter. For purposes of conforming with the 
requirement in Sec. 489.102 that there be documentation in the patient's 
medical records concerning advanced directives, the patient care records 
of a beneficiary in an RNHCI are equivalent to medical records held by 
other providers.
    (c) Standard: Privacy and safety. The patient has the right to the 
following:
    (1) Personal privacy.

[[Page 76]]

    (2) Care in a safe setting.
    (3) Freedom from verbal, psychological, and physical abuse, and 
misappropriation of property.
    (4) Freedom from the use of restraints.
    (5) Freedom from involuntary seclusion.
    (d) Standard: Confidentiality of patient records. For any patient 
care records or election information it maintains on patients, the RNHCI 
must establish procedures to do the following:
    (1) Safeguard the privacy of any information that identifies a 
particular patient. Information from, or copies of, records may be 
released only to authorized individuals, and the RNHCI must ensure that 
unauthorized individuals cannot gain access to or alter patient records. 
Original patient care records must be released only in accordance with 
Federal or State laws, court orders, or subpoenas.
    (2) Maintain the records and information in an accurate and timely 
manner.
    (3) Ensure timely access by patients to the records and other 
information that pertains to that patient.
    (4) Abide by all Federal and State laws regarding confidentiality 
and disclosure for patient care records and election information.



Sec. 403.732  Condition of participation: Quality assessment and 
performance improvement.

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



Sec. 403.734  Condition of participation: Food services.

    The RNHCI must have an organized food service that is directed and 
adequately staffed by qualified personnel.
    (a) Standard: Sanitary conditions. The RNHCI must furnish food to 
the patient that is obtained, stored, prepared, distributed, and served 
under sanitary conditions.
    (b) Standard: Meals. The RNHCI must serve meals that furnish each 
patient with adequate nourishment in accordance with the recommended 
dietary allowances of the Food and Nutrition Board of the National 
Research Council, National Academy of Sciences. The RNHCI must do the 
following:
    (1) Furnish food that is palatable, attractive, and at the proper 
temperature and consistency.

[[Page 77]]

    (2) Offer substitutes of similar nourishment to patients who refuse 
food served or desire alternative choices.
    (3) Furnish meals at regular times comparable to normal mealtimes in 
the community. There must be no more than 14 hours between a substantial 
evening meal and breakfast the following day.
    (4) The RNHCI must offer snacks at bedtime.



Sec. 403.736  Condition of participation: Discharge planning.

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

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



Sec. 403.738  Condition of participation: Administration.

    An RNHCI must have written policies regarding its organization, 
services, and administration.
    (a) Standard: Compliance with Federal, State, and local laws. The 
RNHCI must operate in compliance with all applicable Federal, State, and 
local laws, regulations, and codes including, but not limited to, those 
pertaining to the following:

[[Page 78]]

    (1) Protection against discrimination on the basis of race, color, 
national origin, age, or handicap (45 CFR parts 80, 84, and 91).
    (2) Protection of human research subjects (45 CFR part 46).
    (3) Application of all safeguards to protect against the possibility 
of fraud and abuse (42 CFR part 455).
    (4) Privacy of individually identifiable health information (45 CFR 
part 164).
    (b) Standard: Governing body. (1) The RNHCI must have a governing 
body, or a person designated to function as a governing body, that is 
legally responsible for establishing and implementing all policies 
regarding the RNHCI's management and operation.
    (2) The governing body must appoint the administrator responsible 
for the management of the RNHCI.
    (c) Standard: Affiliations and disclosure. (1) An affiliation is 
permissible if it is between one of the following:
    (i) An individual serving as an uncompensated director, trustee, 
officer, or other member of the governing body of an RNHCI and a 
provider of medical treatment or services.
    (ii) An individual who is a director, trustee, officer, employee, or 
staff member of an RNHCI and another individual, with whom he or she has 
a family relationship, who is affiliated with (or has an ownership 
interest in) a provider of medical treatment or services.
    (iii) The RNHCI and an individual or entity furnishing goods or 
services as a vendor to both providers of medical treatment or services 
and RNHCIs.
    (2) The RNHCI complies with the disclosure requirements of 
Secs. 420.206 and 455.104 of this chapter.
    (3) The RNHCI furnishes written notice, including the identity of 
each new individual or company, to CMS at the time of a change, if a 
change occurs in any of the following:
    (i) Persons with an ownership or control interest, as defined in 
Secs. 420.201 and 455.101 of this chapter.
    (ii) The officers, directors, agents, or managing employees.
    (iii) The religious entity, corporation, association, or other 
company responsible for the management of the RNHCI.
    (iv) The RNHCI's administrator or director of nonmedical nursing 
services.

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



Sec. 403.740  Condition of participation: Staffing.

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



Sec. 403.742  Condition of participation: Physical environment.

    A RNHCI must be designed, constructed, and maintained to ensure the 
safety of the patients, staff, and the public.
    (a) Standard: Buildings. The physical plant and the overall 
environment must be maintained in a manner that ensures the safety and 
well-being of the patients. The RNHCI must have the following:
    (1) Procedures for the proper storage and disposal of trash.
    (2) Proper ventilation and temperature control and appropriate 
lighting levels to ensure a safe and secure environment.
    (3) An effective pest control program.

[[Page 79]]

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

[64 FR 67047, Nov. 30, 1999, as amended at 81 FR 64021, Sept. 16, 2016]



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

    (a) General. An RNHCI must meet the following conditions:
    (1) Except as otherwise provided in this section--
    (i) The RNHCI must meet the applicable provisions and must proceed 
in accordance with the Life Safety Code (NFPA 101 and Tentative Interim 
Amendments TIA 12-1, TIA 12-2, TIA 12-3, and TIA 12-4).
    (ii) Notwithstanding paragraph (a)(1)(i) of this section, corridor 
doors and doors to rooms containing flammable or combustible materials 
must be provided with positive latching hardware. Roller latches are 
prohibited on such doors.
    (2) The RNHCI must have written fire control plans that contain 
provisions for prompt reporting of fires; extinguishing fires; 
protection of patients, staff, and the public; evacuation; and 
cooperation with fire fighting authorities.
    (3) The RNHCI must maintain written evidence of regular inspection 
and approval by State or local fire control agencies.
    (4) The RNHCI may place alcohol-based hand rub dispensers in its 
facility if the dispensers are installed in a manner that adequately 
protects against inappropriate access.
    (5) When a sprinkler system is shut down for more than 10 hours the 
RHNCI must:
    (i) Evacuate the building or portion of the building affected by the 
system outage until the system is back in service, or
    (ii) Establish a fire watch until the system is back in service.
    (6) Building must have an outside window or outside door in every 
sleeping room, and for any building constructed after July 5, 2016 the 
sill height must not exceed 36 inches above the floor. Windows in atrium 
walls are considered outside windows for the purposes of this 
requirement.
    (b) Exceptions. (1) In consideration of a recommendation by the 
State survey agency or Accrediting Organization, or at the discretion of 
the Secretary, may waive, for periods deemed appropriate, specific 
provisions of the Life Safety Code, which would result in unreasonable 
hardship upon a RNHCI facility, but only if the waiver will not 
adversely affect the health and safety of the patients.

[[Page 80]]

    (2) If CMS finds that the fire and safety code imposed by State law 
adequately protects patients in the institution, the provisions of the 
Life Safety Code required in paragraph (a)(1) of this section do not 
apply in that State.
    (c) The standards incorporated by reference in this section are 
approved for incorporation by reference by the Director of the Office of 
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 
51. You may inspect a copy at the CMS Information Resource Center, 7500 
Security Boulevard, Baltimore, MD or at the National Archives and 
Records Administration (NARA). For information on the availability of 
this material at NARA, call 202-741-6030, or go to: http://
www.archives.gov/federal_register/code_of_federal_regulations/
ibr_locations.html. If any changes in this edition of the Code are 
incorporated by reference, CMS will publish a document in the Federal 
Register to announce the changes.
    (1) National Fire Protection Association, 1 Batterymarch Park, 
Quincy, MA 02169, www.nfpa.org, 1.617.770.3000.
    (i) NFPA 101, Life Safety Code, 2012 edition, issued August 11, 
2011;
    (ii) TIA 12-1 to NFPA 101, issued August 11, 2011.
    (iii) TIA 12-2 to NFPA 101, issued October 30, 2012.
    (iv) TIA 12-3 to NFPA 101, issued October 22, 2013.
    (v) TIA 12-4 to NFPA 101, issued October 22, 2013.
    (2) [Reserved]

[64 FR 67047, Nov. 30, 1999, as amended at 68 FR 1385, Jan. 10, 2003; 69 
FR 18803, Apr. 9, 2004; 69 FR 49240, Aug. 11, 2004; 70 FR 15237, Mar. 
25, 2005; 70 FR 71007, Nov. 25, 2005; 71 FR 55339, Sept. 22, 2006; 81 FR 
26896, May 4, 2016]



Sec. 403.745  Condition of participation: Building safety.

    (a) Standard: Building Safety. Except as otherwise provided in this 
section the RNHCI must meet the applicable provisions and must proceed 
in accordance with the Health Care Facilities Code (NFPA 99 and 
Tentative Interim Amendments TIA 12-2, TIA 12-3, TIA 12-4, TIA 12-5 and 
TIA 12-6).
    (b) Standard: Exceptions. Chapters 7, 8, 12, and 13 of the adopted 
Health Care Facilities Code do not apply to a RNHCI.
    (c) Waiver. If application of the Health Care Facilities Code 
required under paragraph (a) of this section would result in 
unreasonable hardship for the RNHCI, CMS may waive specific provisions 
of the Health Care Facilities Code, but only if the waiver does not 
adversely affect the health and safety of individuals.
    (d) Incorporation by reference. The standards incorporated by 
reference in this section are approved for incorporation by reference by 
the Director of the Office of the Federal Register in accordance with 5 
U.S.C. 552(a) and 1 CFR part 51. You may inspect a copy at the CMS 
Information Resource Center, 7500 Security Boulevard, Baltimore, MD or 
at the National Archives and Records Administration (NARA). For 
information on the availability of this material at NARA, call 202-741-
6030, or go to: http://www.archives.gov/federal_register/
code_of_federal_regulations/ibr_locations.html. If any changes in this 
edition of the Code are incorporated by reference, CMS will publish a 
document in the Federal Register to announce the changes.
    (1) National Fire Protection Association, 1 Batterymarch Park, 
Quincy, MA 02169, www.nfpa.org, 1.617.770.3000.
    (i) NFPA 99, Standards for Health Care Facilities Code of the 
National Fire Protection Association 99, 2012 edition, issued August 11, 
2011.
    (ii) TIA 12-2 to NFPA 99, issued August 11, 2011.
    (iii) TIA 12-3 to NFPA 99, issued August 9, 2012.
    (iv) TIA 12-4 to NFPA 99, issued March 7, 2013.
    (v) TIA 12-5 to NFPA 99, issued August 1, 2013.
    (vi) TIA 12-6 to NFPA 99, issued March 3, 2014.
    (2) [Reserved]

[81 FR 26896, May 4, 2016]



Sec. 403.746  Condition of participation: Utilization review.

    The RNHCI must have in effect a written utilization review plan to 
assess the necessity of services furnished. The plan must provide that 
records be maintained of all meetings, decisions,

[[Page 81]]

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

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



Sec. 403.748  Condition of participation: Emergency preparedness.

    The Religious Nonmedical Health Care Institution (RNHCI) must comply 
with all applicable Federal, State, and local emergency preparedness 
requirements. The RNHCI must establish and maintain an emergency 
preparedness program that meets the requirements of this section. The 
emergency preparedness program must include, but not be limited to, the 
following elements:
    (a) Emergency plan. The RNHCI must develop and maintain an emergency 
preparedness plan that must be reviewed, and updated at least annually. 
The plan must do all of the following:
    (1) Be based on and include a documented, facility-based and 
community-based risk assessment, utilizing an all-hazards approach.
    (2) Include strategies for addressing emergency events identified by 
the risk assessment.
    (3) Address patient population, including, but not limited to, 
persons at-risk; the type of services the RNHCI has the ability to 
provide in an emergency; and, continuity of operations, including 
delegations of authority and succession plans.
    (4) Include a process for cooperation and collaboration with local, 
tribal, regional, State, and Federal emergency preparedness officials' 
efforts to maintain an integrated response during a disaster or 
emergency situation, including documentation of the RNHCI's efforts to 
contact such officials and, when applicable, of its participation in 
collaborative and cooperative planning efforts.
    (b) Policies and procedures. The RNHCI must develop and implement 
emergency preparedness policies and procedures, based on the emergency 
plan set forth in paragraph (a) of this section, risk assessment at 
paragraph (a)(1) of this section, and the communication plan at 
paragraph (c) of this section. The policies and procedures must be 
reviewed and updated at least annually. At a minimum, the policies and 
procedures must address the following:
    (1) The provision of subsistence needs for staff and patients, 
whether they evacuate or shelter in place, include, but are not limited 
to the following:
    (i) Food, water, and supplies.
    (ii) Alternate sources of energy to maintain the following:
    (A) Temperatures to protect patient health and safety and for the 
safe and sanitary storage of provisions.
    (B) Emergency lighting.
    (C) Fire detection, extinguishing, and alarm systems.
    (D) Sewage and waste disposal.
    (2) A system to track the location of on-duty staff and sheltered 
patients in the RNHCI's care during an emergency. If on-duty staff and 
sheltered patients are relocated during the emergency, the RNCHI must 
document the specific

[[Page 82]]

name and location of the receiving facility or other location.
    (3) Safe evacuation from the RNHCI, which includes the following:
    (i) Consideration of care needs of evacuees.
    (ii) Staff responsibilities.
    (iii) Transportation.
    (iv) Identification of evacuation location(s).
    (v) Primary and alternate means of communication with external 
sources of assistance.
    (4) A means to shelter in place for patients, staff, and volunteers 
who remain in the facility.
    (5) A system of care documentation that does the following:
    (i) Preserves patient information.
    (ii) Protects confidentiality of patient information.
    (iii) Secures and maintains the availability of records.
    (6) The use of volunteers in an emergency and other emergency 
staffing strategies to address surge needs during an emergency.
    (7) The development of arrangements with other RNHCIs and other 
providers to receive patients in the event of limitations or cessation 
of operations to maintain the continuity of nonmedical services to RNHCI 
patients.
    (8) The role of the RNHCI under a waiver declared by the Secretary, 
in accordance with section 1135 of Act, in the provision of care at an 
alternate care site identified by emergency management officials.
    (c) Communication plan. The RNHCI must develop and maintain an 
emergency preparedness communication plan that complies with Federal, 
State, and local laws and must be reviewed and updated at least 
annually. The communication plan must include all of the following:
    (1) Names and contact information for the following:
    (i) Staff.
    (ii) Entities providing services under arrangement.
    (iii) Next of kin, guardian or custodian.
    (iv) Other RNHCIs.
    (v) Volunteers.
    (2) Contact information for the following:
    (i) Federal, State, tribal, regional, and local emergency 
preparedness staff.
    (ii) Other sources of assistance.
    (3) Primary and alternate means for communicating with the 
following:
    (i) RNHCI's staff.
    (ii) Federal, State, tribal, regional, and local emergency 
management agencies.
    (4) A method for sharing information and care documentation for 
patients under the RNHCI's care, as necessary, with care providers to 
maintain the continuity of care, based on the written election statement 
made by the patient or his or her legal representative.
    (5) A means, in the event of an evacuation, to release patient 
information as permitted under 45 CFR 164.510(b)(1)(ii).
    (6) A means of providing information about the general condition and 
location of patients under the facility's care as permitted under 45 CFR 
164.510(b)(4).
    (7) A means of providing information about the RNHCI's occupancy, 
needs, and its ability to provide assistance, to the authority having 
jurisdiction, the Incident Command Center, or designee.
    (d) Training and testing. The RNHCI must develop and maintain an 
emergency preparedness training and testing program that is based on the 
emergency plan set forth in paragraph (a) of this section, risk 
assessment at paragraph (a)(1) of this section, policies and procedures 
at paragraph (b) of this section, and the communication plan at 
paragraph (c) of this section. The training and testing program must be 
reviewed and updated at least annually.
    (1) Training program. The RNHCI must do all of the following:
    (i) Initial training in emergency preparedness policies and 
procedures to all new and existing staff, individuals providing services 
under arrangement, and volunteers, consistent with their expected roles.
    (ii) Provide emergency preparedness training at least annually.
    (iii) Maintain documentation of all emergency preparedness training.
    (iv) Demonstrate staff knowledge of emergency procedures.
    (2) Testing. The RNHCI must conduct exercises to test the emergency 
plan. The RNHCI must do the following:

[[Page 83]]

    (i) Conduct a paper-based, tabletop exercise at least annually. A 
tabletop exercise is a group discussion led by a facilitator, using a 
narrated, clinically-relevant emergency scenario, and a set of problem 
statements, directed messages, or prepared questions designed to 
challenge an emergency plan.
    (ii) Analyze the RNHCI's response to and maintain documentation of 
all tabletop exercises, and emergency events, and revise the RNHCI's 
emergency plan, as needed.

[81 FR 64021, Sept. 16, 2016]



Sec. 403.750  Estimate of expenditures and adjustments.

    (a) Estimates. CMS estimates the level of expenditures for services 
provided under this subpart before the start of each FFY beginning with 
FFY 2000.
    (b) Adjustments to payments. When the level of estimated 
expenditures is projected to exceed the FFY trigger level as described 
in paragraph (d) of this section, for the year of the projection, 
payments to RNHCIs will be reduced by a proportional percentage to 
prevent estimated expenditures from exceeding the trigger level. In 
addition to reducing payments proportionally, CMS may impose alternative 
adjustments.
    (c) Notification of adjustments. CMS notifies participating RNHCIs 
before the start of the FFY of the type and level of expenditure 
reductions to be made and when these adjustments will apply.
    (d) Calculation of trigger level. The trigger level for FFY 1998 is 
$20,000,000. For subsequent FFYs, the trigger level is the unadjusted 
trigger level increased or decreased by the carry forward as described 
in Sec. 403.754(b). The unadjusted trigger level is the base year amount 
(the unadjusted trigger level dollar amount for the prior FFY) increased 
by the average consumer price index (the single numerical value 
published monthly by the Bureau of Labor Statistics that presents the 
relationship in United States urban areas for the current cost of goods 
and services compared to a base year, to represent the change in 
spending power) for the 12-month period ending on July 31 preceding the 
beginning of the FFY.



Sec. 403.752  Payment provisions.

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



Sec. 403.754  Monitoring expenditure level.

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



Sec. 403.756  Sunset provision.

    (a) Effective date. Beginning with FFY 2002, if the level of 
estimated expenditures for all RNHCIs exceeds the trigger level for 3 
consecutive FFYs, CMS

[[Page 84]]

will not accept as the basis for payment of any claim any election 
executed on or after January 1 of the following calendar year.
    (b) Notice of activation. A notice in the Federal Register will be 
published at least 60 days before January 1 of the calendar year that 
the sunset provision becomes effective.
    (c) Effects of sunset provision. Only those beneficiaries who have a 
valid election in effect before January 1 of the year in which the 
sunset provision becomes effective will be able to claim Medicare 
payment for care in an RNHCI, and only for RNCHI services furnished 
during that election.



Sec. 403.764  Basis and purpose of religious nonmedical health care
institutions providing home service.

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

[69 FR 66419, Nov. 15, 2004]



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

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

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



Sec. 403.768  Excluded services.

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

[69 FR 66419, Nov. 15, 2004]



Sec. 403.770  Payments for home services.

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

[69 FR 66419, Nov. 15, 2004]



  Subpart H_Medicare Prescription Drug Discount Card and Transitional 
                           Assistance Program

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

[[Page 85]]



Sec. 403.800  Basis and scope.

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



Sec. 403.802  Definitions.

    For purposes of this subpart, the following definitions apply:
    Affiliated organization means an organization that is a legally 
separate entity from the endorsed drug card sponsor and meets one of the 
following conditions:
    (1) The organization and the endorsed drug card sponsor are under 
common control. Common control exists if another entity has the power, 
directly or indirectly, to significantly influence or direct the actions 
or policies of the organization and the endorsed drug card sponsor.
    (2) The organization is under the control of the endorsed drug card 
sponsor or the organization controls the endorsed drug card sponsor. 
Control exists if an entity has the power, directly or indirectly, to 
significantly influence or direct the actions or policies of another 
entity.
    (3) The organization possesses an ownership or equity interest of 5 
percent or more in the endorsed drug card sponsor on both the date on 
which the endorsed drug card sponsor markets the organization's Part D 
plan, and the date on which the endorsed drug card sponsor signed its 
endorsement contract with CMS.
    Annual coordinated election period means the period beginning on 
November 15, 2004 and ending on December 31, 2004, during which a 
discount card enrollee may elect to disenroll from their current 
endorsed discount card program and elect enrollment in another endorsed 
discount card program effective January 1, 2005.
    Applicant means the non-governmental, single legal organization or 
entity doing business in the United States that is applying for Medicare 
endorsement of its prescription drug discount card program, as described 
in its application, to be operated by itself or in coordination with 
subcontractors.
    Application means the document submitted to CMS by an applicant that 
seeks to demonstrate the applicant's compliance with the requirements 
specified in this subpart in order to obtain Medicare endorsement of the 
applicant's prescription drug discount card program.
    Authorized representative means a person with legal authority to act 
on behalf of an individual in making decisions related to the 
individual's health care or the individual's enrollment in, 
disenrollment from, and access to negotiated prices and transitional 
assistance under the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program.
    Covered discount card drug means any of the following: a drug that 
may be dispensed only upon a prescription and that is described in 
sections 1927(k)(2)(A)(i) through (iii) of the Act; a biological product 
described in sections 1927(k)(2)(B)(i) through (iii) of the Act; insulin 
described in section 1927(k)(2)(C) of the Act; the following medical 
supplies associated with the injection of insulin: syringes, needles, 
alcohol swabs, and gauze; a vaccine licensed under section 351 of the 
Public Health Service Act; or any use of a covered discount card drug 
for a medically accepted indication (as defined in section 1927(k)(6) of 
the Act). The definition of covered discount card drug excludes the 
following: agents when used for anorexia, weight loss, or weight gain; 
agents when used to promote fertility; agents when used for cosmetic 
purposes or hair growth; agents when used for the symptomatic relief of 
cough and colds; prescription vitamins and mineral products, except 
prenatal vitamins and fluoride preparations; nonprescription drugs; 
outpatient drugs for which the manufacturer seeks to require that 
associated tests or monitoring services be purchased exclusively from 
the manufacturer or its designee as a condition of sale; barbiturates; 
and benzodiazepines.
    Discount card enrollee or enrollee or card enrollee means an 
individual described in Sec. 403.810(a) who elects to enroll in a 
Medicare-endorsed prescription drug discount card program.

[[Page 86]]

    Effective date means the date on which an enrollment or 
disenrollment transaction becomes effective.
    Enrollment period means the period beginning on the initial 
enrollment date and ending on December 31, 2005.
    Exclusive card program means an endorsed discount card program that 
is offered by an exclusive card sponsor.
    Exclusive card sponsor means an endorsed sponsor that also operates 
one or more Medicare managed care plans and limits enrollment in its 
endorsed discount card program to individuals described in 
Sec. 403.810(a) who are enrollees in one of the Medicare managed care 
plans it offers.
    Family size means one for individuals who are single, and two for 
individuals who are married.
    Federal Employee's Health Benefits Program plan means a plan under 
chapter 89 of title 5 of the United States Code including the Retired 
Federal Employee's Health Benefits Program.
    Formulary means the list of specific drugs from among covered 
discount card drugs for which an endorsed sponsor offers negotiated 
prices to Medicare beneficiaries enrolled in its Medicare-endorsed 
prescription drug discount card program.
    Group enrollment means simultaneous enrollment of all or some of the 
individuals described in section 403.810(a) who are members of a 
Medicare managed care plan into the exclusive card program offered by 
the Medicare managed care organization.
    HIPAA means the Health Insurance Portability and Accountability Act 
of 1996, 42 U.S.C. 1320d and section 264 of Public Law 104-191.
    Income means the components of an individual's adjusted gross income 
(AGI), as defined under 26 U.S.C. section 62, and, to the extent not 
included in the components of AGI, retirement and disability benefits, 
or, if he or she is married, the sum of such income for the individual 
and his or her spouse.
    Initial enrollment date means the date established by the Secretary 
on which endorsed sponsors may begin accepting beneficiaries' standard 
enrollment forms.
    Initial enrollment year means the period beginning on the initial 
enrollment date and ending on December 31, 2004.
    I/T/U pharmacy means a pharmacy operated by the Indian Health 
Service, an Indian tribe or tribal organization, or an urban Indian 
organization, all of which are defined in section 4 of the Indian Health 
Care Improvement Act, 25 U.S.C. 1603.
    Long-term care facility means a skilled nursing facility, as defined 
in section 1819(a) of the Act, or nursing facility, as defined in 
section 1919(a) of the Act.
    Long-term care pharmacy means a pharmacy owned by or under contract 
with a long-term care facility to provide prescription drugs to the 
facility's residents.
    Medicare cost plan means an organization that offers enrollment 
under a reasonable cost reimbursement contract under section 1876(h) of 
the Act.
    Medicare managed care organization means a Part C organization 
offering a Part C plan described in section 1851(a)(2)(A) of the Act or 
a Medicare cost plan.
    Medicare managed care plan means a plan described in section 
1851(a)(2)(A) of the Act offered by a Part C organization or a Medicare 
cost plan.
    Medicare Prescription Drug Discount Card and Transitional Assistance 
Program or Medicare Drug Discount Card Program means the program 
established under section 1860D-31 of the Act.
    Medicare-endorsed prescription drug discount card program, or 
endorsed program, or endorsed discount card program means any 
prescription drug discount card program that has received Medicare 
endorsement and whose endorsed sponsor has entered into a contract with 
CMS.
    Medicare-endorsed prescription drug discount card sponsor, or 
endorsed sponsor, or endorsed discount card sponsor means any applicant 
that has received endorsement from Medicare and entered into a contract 
with CMS to operate an approved Medicare-endorsed discount card program.
    Negotiated price means the discounted price for a covered discount 
card drug offered by an endorsed sponsor, including any dispensing fee, 
which takes

[[Page 87]]

into account negotiated price concessions, such as discounts, direct or 
indirect subsidies, rebates, and direct or indirect remunerations.
    Network pharmacy means a licensed pharmacy that is not a mail order 
pharmacy and that is under contract with an endorsed sponsor to provide 
negotiated prices to its card enrollees and accept transitional 
assistance as payment for covered discount card drugs provided to its 
transitional assistance enrollees.
    New Medicare managed care organization means an entity applying for 
approval to enter into a new contract with CMS to offer a new, 
coordinated care plan or plans as described in section 1851(a)(2)(A) of 
the Act under Medicare Part C and an exclusive card program under the 
Medicare Drug Discount Card Program.
    Over-the-counter drug means a non-prescription drug.
    Part C organization means an organization offering a Part C plan.
    Part C plan means a plan described in section 1859(b)(1) of the Act.
    Part D plan has the meaning given the term at Sec. 423.4.
    Pharmacy network means the group of network pharmacies under 
contract with an endorsed sponsor.
    Poverty line means the income level defined in section 673(2) of the 
Community Services Block Grant Act, 42 U.S.C. 9902(2), including any 
revision required by such section, applicable to the family size 
involved.
    Rural means a five-digit zip code in which the population density is 
less than 1000 persons per square mile.
    Second enrollment year means the period beginning on January 1, 2005 
and ending on December 31, 2005.
    Solicitation means the application materials identified in the 
notice CMS publishes in the Federal Register announcing its intention to 
accept and consider applications from applicants seeking Medicare 
endorsement for their prescription drug discount card programs.
    Special election period means the period beginning the day after the 
effective date of an individual's disenrollment from an endorsed 
discount card program for one of the reasons listed in 
Sec. 403.811(b)(2). The length of any given election period will be 
specified by CMS in a form and manner that supports the goals of the 
Medicare Drug Discount Card Program.
    Special endorsed sponsor means an endorsed sponsor who has received 
special endorsement by CMS.
    Special endorsement means an endorsement granted under Sec. 403.816 
or Sec. 403.817.
    Standard enrollment form means an enrollment form or other approved 
process for enrolling individuals into an endorsed program that 
incorporates the standard elements provided by CMS.
    Subcontractor means an organization or entity doing business in the 
United States with which an applicant or endorsed sponsor enters into a 
contract or other legal arrangement in connection with the operation of 
a prescription drug discount card program.
    Suburban means a five-digit zip code in which the population density 
is between 1000 and 3000 persons per square mile.
    Transition period means the period beginning on January 1, 2006 and 
ending, for individuals enrolled for coverage under Part D, on the 
effective date of the individual's coverage, and for individuals not so 
enrolled, on the last day of the initial Part D open enrollment period.
    Transitional assistance means a subsidy that transitional assistance 
enrollees may apply toward the cost of covered discount card drugs in 
the manner described in Sec. 403.808(d).
    Transitional assistance effective date means the date on which a 
transitional assistance enrollee can access transitional assistance.
    Transitional assistance enrollee means an individual described in 
Sec. 403.810(b) who has applied for and been determined eligible for 
transitional assistance and has enrolled in a discount card program.
    Urban means a five-digit zip code in which the population density is 
greater than 3000 persons per square mile.

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

[[Page 88]]



Sec. 403.804  General rules for solicitation, application and Medicare
endorsement period.

    (a) Application. (1) Except as provided in paragraph (a)(2) of this 
section, an applicant must submit an application to CMS by the deadline 
announced in the solicitation to be eligible for Medicare endorsement of 
its prescription drug discount card program. The applicant must certify 
that based on best knowledge, information, and belief, the reported 
information is accurate, complete, truthful, and supportable.
    (2) A new Medicare managed care organization may simultaneously 
apply to offer a new Part C plan or plans and an exclusive card program 
after the deadline announced in the solicitation. New Medicare managed 
care organizations seeking endorsement of their prescription drug 
discount card programs must submit an application to CMS at the time 
that they submit their Part C applications. New Medicare managed care 
organizations will be eligible for endorsement provided CMS approves 
their Part C application, the new Medicare managed care organizations 
demonstrate to CMS that they meet the criteria under paragraph (b) of 
this section, and the new Medicare managed care organizations 
demonstrate that they will meet the requirements of paragraph (e)(2) of 
this section.
    (b) Eligibility to receive endorsement. Except as specified in 
Secs. 403.814, 403.816 and 403.817, an applicant will be eligible for 
endorsement if its application demonstrates to CMS's satisfaction that 
the applicant meets the requirements of Sec. 403.806(a) and 
Sec. 403.806(b)(1) and that it would operate its endorsed program in a 
manner consistent with the requirements of Sec. 403.806(b)(2) and (b)(3) 
through Sec. 403.806(m). An applicant that submits a complete 
application that meets all of the requirements of this subpart will be 
eligible to enter into a contract with CMS to operate a Medicare-
endorsed prescription drug discount card program. Following the receipt 
of its Medicare endorsement, an endorsed sponsor must comply with the 
requirements of Sec. 403.806(b)(2) and (b)(3) through Sec. 403.806(m) 
through the end of the transition period.
    (c) Ability to subcontract with other organizations and entities. 
(1) An applicant for endorsement may demonstrate that it meets the 
requirements of this subpart by combining with subcontractors.
    (2) Any subcontracts must be in final form satisfactory to CMS, 
signed by all applicable parties, and filed with CMS before an endorsed 
sponsor will be permitted to engage in any enrollment or information and 
outreach.
    (3) Once endorsed, an endorsed sponsor must ensure that its 
subcontractors comply with all applicable requirements of this subpart.
    (d) Period of endorsement. An applicant eligible to receive 
endorsement will be required to sign a contract with CMS agreeing to 
operate its approved Medicare-endorsed prescription drug discount card 
program(s) until the end of the transition period.
    (e)(1) Except as provided in paragraph (e)(2) of this section, we 
expect an endorsed sponsor to be ready by June 8, 2004, to initiate 
enrollment and fully operate its endorsed program in compliance with the 
requirements of Sec. 403.806(b)(2) and (b)(3) through Sec. 403.806(m).
    (2) A new Medicare managed care organization must be ready to 
initiate enrollment and fully operate its exclusive card program in 
compliance with the requirements of Secs. 403.806(b)(2) and (b)(3) 
through Sec. 403.806(m) upon approval of its Part C application and 
application for Medicare endorsement of its prescription drug discount 
card program.



Sec. 403.806  Sponsor requirements for eligibility for endorsement.

    Except as specified in Secs. 403.814, 403.816, and 403.817, an 
endorsed sponsor must meet the following requirements:
    (a) Applicant experience. (1) An applicant must be a non-
governmental, single legal entity doing business in the United States.
    (2) An applicant must have 3 years of private sector experience in 
the United States in pharmacy benefit management, which is defined to 
mean--
    (i) Adjudicating and processing claims for drugs at the point of 
sale;
    (ii) Negotiating with prescription drug manufacturers and others for 
discounts, rebates, and/or other price concessions on prescription 
drugs; and

[[Page 89]]

    (iii) Administering and tracking individuals' subsidies or benefits 
in real time.
    (3) A single legal entity which is either the applicant or a 
subcontractor must, at the time of application for Medicare endorsement, 
operate a pharmacy benefit program, a prescription drug discount card 
program, a low-income drug assistance program, or a similar program that 
serves at least 1 million covered lives.
    (b) Financial stability and business integrity. (1) An applicant 
must demonstrate a satisfactory record of the financial stability and 
business integrity of itself, any subcontractors on whom the applicant 
relies to satisfy the 3 years experience requirement in paragraph (a)(2) 
of this section and the 1 million covered lives requirement in paragraph 
(a)(3) of this section, and any subcontractors engaged by the applicant 
to perform the following activities: develop the pharmacy network; 
negotiate with manufacturers or pharmacies for rebates, discounts, or 
other price concessions; handle eligibility for or enrollment in the 
endorsed sponsor's endorsed discount card program and/or transitional 
assistance; and administer transitional assistance.
    (2) An endorsed sponsor and any subcontractors described in 
paragraph (b)(1) of this section must maintain a satisfactory record of 
financial stability and business integrity during the term of the 
endorsed program.
    (3) Medicare endorsement of a discount card program shall not be 
construed to express or imply any opinion that an endorsed sponsor or 
any subcontractor of an endorsed sponsor is in compliance with or not 
liable under the False Claims Act, anti-kickback statute (section 
1128B(b) of the Act), or other legal authorities for any improper 
billing, claims submission, or related conduct.
    (c) Compliance with applicable law. An endorsed sponsor must comply 
with all applicable Federal and State laws, including the Federal anti-
kickback statute (section 1128B(b) of the Act).
    (d) Prescription drug offering. An endorsed sponsor must comply with 
the following discount, rebate, and formulary requirements:
    (1) Offer all of its discount card enrollees negotiated prices on 
covered discount card drugs, which may be limited to those covered 
discount card drugs included on the endorsed sponsor's formulary.
    (2) If the endorsed sponsor uses a formulary, offer a negotiated 
price on at least one covered discount card drug in each of the lowest 
level categories for each of the therapeutic groups representing the 
drugs most commonly needed by Medicare beneficiaries as determined by 
CMS. A specific covered discount card drug may not be used to fulfill 
this requirement for more than one category.
    (3) Offer a negotiated price on a generic drug in at least 55 
percent of the lowest level categories in each of the therapeutic groups 
representing the drugs most commonly needed by Medicare beneficiaries as 
determined by CMS.
    (4) In setting negotiated prices under this section, an endorsed 
sponsor may vary its prices and the drugs included on the formulary by 
pharmacy contract and enrollee characteristics, such as transitional 
assistance eligibility status.
    (5) Synchronize changes in the list of, and negotiated prices for, 
covered discount card drugs included in the endorsed sponsor's formulary 
with formulary and negotiated prices published on a price comparison Web 
site, as described in paragraph (i)(4)(v) of this section.
    (6) Obtain rebates, discounts, or other price concessions from 
manufacturers on covered discount card drugs and pass a share of such 
concessions to enrollees through negotiated prices.
    (7) Guarantee that network and mail order pharmacies provide the 
lower of the negotiated price or usual and customary price when a 
covered discount card drug for a negotiated price is available at the 
point of sale.
    (8) Guarantee that a network pharmacy, at the point of sale, inform 
a discount card enrollee of any differential between the price of a 
prescribed drug (if it is a covered discount card drug) and the price of 
the lowest priced generic covered discount card drug that

[[Page 90]]

is therapeutically equivalent and bioequivalent and available at such 
pharmacy. Mail order pharmacies are to provide this information at the 
time of delivery of the drug.
    (9) Except during the week of November 15, 2004 (which coincides 
with the beginning of the annual coordinated election period), ensure 
that any increase in the negotiated price for a covered discount card 
drug does not exceed an amount proportionate to the change in the drug's 
average wholesale price (AWP), and/or an amount proportionate to the 
changes in the endorsed sponsor's cost structure, including material 
changes to any discounts, rebates, or other price concessions the 
endorsed sponsor receives from a pharmaceutical manufacturer or 
pharmacy.
    (e) Transitional assistance administration. An endorsed sponsor must 
administer transitional assistance funds, including any roll-over funds 
as described in Sec. 403.808(f), for transitional assistance enrollees, 
through the following procedures:
    (1) Establish accounting procedures to manage the transitional 
assistance funds for each transitional assistance enrollee.
    (2) Ensure that transitional assistance funds are applicable to, and 
only to, all covered discount card drugs available at the endorsed 
sponsors' network and mail order pharmacies, regardless of formulary.
    (3) Ensure that, at network and mail order pharmacies, transitional 
assistance funds are applied at the lower of negotiated price (if any) 
and the pharmacy's usual and customary price.
    (4) Ensure that network pharmacies make available to the 
transitional assistance enrollee, electronically or by telephone, at the 
point-of-sale of covered discount card drugs, the amount of transitional 
assistance remaining available to the transitional assistance enrollee. 
Mail order pharmacies are to make this information available by 
telephone.
    (5) Maintain a toll-free telephone number that discount card 
enrollees may use to determine their transitional assistance balances.
    (6) Enforce coinsurance requirements described in Sec. 403.808(e) 
and ensure that the portion of the price paid through coinsurance is not 
deducted from the total transitional assistance funds available to the 
discount card enrollee.
    (f) Service area and pharmacy access. An endorsed sponsor must meet 
the following requirements for its service area and its pharmacy 
network:
    (1) The service area must cover one or more States.
    (2) The endorsed sponsor's discount card program must be available 
to all eligible individuals residing in each State in the endorsed 
sponsor's service area and may not be offered to individuals residing 
outside of the United States.
    (3) The endorsed sponsor must have a contracted pharmacy network, 
consisting of pharmacies other than mail-order pharmacies, sufficient to 
ensure that for beneficiaries residing in the endorsed sponsor's service 
area the following requirements are satisfied:
    (i) At least 90 percent of Medicare beneficiaries, on average, in 
urban areas served by the endorsed program, live within 2 miles of a 
network pharmacy;
    (ii) At least 90 percent of Medicare beneficiaries, on average, in 
suburban areas served by the endorsed program, live within 5 miles of a 
network pharmacy; and
    (iii) At least 70 percent of Medicare beneficiaries, on average, in 
rural areas served by the endorsed program, live within 15 miles of a 
network pharmacy.
    (4) The endorsed sponsor's pharmacy network may be supplemented by 
pharmacies offering home delivery via mail-order, provided the 
requirements of paragraph (f)(3) of this section are met.
    (g) Information and outreach and customer service. (1) An endorsed 
sponsor must provide through the Internet and some other tangible medium 
(such as a mailing) to Medicare beneficiaries information and outreach 
materials describing its endorsed drug card program, including the 
following information--
    (i) The enrollment fee;
    (ii) Negotiated prices offered for covered discount card drugs;
    (iii) If offered, discounts on over-the-counter drugs;
    (iv) Any other products or services offered under the endorsement; 
and

[[Page 91]]

    (v) Any other information that CMS determines is necessary for a 
full description of the endorsed discount drug card program.
    (2) An endorsed sponsor must include on a Web site the following:
    (i) Information regarding when the Web site was last updated; and
    (ii) A disclaimer that the information on the Web site may not be 
current.
    (3) An endorsed sponsor must use the following forms which 
incorporate standard elements provided by CMS:
    (i) An enrollment form (except as may be modified for an exclusive 
card sponsor as discussed in Sec. 403.814(b)(5)(iii); and
    (ii) An eligibility determination notice.
    (4) An endorsed sponsor must provide to each enrollee a card that 
complies with National Council for Prescription Drug Programs standards.
    (5) An endorsed sponsor must meet the following requirements for the 
review and approval of information and outreach materials:
    (i) Comply with the Information and Outreach Guidelines published by 
CMS except as provided in paragraph (g)(5)(vi) of this section.
    (ii) Except as provided in paragraph (g)(5)(iii) of this section, 
not distribute any information and outreach materials until or unless 
they are approved by CMS.
    (iii) If CMS does not disapprove the initial submission of 
information and outreach materials within 30 days of receipt of these 
materials, the materials are deemed approved under paragraph (g)(5)(ii) 
of this section.
    (iv) Information and outreach materials may discuss only products or 
services inside the scope of endorsement, as described in paragraph (h) 
of this section.
    (v) Information and outreach materials include the same kinds of 
materials described in 42 CFR 422.80(b), as well as the enrollment form, 
eligibility determination form, and membership card described in 
paragraphs (g)(3) and (g)(4) of this section, Web site content, and 
information regarding discounts for over-the-counter drugs.
    (vi) All materials related to products and services that are Part D 
plans must comply with the requirements specified in Sec. 423.50 of this 
chapter.
    (6) An endorsed sponsor must maintain a toll-free customer call 
center that is open during usual business hours and that provides 
customer telephone service, including to pharmacists, in accordance with 
standard business practices. The endorsed sponsor must inform enrollees 
that the toll-free telephone number provides information on the amount 
of remaining transitional assistance, in accordance with paragraph 
(e)(5) of this section.
    (7) An endorsed sponsor must provide a system to reduce the 
likelihood of medical errors and adverse drug interactions and to 
improve medication use.
    (h) Products and services inside and outside the scope of the 
endorsement. (1) An endorsed sponsor may provide, under the endorsement, 
only those products and services inside the scope of the endorsement, 
including conducting enrollment. An endorsed sponsor must ensure that 
discount card enrollees are not charged any additional fee (other than 
the enrollment fee allowed under Sec. 403.811(c)) for products or 
services inside the scope of the endorsement.
    (2) Products and services inside the scope of the endorsement are 
limited to--
    (i) Products or services offered for no additional fee, other than 
the enrollment fee allowed under Sec. 403.811(c), that are directly 
related to a covered discount card drug; or
    (ii) A discounted price for an over-the-counter drug.
    (i) Reporting. (1) An endorsed sponsor must report to CMS on a 
periodic basis information on the major features of the endorsed 
sponsor's programs that correspond to the qualifications for 
endorsement, including, but not limited to, information concerning--
    (i) Savings from pharmacies and manufacturers obtained through 
rebates, discounts, and other price concessions;
    (ii) Savings shared with discount card enrollees by manufacturer, by 
all retail pharmacies, by all mail order pharmacies, and by all brand 
name and all generic covered discount card drugs;
    (iii) Dispensing fees;

[[Page 92]]

    (iv) Certified (by the chief financial officer) financial accounting 
records on transitional assistance used by the transitional assistance 
enrollees in each month;
    (v) Participant utilization and spending statements;
    (vi) Utilization and spending for selected drugs;
    (vii) Performance on customer service metrics such as call center 
performance;
    (viii) Grievance logs; and
    (ix) Endorsed sponsor's compliance with the pharmacy network access 
standards.
    (2) An endorsed sponsor must provide notice of, and the rationale 
for, negotiated price increases, except for increases during the week of 
November 15, 2004, due to reasons other than changes in average 
wholesale price (AWP).
    (3) An endorsed sponsor must certify that based on best knowledge, 
information, and belief, the reported information is accurate, complete, 
truthful, and supportable.
    (4) Through a price comparison Web site, an endorsed sponsor must 
report the following information:
    (i) Customer service hours;
    (ii) Customer service contact information;
    (iii) Endorsed program Web site address;
    (iv) Annual enrollment fee; and
    (v) Negotiated prices (including any applicable dispensing fee), for 
every covered discount card drug included in the discount card program's 
offering.
    (5) CMS may require endorsed sponsors to submit, in standard 
terminology, descriptions of other discount card related services they 
provide, such as pharmacist services.
    (j) Grievance process. An endorsed sponsor must establish and 
maintain a grievance process. This process must be designed to track and 
appropriately address in a timely manner enrollees' complaints about any 
aspect of their endorsed program for which the endorsed sponsor is 
responsible.
    (k) Eligibility, enrollment, and disenrollment. (1) An endorsed 
sponsor must make preliminary eligibility determinations in accordance 
with Sec. 403.810 and conduct enrollment and disenrollment in accordance 
with Sec. 403.811.
    (l) Authorized representative. An endorsed sponsor must treat an 
individual's authorized representative as the individual, if under 
applicable law, the authorized representative has the legal authority to 
act on behalf of the individual with respect to the action at issue.
    (m) Other. An endorsed sponsor must meet the requirements of 
Secs. 403.812, 403.813, and 403.822 of this subpart.

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



Sec. 403.808  Use of transitional assistance funds.

    (a) Individuals determined eligible for transitional assistance in 
2004. Subject to paragraph (d) of this section, an individual who, in 
calendar year 2004, is determined eligible for transitional assistance 
under Sec. 403.810(b) is entitled to the following:
    (1) $600 in calendar year 2004; and
    (2) $600 in calendar year 2005.
    (b) Individuals determined eligible for transitional assistance in 
2005. Subject to paragraph (d) of this section, an individual who, in 
calendar year 2005, is determined eligible for transitional assistance 
under Sec. 403.810(b) is entitled to one of the following amounts for 
calendar year 2005:
    (1) If the complete application for the individual's transitional 
assistance eligibility is received on or after January 1, 2005 and 
before April 1, 2005, $600.
    (2) If the complete application for the individual's transitional 
assistance eligibility is received on or after April 1, 2005 and before 
July 1, 2005, $450.
    (3) If the complete application for the individual's transitional 
assistance eligibility is received on or after July 1, 2005 and before 
October 1, 2005, $300.
    (4) If the complete application for the individual's transitional 
assistance eligibility is received on or after October 1, 2005 and on or 
before December 31, 2005, $150.
    (c) Payment of enrollment fee. An individual found eligible for 
transitional assistance is entitled to have CMS pay the annual 
enrollment fee to the endorsed sponsor on his or her behalf.

[[Page 93]]

    (d) Conditions on use of transitional assistance. A transitional 
assistance enrollee may access the transitional assistance described in 
paragraphs (a) and (b) of this section only if the following conditions 
are met:
    (1) Except as provided in Sec. 403.814(b)(3)(v), the transitional 
assistance funds are applied toward the cost of a covered discount card 
drug obtained under the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program;
    (2) The individual pays a coinsurance amount in accordance with 
Sec. 403.808(e);
    (3) The individual purchases the covered discount card drug on or 
after the individual's transitional assistance effective date; and
    (4) The individual is enrolled in the Medicare Prescription Drug 
Discount Card and Transitional Assistance Program on the date the 
individual's claim for the covered discount card drug is adjudicated.
    (e) Coinsurance. If sufficient transitional assistance funds are 
available, transitional assistance funds must be expended in accordance 
with the following:
    (1) For beneficiaries with incomes at or below 100 percent of the 
poverty line, 95 percent of the price of a covered discount card drug 
must be paid from the available transitional assistance funds.
    (2) For beneficiaries with incomes greater than 100 percent but at 
or below 135 percent of the poverty line, 90 percent of the price of a 
covered discount card drug must be paid from the available transitional 
assistance funds.
    (f) Rollover. An individual with transitional assistance retains 
access to any balance of transitional assistance not expended in a 
calendar year during the next calendar year, up to and including the 
transition period, if the individual--
    (1) Remains in his or her current endorsed discount card program;
    (2) Elects a new endorsed program in an Annual Coordinated Election 
Period; or
    (3) Is eligible for a Special Election Period under 
Sec. 403.811(b)(2) and elects a new endorsed discount card program 
during such Special Election Period.



Sec. 403.810  Eligibility and reconsiderations.

    (a) Eligibility for an endorsed discount card program. An individual 
is eligible to enroll in an endorsed discount card program only if such 
individual meets the following conditions:
    (1) The individual is entitled to benefits, or enrolled, under 
Medicare Part A or enrolled under Medicare Part B; and
    (2) The individual, at the time of applying to enroll in an endorsed 
discount card program, is not enrolled in a State medical assistance 
program under Title XIX of the Act or under a waiver pursuant to section 
1115 of the Act, under which the individual is entitled to any medical 
assistance for outpatient prescribed drugs as described in section 
1905(a)(12) of the Act, except as allowed in Sec. 403.817(d).
    (b) Eligibility for transitional assistance. An individual is 
eligible to receive transitional assistance if, at the time of applying 
for transitional assistance, the individual meets the following 
conditions:
    (1) The individual meets the conditions in paragraph (a) of this 
section;
    (2) The individual resides in one of the 50 States or the District 
of Columbia;
    (3) The individual's income is not more than 135 percent of the 
poverty line applicable to the individual's family size;
    (4) The individual does not have coverage for covered discount card 
drugs under one or more of the following sources:
    (i) A group health plan or health insurance coverage, as these terms 
are defined under section 2791 of the Public Health Service Act, other 
than a Part C plan or a group health plan consisting solely of excepted 
benefits (such as a Medigap plan) as the term is defined under section 
2791 of the Public Health Service Act;
    (ii) Coverage provided under Chapter 55 of Title 10, United States 
Code, including TRICARE; or
    (iii) A Federal Employee's Health Benefits Program plan; and
    (5) The individual (or the individual's authorized representative) 
completes a standard enrollment form and signs and dates the form in 
accordance with Sec. 403.811(a)(4). By signing the form, the

[[Page 94]]

individual (or the individual's authorized representative) certifies, 
under penalty of perjury, that, to the best of the individual's 
knowledge, the information he or she provides on the form is accurate.
    (c) Special rule for QMBs, SLMBs and QIs. An individual is deemed to 
meet the income requirements in paragraph (b)(3) of this section if the 
individual is enrolled under Title XIX of the Act as a--
    (1) Qualified Medicare Beneficiary (QMB);
    (2) Specified Low-Income Medicare Beneficiary (SLMB); or
    (3) Qualified Individual (QI).
    (d) Duration of eligibility determinations. An individual determined 
eligible for the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program and, in the case of transitional 
assistance enrollees, for transitional assistance, shall remain eligible 
for the Medicare Prescription Drug Discount Card and Transitional 
Assistance Program and, in the case of transitional assistance 
enrollees, for transitional assistance for the duration of the 
individual's enrollment in the Medicare Prescription Drug Discount Card 
and Transitional Assistance Program.
    (e) Drug card and transitional assistance benefits not treated as 
benefits under other Federal programs. Any benefits received under the 
Medicare Prescription Drug Discount Card and Transitional Assistance 
Program must not be taken into account in determining an individual's 
eligibility for, or the amount of benefits under, any other Federal 
program.
    (f) Verification of eligibility. (1) CMS will verify eligibility to 
enroll in an endorsed discount card program or to receive transitional 
assistance.
    (2) If CMS is unable to verify an individual's eligibility or 
ineligibility for transitional assistance, CMS can require the 
individual to provide additional income information in a form and manner 
specified by CMS as one condition of eligibility for transitional 
assistance.
    (g) Reconsideration. (1) If an individual is determined ineligible 
to enroll in an endorsed discount card program under paragraph (a) of 
this section or determined ineligible to receive transitional assistance 
under paragraph (b) of this section, the individual (or the individual's 
authorized representative) has a right to request that an independent 
review entity under contract with CMS reconsider the determination.
    (2) Reconsideration requests must be filed within 60 days from date 
of notice of an ineligibility determination, unless the individual (or 
the individual's authorized representative) can demonstrate good cause 
for why the 60-day time frame should be extended.
    (3) An individual (or the individual's authorized representative) 
may submit additional documentary evidence or an explanation about his 
or her eligibility in writing to the independent review entity, as part 
of the reconsideration process.
    (4) Reconsideration decisions shall be issued by the independent 
review entity in writing and contain an explanation of the reasoning of 
the decision.



Sec. 403.811  Enrollment and disenrollment and associated endorsed 
sponsor requirements.

    (a) Enrollment process. (1) An individual (or an individual's 
authorized representative) applying to enroll in an endorsed discount 
card program must complete a standard enrollment form or other method 
allowed by CMS and provide such information to the endorsed discount 
card program in which the individual wishes to enroll.
    (2) An individual electing to join an endorsed discount card program 
that charges an annual enrollment fee, and who is not applying for 
transitional assistance, must agree to pay the annual enrollment fee, if 
any, in a form and manner determined by the endorsed card sponsor.
    (3) An individual applying for transitional assistance at the time 
that they apply for enrollment in an endorsed discount card program may 
only enroll in the endorsed discount card program at that time if CMS 
determines that the individual is eligible for transitional assistance. 
Individuals not found eligible for transitional assistance may enroll in 
an endorsed discount card program without applying for transitional 
assistance after being notified of

[[Page 95]]

their ineligibility for transitional assistance.
    (4) An individual applying for transitional assistance must complete 
a standard enrollment form and sign and date the form, certifying, under 
penalty of perjury or similar sanction for false statements, as to the 
accuracy of the information provided on the standard enrollment form.
    (5) Except as provided in Sec. 403.811(b)(4), an individual who is 
not currently enrolled in an endorsed card program seeking to enroll in 
the Medicare Prescription Drug Discount Card and Transitional Assistance 
Program may do so at any time during the enrollment period.
    (6) An individual may not be enrolled in more than one endorsed 
discount card program at a time.
    (7) An individual may enroll in only one endorsed discount card 
program per year during the enrollment period. An individual enrolling 
during the initial enrollment year, with the exception of the 
circumstances under paragraph (b)(2) of this section, may change 
election for the second enrollment year during the annual coordinated 
election period. During the second enrollment year, an individual may 
enroll in only one endorsed discount card program, unless the individual 
meets the circumstances described in paragraph (b)(2) of this section.
    (8) An individual remains enrolled in an endorsed discount card 
program elected unless--
    (i) The individual is disenrolled under paragraph (b) of this 
section;
    (ii) The individual elects a new program during the Annual 
Coordinated Election Period; or
    (iii) The endorsed sponsor terminates its endorsed discount card 
program, or is terminated.
    (9) No new enrollment in an endorsed discount card program or 
changing election of an endorsed discount card program is allowed during 
the transition period.
    (10) Except as specified in Sec. 403.814(b)(6)(i), an individual may 
enroll in any endorsed discount card program, and only those endorsed 
discount card programs, offered in the individual's State of residence.
    (11) In order to access negotiated prices or transitional 
assistance, if applicable, an individual must be enrolled in an endorsed 
discount card program. Access to negotiated prices begins with the 
effective date of enrollment and ends with disenrollment. Access to 
transitional assistance begins with the transitional assistance 
effective date and ends for claims finalized on the date of 
disenrollment.
    (12) Except as provided in paragraph (b)(5) of this section, an 
individual may apply for transitional assistance at any time during the 
enrollment period.
    (b) Disenrollment process. (1) An enrollee may voluntarily disenroll 
at any time by notifying (or by having his authorized representative 
notify) the endorsed sponsor.
    (2) An enrolled individual who disenrolls during the enrollment 
period under the following circumstances is granted a Special Election 
Period in which the individual may enroll in another endorsed discount 
card program during the enrollment period:
    (i) A move of residence outside the service area of the current 
program;
    (ii) A change in residence to or from a long-term care facility;
    (iii) Enrollment in or disenrollment from a Part C plan or Medicare 
cost plan;
    (iv) An individual's current endorsed discount card program is 
terminated or terminates; or
    (v) Other exceptional circumstances, as defined by the Secretary.
    (3) Notification in order to effect a disenrollment is not required 
for an individual disenrolling from a terminating endorsed discount card 
program or enrolling in or disenrolling from a Medicare managed care 
plan offering an exclusive card program, or for individuals changing 
endorsed discount card programs during the Annual Coordinated Election 
Period.
    (4) A drug discount card enrollee who disenrolls from an endorsed 
discount card program other than for one of the reasons listed in 
paragraph (b)(2) of this section will no longer be determined eligible 
for the Medicare Prescription Drug Discount Card and Transitional 
Assistance Program and, if he or she disenrolls in 2004, must re-apply 
for the Medicare Prescription

[[Page 96]]

Drug Discount Card and Transitional Assistance Program should he or she 
wish to enroll in another endorsed discount card program for the second 
enrollment year.
    (5) An individual receiving transitional assistance who voluntarily 
disenrolls from an endorsed discount card program other than for one of 
the reasons listed in paragraph (b)(2) of this section will forfeit any 
transitional assistance remaining available to the individual on the 
date of disenrollment, and, if he or she disenrolls in 2004, must re-
apply for transitional assistance for 2005 in order to receive 
transitional assistance in 2005.
    (6) A discount card enrollee other than a transitional assistance 
enrollee may be involuntarily disenrolled from his or her endorsed 
discount card program for failure to pay the annual enrollment fee on a 
timely basis.
    (7) A discount drug card enrollee other than a transitional 
assistance enrollee may be charged another annual enrollment fee each 
time the individual disenrolls from one endorsed discount card program 
and enrolls in another endorsed discount card program during the 
calendar year.
    (c) Enrollment fees. (1) An endorsed sponsor may charge an annual 
enrollment fee of no more than $30 to each individual enrolled in its 
endorsed discount card program.
    (2) An endorsed sponsor may not collect an enrollment fee from any 
individual applying for or receiving transitional assistance.
    (3) The annual enrollment fee must not be prorated for portions of 
the year.
    (4) An endorsed sponsor must charge a uniform enrollment fee to 
every discount card eligible individual, or to the Secretary in the case 
of individuals receiving transitional assistance, residing in a State.
    (5) An endorsed sponsor must refund any enrollment fee collected 
from a discount card enrollee, or any State that has paid the enrollment 
fee on behalf of the discount card enrollee, during the calendar year 
during which the individual is determined eligible to receive 
transitional assistance.
    (6) An endorsed sponsor may not charge an annual enrollment fee 
during the transition period.



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

    (a) HIPAA covered entities. An endorsed sponsor is a HIPAA covered 
entity and must comply with the standards, implementation 
specifications, and requirements in 45 CFR parts 160, 162, and 164 as 
set forth in this section. Those functions of an endorsed sponsor the 
performance of which are necessary or directly related to the operations 
of the endorsed discount card program are covered functions for purposes 
of applying to endorsed sponsors the standards, implementation 
specifications, and requirements in 45 CFR parts 160, 162, and 164.
    (b) HIPAA privacy requirements. An endorsed sponsor must comply with 
the standards, implementation specifications, and requirements in the 
Standards for Privacy of Individually Identifiable Health Information, 
45 CFR parts 160 and 164, subparts A and E, in the same manner as a 
health plan, except to the extent such requirements are temporarily 
waived by the Secretary.
    (c) Security requirements--(1) Standard. An endorsed sponsor must 
comply with the applicable standards, implementation specifications, and 
requirements in the HIPAA Security Rule, 45 CFR parts 160 and 164, 
subparts A and C, in the same manner as other covered entities as of the 
compliance date of such Rule.
    (2) Attestation. An applicant in its application shall--
    (i) Attest that, as of the initial enrollment date, it will have in 
place appropriate administrative, technical, and physical safeguards to 
protect the privacy of protected health information in accordance with 
45 CFR 164.530(c); and
    (ii) Attest that its information security measures will meet the 
standards, implementation specifications, and requirements of 45 CFR 
part 164 subparts A and C as of the initial enrollment date, or, if 
unable to make this attestation, provide a plan for coming into 
compliance with these requirements by

[[Page 97]]

the compliance date of the Security Rule set forth in 45 CFR part 164, 
subpart C.
    (d) Administrative data standards. An endorsed sponsor must comply 
with any applicable standards, implementation specifications, and 
requirements in the Standards for Electronic Transactions under 45 CFR 
parts 160 and 162 subparts I through R.
    (e) Unique identifiers. An endorsed sponsor must comply with any 
applicable standards, implementation specifications, and requirements 
regarding standard unique identifiers under 45 CFR parts 160 and 162 as 
of the compliance date of any final rule for standard unique 
identifiers.
    (f) Applicability of other regulations. Nothing in this paragraph or 
in Sec. 403.813 shall be deemed a modification of parts 160, 162 and 164 
of title 45, Code of Federal Regulations or otherwise modify the 
applicability of such regulations to other organizations or covered 
entities independently subject to the mandates of HIPAA. If an endorsed 
sponsor is also a health plan, health care provider, or health care 
clearinghouse, nothing is this paragraph shall impair or otherwise 
affect the application of HIPAA or parts 160, 162 and 164 of title 45, 
Code of Federal Regulations to such entity and its performance of those 
functions which make such entity a health plan, health care provider, or 
health care clearinghouse.



Sec. 403.813  Marketing limitations and record retention requirements.

    (a) Marketing limitations. (1) An endorsed sponsor may only market 
the following:
    (i) Those products and services offered under the endorsed program 
that are inside the scope of endorsement defined in Sec. 403.806(h) and 
permitted under Sec. 403.812(b).
    (ii) A Part D plan offered by the endorsed sponsor or an affiliated 
organization of the endorsed sponsor.
    (2) An endorsed sponsor may not request that a drug card enrollee or 
an individual seeking to enroll in its endorsed discount card program 
authorize the endorsed sponsor to use or disclose individually 
identifiable health information for purposes of marketing any product or 
service not allowed under paragraph (a)(1) of this section.
    (3) An endorsed sponsor may not co-mingle any materials related to 
the marketing of products and services allowed under paragraph (a)(1) of 
this section with other marketing materials.
    (4) Following termination of an endorsed sponsor's endorsement under 
Secs. 403.820(c), (d) or (e) or termination of the Medicare Drug 
Discount Card and Transitional Assistance Program, a drug card 
enrollee's individually identifiable health information collected or 
maintained by an endorsed sponsor may not be used or disclosed for 
purposes of marketing any product or service.
    (b) Record retention standard. (1) An endorsed sponsor must retain 
records that it creates, collects, or maintains while participating in 
the Medicare Drug Discount Card and Transitional Assistance Program as 
part of its operations of an endorsed program for at least 6 years 
following termination of such program, or, in the event the endorsed 
sponsor's endorsement is terminated under Sec. 420.820(c), (d), or (e) 
of this chapter at least 6 years following termination of such 
endorsement. The Secretary may extend the six-year retention period if 
an endorsed sponsor's records relate to an ongoing investigation, 
litigation, or negotiation by the Secretary, the Department of Health 
and Human Services Office of Inspector General, the Department of 
Justice, or a State, or such documents otherwise relate to suspicions of 
fraud and abuse or violations of Federal or State law.
    (2) For the period during which an endorsed sponsor retains records 
as specified in paragraph (b)(1) of this section, an endorsed sponsor 
must continue to apply security and privacy protections to such records 
and the information contained therein to the same extent endorsed 
sponsors are required to do so under Secs. 403.812(b) and 403.812(c)(1) 
prior to termination.

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

[[Page 98]]



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

    (a) General requirements. (1) A Part C organization and Medicare 
cost plan may not require enrollment in an endorsed discount card 
program as a condition for enrollment in its Part C plan or Medicare 
cost plan.
    (2) A Part C organization may subsidize the enrollment fee for an 
endorsed discount card program, whether operated by the Part C 
organization or another endorsed sponsor, for individuals described in 
Sec. 403.810(a), provided that any such benefit is reflected in the Part 
C organization's Adjusted Community Rate filing.
    (b) Exclusive card sponsors. (1) A Medicare managed care 
organization may elect to become an exclusive card sponsor by limiting 
enrollment in its endorsed discount card program to individuals 
described in Sec. 403.810(a) who are enrolled in any of its Medicare 
managed care plans. The Medicare managed care organization must be the 
applicant for endorsement in order to offer an exclusive card program. 
Such an election must be made at the time of application for 
endorsement.
    (2) Except as noted in paragraphs (b)(3) and (b)(4) of this section, 
an exclusive card sponsor must comply with all requirements for endorsed 
sponsors noted in Secs. 403.804 and 403.806.
    (3) An exclusive card sponsor is deemed to meet or is exempt from 
certain specific requirements listed in Sec. 403.806 as follows:
    (i) An exclusive card sponsor is deemed to meet the pharmacy network 
requirement in Sec. 403.806(f)(3) if its pharmacy network is not limited 
to mail-order pharmacies and is equivalent to the pharmacy network used 
in its Medicare managed care plan and such pharmacy network has been 
approved by the Secretary, or, if its Medicare managed care plan does 
not use a pharmacy network, the Secretary determines that the pharmacy 
network provides sufficient access to covered discount card drugs at 
negotiated prices for discount card enrollees under the standard set 
forth under 42 CFR 422.112 for a Part C organization described in 
section 1851(a)(2)(A) of the Act, or under 42 CFR 417.416(e) for a 
Medicare cost plan.
    (ii) An exclusive card sponsor is deemed to meet the service area 
requirements in Sec. 403.806(f)(1) and (f)(2) if it operates in a 
service area equivalent to its Medicare managed care plan's service 
area.
    (iii) An exclusive card sponsor is deemed to meet the requirement 
for financial stability and business integrity in Sec. 403.806(b) 
through compliance with Sec. 422.400 of this chapter (if a Part C 
organization described in section 1851(a)(2)(A) of the Act) or 
compliance with Secs. 417.120 and 417.122 of this chapter (if a Medicare 
cost plan).
    (iv) An exclusive card sponsor is deemed to meet the covered lives 
requirement in Sec. 403.806(a)(3).
    (v) An exclusive card sponsor is deemed to meet the requirements of 
Sec. 403.806(e)(2) if it ensures that transitional assistance funds are 
applied to, and only to, the cost to transitional assistance enrollees 
of any covered discount card drugs obtained from a network or mail order 
pharmacy included in the exclusive card sponsor's pharmacy network, and 
at the option of the exclusive card sponsor, any covered discount card 
drug obtained under an outpatient prescription drug benefit offered 
under the affiliated Medicare managed care plan, including any 
deductibles, co-payments, coinsurance, and other cost-sharing amounts 
for which transitional assistance enrollees are responsible under the 
Medicare managed care plan's outpatient prescription drug benefit.
    (4) As the Secretary determines appropriate on a case-by-case basis, 
any additional requirements discussed in Secs. 403.804 and 403.806, 
except for the requirements in Secs. 403.812 and 403.813, may be waived 
or modified on behalf of an exclusive card sponsor if:
    (i) The requirements are duplicative of or conflict with the 
requirements that a Medicare managed care organization must meet either 
under Part C or under section 1876 of Title XVIII of the Act; or
    (ii) The waiver or modification is necessary to improve coordination 
between benefits under the Medicare Prescription Drug Discount Card and 
Transitional Assistance Program and

[[Page 99]]

the benefits either under Part C or under section 1876 of Title XVIII of 
the Act.
    (iii) The applicant seeking to become an exclusive card sponsor 
requests such waivers or modifications in writing in a manner required 
by the Secretary.
    (5) An exclusive card sponsor may conduct group enrollment according 
to the following rules:
    (i) The exclusive card sponsor must seek CMS verification that its 
Medicare managed care members are individuals described in 
Sec. 403.810(a) and enroll such individuals as a group into its 
exclusive card program.
    (ii) The exclusive card sponsor must give all individuals it is 
enrolling as a group the opportunity to decline enrollment, and the 
opportunity to apply for transitional assistance.
    (iii) The exclusive card sponsor may use a modified version of the 
standard enrollment form described in Sec. 403.806(g)(3) or other CMS-
approved process for group enrollment in its endorsed discount card 
program.
    (6) An individual enrolled in a Medicare managed care plan offered 
by a Medicare managed care organization offering an exclusive card 
program to individuals enrolled in such Medicare managed care plan is 
subject to the following requirements:
    (i) The individual may enroll only in the endorsed discount card 
program offered by his or her Medicare managed care organization.
    (ii) If the exclusive card sponsor group elects to group enroll into 
an exclusive card program members of the Medicare managed plan, the 
individual must actively decline enrollment to avoid enrollment in the 
exclusive card program.
    (c) Non-uniformity of Benefits. Implementation of the Medicare 
Prescription Drug Discount Card and Transitional Assistance Program, 
including the provision of transitional assistance and the payment or 
waiver of any enrollment fee by a Part C organization, will not be taken 
into account in applying the uniform premium and uniform benefits 
requirement in sections 1854(c) and 1854(f)(1)(D) of the Act and 42 CFR 
422.100(d)(2) and 42 CFR 422.312(b)(2).



Sec. 403.815  Special rules concerning States.

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

[[Page 100]]



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

    (a) In general. (1) An applicant for endorsement may submit an 
application to become a special endorsed sponsor for long-term care and/
or for I/T/U pharmacies.
    (2) Of qualified applicants, the Secretary will select at least two 
of the best-qualified applicants for special endorsement for long-term 
care and at least two of the best-qualified applicants for special 
endorsement for I/T/U pharmacies.
    (3) Applicants for special endorsement for long-term care must 
demonstrate in their applications that they meet the requirements in 
paragraph (b) of this section.
    (4) Applicants for special endorsement for I/T/U pharmacies must 
demonstrate in their applications that they meet the requirements in 
paragraph (d) of this section.
    (b) Long-term care. A special endorsed sponsor for long-term care 
must--
    (1) Apply transitional assistance toward the cost of covered 
discount card drugs obtained by transitional assistance enrollees who 
reside in long-term care facilities and who receive such prescription 
drugs through long-term care pharmacies;
    (2) Offer contractual arrangements to any long-term care pharmacy 
seeking reimbursement from transitional assistance for covered discount 
card drugs provided by such pharmacy to transitional assistance 
enrollees who reside in long-term care facilities;
    (3) Process any submitted claims from network pharmacies and out-of-
network long-term care pharmacies that supply covered discount card 
drugs to transitional assistance enrollees who reside in long-term care 
facilities, when such enrollees have unspent transitional assistance 
remaining;
    (4) Include special terms and conditions in its contracts with 
network pharmacies that are long-term care pharmacies to facilitate 
access to and the administration of transitional assistance to 
transitional assistance enrollees residing in long-term care facilities, 
including, but not limited to the following--
    (i) Waiving penalties against long-term care pharmacies for 
submitting late claims to the special endorsed sponsor due to the 
pharmacy's coordination of benefits activities; and
    (ii) Permitting a long-term care pharmacy to limit its services to 
only transitional assistance enrollees who reside in a long-term care 
facility served by the long-term care pharmacy.
    (5) Except as noted in paragraph (c) of this section, comply with 
all requirements for endorsed sponsors noted in Secs. 403.804 and 
403.806.
    (c) Waiver of requirements. (1) The following requirements will not 
apply to or will be waived for special endorsed sponsors providing 
transitional assistance to long-term care residents:
    (i) Section 403.806(d) (relating to the prescription drug offering) 
shall not apply to long-term care pharmacies in the special endorsed 
sponsor's network; and
    (ii) Section 403.806(e)(4) (requiring information about the amount 
of transitional assistance remaining) shall not apply to long-term care 
pharmacies in the special endorsed sponsor's network.
    (2)(i) As the Secretary determines appropriate on a case-by-case 
basis, any additional requirements discussed in Secs. 403.804 and 
403.806, except for the requirements in Secs. 403.812 and 403.813, may 
be waived or modified on behalf of a special endorsed sponsor for long-
term care if the waiver or modification is--
    (A) Necessary to enable the applicant to either initiate enrollment 
activities under the special endorsement within 6 months of enactment of 
section 1860D-31 of the Act, or accommodate the unique needs of long-
term care pharmacies; or
    (B) Compliance with the requirement(s) in question would be 
impracticable or inefficient.
    (ii) Applicants to become special endorsed sponsors for long-term 
care must request such waivers or modifications in writing in a manner 
required by the Secretary.
    (d) I/T/U pharmacies. A special endorsed sponsor for I/T/U 
pharmacies must--
    (1) Apply transitional assistance toward the cost of covered 
discount card

[[Page 101]]

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



Sec. 403.817  Special rules concerning the territories.

    (a) In general. (1) An applicant for endorsement may submit an 
application to become a special endorsed sponsor for all of the 
territories.
    (2) Of qualified applicants, the Secretary will select at least one 
of the best-qualified applicants to receive a special endorsement for 
the territories.
    (3) Applicants for special endorsement for the territories must 
demonstrate in their applications that they meet the requirements in 
paragraph (b) of this section.
    (b) Requirements--(1) Negotiated prices. A special endorsed sponsor 
for residents of the territories must provide access to negotiated 
prices in the territories.
    (2) Transitional assistance. Any transitional assistance in the 
territories must be in accordance with paragraph (e) of this section.
    (3) Requirements, exception. Except as specified in paragraph (c) of 
this section, a special endorsed sponsor for the territories must meet 
the requirements of Secs. 403.804 and 403.806.
    (c) Waiver of requirements and alternative requirements. (1) Section 
403.806(d)(8) (requiring information about price differentials) shall 
not apply to pharmacies located in the territories and which are in the 
special endorsed sponsor's pharmacy network.
    (2) Sections 403.806(f)(2) and (f)(3) will be deemed met if the 
special endorsed sponsor makes a good faith effort to secure the 
participation of retail and mail order pharmacies throughout a 
territory.
    (3)(i) As the Secretary determines appropriate on a case-by-case 
basis, any

[[Page 102]]

additional requirements discussed in Secs. 403.804 and 403.806, except 
for the requirements in Secs. 403.812 and 403.813, may be waived or 
modified on behalf of a special endorsed sponsor for the territories 
if--
    (A) Such waiver is necessary to enable the applicant to either 
initiate enrollment activities under the special endorsement within 6 
months of enactment of section 1860D-31 of the Act, or accommodate the 
unique needs of pharmacies in the territories; or
    (B) Compliance with the requirement(s) in question would be 
impracticable or inefficient.
    (ii) Applicants to become special endorsed sponsors for the 
territories must request such waivers or modifications in writing in a 
manner required by the Secretary.
    (d) Other exceptions. A special endorsed sponsor for the territories 
may enroll in its endorsed discount card program Medicaid enrollees with 
coverage for outpatient prescription drugs, as described in 
Sec. 403.810(a)(2).
    (e) Transitional assistance provided by Territories. (1) 
Transitional assistance in the territories may be administered only 
according to a plan submitted by a territory and approved by CMS.
    (2) Territories choosing to provide transitional assistance must 
submit a plan to CMS within 90 days of the publication of this 
regulation. The plan must--
    (i) Describe how funds allocated to the territory are to be used to 
cover the cost of covered discount card drugs obtained by individuals 
who reside in the territory, who are entitled to benefits under Medicare 
Part A or enrolled under Medicare Part B, and who have income at or 
below 135 percent of the poverty line for the contiguous United States; 
and
    (ii) Describe how the territory will ensure that amounts received 
under the allotment are to be used only to provide covered discount card 
drugs to those individuals determined eligible for transitional 
assistance, as described in paragraph (e)(2)(i) of this section, and
    (iii) Provide such written assurance for the requirements in 
paragraph (e)(2)(ii) of this section.
    (3) CMS will review and approve plans submitted and make allotments 
to territories with approved plans.
    (4) CMS may request reports or information to substantiate that the 
territories have administered the program consistent with the 
territory's approved transitional assistance plan.



Sec. 403.820  Sanctions, penalties, and termination.

    (a) Intermediate sanctions. (1) For the violations listed in 
paragraph (a)(3) of this section, the following intermediate sanctions 
may be imposed on any endorsed sponsor:
    (i) Suspension of enrollment of Medicare beneficiaries.
    (ii) Suspension of information and outreach activities to Medicare 
beneficiaries.
    (2) Duration of sanctions. The intermediate sanctions continue in 
effect until CMS is satisfied that the deficiency on which the 
determination was based has been corrected and is not likely to recur.
    (3) Sanctionable violations. The violations for which intermediate 
sanctions may be imposed are as follows:
    (i) Substantial failure to maintain a contracted retail pharmacy 
network meeting the requirements of Sec. 403.806(f);
    (ii) Substantial failure to comply with CMS Information and Outreach 
Guidelines;
    (iii) Substantial failure to provide discount card enrollees with 
negotiated prices consistent with information reported to CMS for the 
price comparison Web site and/or reported by the endorsed sponsor;
    (iv) Except during the week of November 15, 2004 (which coincides 
with the beginning of the annual coordinated election period), 
substantial failure to ensure that the negotiated price for a covered 
discount card drug does not exceed an amount proportionate to the change 
in the drug's average wholesale price (AWP), and/or an amount 
proportionate to changes in the card sponsor's cost structure (including 
material changes to any discounts, rebates, or other price concessions 
the sponsor receives from a pharmaceutical manufacturer or pharmacy);
    (v) Charging drug card enrollees additional fees beyond a $30 
enrollment fee;

[[Page 103]]

    (vi) Charging transitional assistance enrollees any enrollment fee;
    (vii) Charging a coinsurance more than 5 percent for those at or 
below 100 percent of the poverty line, or 10 percent for those above 100 
percent but at or below 135 percent of the poverty line;
    (viii) Substantial failure to administer properly the transitional 
assistance funding for transitional assistance enrollees;
    (ix) Substantial failure to provide CMS or its designees with 
requested information related to the endorsed sponsor's endorsed 
discount card operations; or
    (x) Failure to otherwise substantially comply with the requirements 
of this subpart, including failing to perform the operational 
requirements of this program or the failure to submit an acceptable plan 
of correction within the timeframe specified by CMS.
    (4) Written notice of proposed sanctions. (i) Prior to imposing 
sanctions, CMS will send a written notice to the endorsed sponsor 
stating the nature and basis of the proposed sanction.
    (ii) CMS will send a copy of the notice in paragraph (a)(4)(i) of 
this section to the Office of the Inspector General.
    (iii) CMS will allow the endorsed sponsor 15 days from the receipt 
of notice to provide evidence that it has not committed an act or 
omission that may fairly be characterized as a basis for sanction.
    (iv) Should an endorsed sponsor present evidence described in 
paragraph (a)(4)(iii) of this section and by the time limit described in 
that paragraph, a CMS official not involved in the original sanction 
determination shall review the evidence and provide the endorsed sponsor 
a concise written decision setting forth the factual and legal basis for 
the decision that affirms or rescinds the original determination.
    (5) Effective date of sanction. (i) A sanction is effective 15 days 
after the date that the endorsed sponsor is notified of the sanction or, 
if the endorsed sponsor timely seeks reconsideration of that sanction 
decision, on the date specified in the notice of CMS's reconsideration 
determination.
    (ii) The sanction remains in effect until CMS notifies the endorsed 
sponsor that CMS is satisfied that the basis for imposing the sanction 
has been corrected and is not likely to recur.
    (b) Civil monetary penalties--(1) OIG penalties. The Office of the 
Inspector General (OIG) may impose civil monetary penalties in 
accordance with 42 CFR parts 1003 and 1005 in addition to, or in place 
of, sanctions that CMS may impose, as described in paragraph (a) of this 
section, against an endorsed sponsor whom it determines has knowingly--
    (i) Misrepresented or falsified information in information and 
outreach or comparable material provided to program enrollee or other 
persons;
    (ii) Charged a program enrollee in violation of the terms of the 
endorsement contract; or
    (iii) Used transitional assistance funds in any manner that is 
inconsistent with the purpose of the transitional assistance program.
    (2) CMS penalties. If CMS determines that an endorsed sponsor has 
engaged in conduct that it knows or should know constitutes a violation 
as described in paragraph (a)(3) of this section, where the failure to 
perform involves the operational requirements of the program, CMS may 
impose civil monetary penalties in accordance with 42 CFR parts 1003 and 
1005 in addition to, or in place of, the sanctions that CMS may impose, 
as described in paragraph (a) of this section.
    (3) CMS or the OIG may impose civil monetary penalties of no more 
than $10,000 for each violation.
    (c) Termination of endorsement by CMS. (1) CMS may terminate the 
endorsement contract at any time with notice on the following bases:
    (i) Any of the bases for the imposition of intermediate sanctions as 
stated in paragraph (a)(3) of this section; or
    (ii) The endorsed sponsor engaged in false or misleading information 
and outreach practices; or
    (iii) The endorsed sponsor fails to comply with the requirement of 
Sec. 403.804(e).
    (2) CMS shall provide the endorsed sponsor written notice of 
termination 30 days prior to the CMS-determined effective date of the 
termination at

[[Page 104]]

which time the endorsed sponsor must do the following:
    (i) Provide its discount card enrollees notice of the termination 
within 10 days of receiving notice from CMS;
    (ii) Continue to provide services to its discount card enrollees for 
90 days after the discount card enrollees were sent the notice of 
termination from the endorsed sponsor; and
    (iii) Suspend all information and outreach and enrollment activities 
once enrollees have received the notice of termination.
    (3) Corrective action plan. Before terminating a contract, CMS shall 
provide the endorsed sponsor with reasonable opportunity to develop and 
receive CMS approval of a corrective action plan to correct the 
deficiencies that are the basis of the proposed termination.
    (d) Termination by endorsed sponsor--(1) Cause for termination. The 
endorsed sponsor may terminate its endorsement contract if CMS fails 
substantially to carry out the terms of the contract.
    (2) Card sponsor notice. The endorsed sponsor must give advance 
notice as follows:
    (i) To CMS, at least 90 days prior to the intended date of 
termination. This notice must specify the reasons why the endorsed 
sponsor is requesting contract termination; and
    (ii) To its discount card enrollees, by mail, at least 60 days prior 
to the termination effective date. This notice must include a written 
description of alternative endorsed discount card programs that serve 
the discount card enrollee's address.
    (3) Effective date of termination. The effective date of the 
termination is determined by CMS and is at least 90 days after the date 
CMS receives the endorsed sponsor's notice of intent to terminate.
    (e) Termination by mutual consent. (1) A contract may be modified or 
terminated at any time by written mutual consent.
    (2) If the contract is terminated by mutual consent, the endorsed 
sponsor must provide notice to its discount card enrollees as provided 
in paragraph (d)(2) of this section.
    (3) If the contract is modified by mutual consent, the endorsed 
sponsor must provide notice to its discount card enrollees of any 
changes that CMS determines are appropriate for notification within 
timeframes specified by CMS.
    (f) Appeal of contract determinations--(1) Scope. This section 
establishes the procedures for reviewing the following contract 
determinations:
    (i) A determination that an applicant is not qualified to enter into 
a contract with CMS under section 1860D-31 of the Act; and
    (i) A determination to terminate a contract with an endorsed sponsor 
in accordance with paragraph (c) of this section.
    (2) Notice of determination. When CMS makes an initial contract 
determination, it gives the endorsed sponsor or applicant written notice 
specifying--
    (i) The reasons for the determination; and
    (ii) The endorsed sponsor's or applicant's right to request 
reconsideration.
    (3) Effect of contract determination. The contract determination is 
final and binding unless a timely request for a reconsideration hearing 
is filed under this section.
    (4) Right to reconsideration. An endorsed sponsor whose contract is 
terminated or an applicant denied endorsement may request a hearing for 
reconsideration of the CMS contract determination.
    (5) Method and place for filing a request. A request for a 
reconsideration hearing must be made in writing and filed with the CMS 
Central Office.
    (6) Time for filing a request. The request for a reconsideration 
hearing must be filed within 15 days from the date of the notice of the 
initial determination.
    (7) Appointment of hearing officer. CMS shall appoint a hearing 
officer to conduct the reconsideration. The hearing officer shall be a 
representative of the Administrator and not otherwise a party to the 
contract determination.
    (8) Conduct of hearing. The endorsed sponsor or applicant may be 
represented by counsel and may present evidence and examine witnesses. A 
complete recording of the proceedings will be made and transcribed.

[[Page 105]]

    (9) Reconsideration determination. A reconsideration determination 
is a new determination that--
    (i) Is based on a review of the contract determination, the evidence 
and findings upon which it was based, and any other written evidence 
submitted before notice of the reconsidered determination is mailed, 
including facts relating to the status of the endorsed sponsor 
subsequent to the contract determination; and
    (ii) Affirms, reverses, or modifies the initial contract 
determination.
    (10) Notice of reconsidered determination. As soon as practicable 
after the close of the hearing, the hearing officer issues a written 
reconsideration determination that contains the following:
    (i) Findings with respect to the applicant's qualifications to enter 
into or an endorsed sponsor's qualifications to remain under a contract 
with CMS under section 1860D-31 of the Act;
    (ii) A statement of the specific reasons for the reconsidered 
determination.
    (11) Effect of reconsidered determination. A reconsidered 
determination is final and binding on the parties and is not subject to 
judicial review.
    (g) Compliance with HIPAA. Failure of an endorsed sponsor to comply 
with HIPAA and/or the standards, implementation specifications, and 
requirements in 45 CFR parts 160, 162, and 164, as established in 
Sec. 403.812, shall be a violation of HIPAA and may be enforced under 
sections 1176 and 1177 of the Act.



Sec. 403.822  Reimbursement of transitional assistance and associated
sponsor requirements.

    (a) A Transitional Assistance Account is created within the Federal 
Supplementary Medical Insurance Trust Fund and kept separate from all 
other funds within that fund.
    (b) The Managing Trustee of the Transitional Assistance Account 
shall pay on a monthly basis from the Account the amounts certified by 
CMS as necessary to make payments for transitional assistance as allowed 
in Sec. 403.808.
    (c) Endorsed sponsors must routinely account to CMS for the 
transitional assistance provided to the transitional assistance 
enrollees for finalized (not pending, or denied) claims up to the 
allowed balance provided by CMS to the sponsor.
    (d) Payment transactions will be audited by the Secretary or his 
agent.
    (e) Federal funding in excess of the amount of the balance included 
in CMS's system is not permitted.



 Subpart I_Transparency Reports and Reporting of Physician Ownership or 
                          Investment Interests

    Source: 78 FR 9521, Feb. 8, 2013, unless otherwise noted.



Sec. 403.900  Purpose and scope.

    The regulations in this subpart implement section 1128G of the Act. 
These regulations apply to applicable manufacturers and applicable group 
purchasing organizations and describe the requirements and procedures 
for applicable manufacturers to report payments or other transfers of 
value provided to covered recipients, as well as for applicable 
manufacturers and applicable group purchasing organizations to report 
ownership or investment interests held by physicians or immediate family 
members of physicians in such entities.



Sec. 403.902  Definitions.

    For purposes of this subpart, the following definitions apply:
    Applicable group purchasing organization means an entity that:
    (1) Operates in the United States; and
    (2) Purchases, arranges for or negotiates the purchase of a covered 
drug, device, biological, or medical supply for a group of individuals 
or entities, but not solely for use by the entity itself.
    Applicable manufacturer means an entity that is operating in the 
United States and that falls within one of the following categories:
    (1) An entity that is engaged in the production, preparation, 
propagation, compounding, or conversion of a covered drug, device, 
biological, or medical supply, but not if such covered drug, device, 
biological or medical supply is solely for use by or within the

[[Page 106]]

entity itself or by the entity's own patients. This definition does not 
include distributors or wholesalers (including, but not limited to, 
repackagers, relabelers, and kit assemblers) that do not hold title to 
any covered drug, device, biological or medical supply.
    (2) An entity under common ownership with an entity in paragraph (1) 
of this definition, which provides assistance or support to such entity 
with respect to the production, preparation, propagation, compounding, 
conversion, marketing, promotion, sale, or distribution of a covered 
drug, device, biological or medical supply.
    Assistance and support means providing a service or services that 
are necessary or integral to the production, preparation, propagation, 
compounding, conversion, marketing, promotion, sale, or distribution of 
a covered drug, device, biological or medical supply.
    Charitable contribution includes, but is not limited to, any payment 
or transfer of value made to an organization with tax-exempt status 
under the Internal Revenue Code of 1986, which is not provided in 
exchange for any goods, items or services.
    Charity care means services provided by a covered recipient 
specifically for a patient who is unable to pay for such services or for 
whom payment would be a significant hardship, where the covered 
recipient neither receives, nor expects to receive, payment because of 
the patient's inability to pay.
    Clinical investigation means any experiment involving one or more 
human subjects, or materials derived from human subjects, in which a 
drug, device, biological or medical supply is administered, dispensed or 
used.
    Common ownership refers to circumstances where the same individual, 
individuals, entity, or entities directly or indirectly own 5 percent or 
more total ownership of two entities. This includes, but is not limited 
to, parent corporations, direct and indirect subsidiaries, and brother 
or sister corporations.
    Covered drug, device, biological, or medical supply means any drug, 
device, biological, or medical supply for which payment is available 
under Title XVIII of the Act or under a State plan under Title XIX or 
XXI of the Act (or a waiver of such plan), either separately (such as 
through a fee schedule or formulary) or as part of a bundled payment 
(for example, under the hospital inpatient prospective payment system or 
the hospital outpatient prospective payment system) and which is of the 
type that in the case of a--
    (1) Drug or biological, by law, requires a prescription to be 
dispensed; or
    (2) Device (including a medical supply that is a device), by law, 
requires premarket approval by or premarket notification to the FDA.
    Covered recipient means-- (1) Any physician, except for a physician 
who is a bona fide employee of the applicable manufacturer that is 
reporting the payment; or
    (2) A teaching hospital, which is any institution that received a 
payment under 1886(d)(5)(B), 1886(h), or 1886(s) of the Act during the 
last calendar year for which such information is available.
    Employee means an individual who is considered to be ``employed by'' 
or an ``employee'' of an entity if the individual would be considered to 
be an employee of the entity under the usual common law rules applicable 
in determining the employer-employee relationship (as applied for 
purposes of section 3121(d)(2) of the Internal Revenue Code of 1986).
    Immediate family member means any of the following:
    (1) Spouse.
    (2) Natural or adoptive parent, child, or sibling.
    (3) Stepparent, stepchild, stepbrother, or stepsister.
    (4) Father-, mother-, daughter-, son-, brother-, or sister-in-law.
    (5) Grandparent or grandchild.
    (6) Spouse of a grandparent or grandchild.
    Indirect payments or other transfers of value refer to payments or 
other transfers of value made by an applicable manufacturer (or an 
applicable group purchasing organization) to a covered recipient (or a 
physician owner or investor) through a third party, where the applicable 
manufacturer (or applicable group purchasing organization)

[[Page 107]]

requires, instructs, directs, or otherwise causes the third party to 
provide the payment or transfer of value, in whole or in part, to a 
covered recipient(s) (or a physician owner or investor).
    Know, knowing, or knowingly--(1) Means that a person, with respect 
to information--
    (i) Has actual knowledge of the information;
    (ii) Acts in deliberate ignorance of the truth or falsity of the 
information; or
    (iii) Acts in reckless disregard of the truth or falsity of the 
information; and
    (2) Requires no proof of a specific intent to defraud.
    NPPES stands for the National Plan & Provider Enumeration System.
    Operating in the United States means that an entity--
    (1) Has a physical location within the United States or in a 
territory, possession, or commonwealth of the United States; or
    (2) Otherwise conducts activities within the United States or in a 
territory, possession, or commonwealth of the United States, either 
directly or through a legally-authorized agent.
    Ownership or investment interest--(1) Includes, but is not limited 
to the following:
    (i) Stock, stock option(s) (other than those received as 
compensation, until they are exercised).
    (ii) Partnership share(s);
    (iii) Limited liability company membership(s).
    (iv) Loans, bonds, or other financial instruments that are secured 
with an entity's property or revenue or a portion of that property or 
revenue.
    (2) May be direct or indirect and through debt, equity or other 
means.
    (3) Exceptions. The following are not ownership or investment 
interests for the purposes of this section:
    (i) An ownership or investment interest in a publicly traded 
security or mutual fund, as described in section 1877(c) of the Act.
    (ii) An interest in an applicable manufacturer or applicable group 
purchasing organization that arises from a retirement plan offered by 
the applicable manufacturer or applicable group purchasing organization 
to the physician (or a member of his or her immediate family) through 
the physician's (or immediate family member's) employment with that 
applicable manufacturer or applicable group purchasing organization.
    (iii) Stock options and convertible securities received as 
compensation, until the stock options are exercised or the convertible 
securities are converted to equity.
    (iv) An unsecured loan subordinated to a credit facility.
    (v) An ownership or investment interest if an applicable 
manufacturer or applicable group purchasing organization did not know, 
as defined in this section, about such ownership or investment interest.
    Payment or other transfer of value means a transfer of anything of 
value.
    Physician has the same meaning given that term in section 1861(r) of 
the Act.
    Related to a covered drug, device, biological, or medical supply 
means that a payment or other transfer of value is made in reference to 
or in connection with one or more covered drugs, devices, biologicals, 
or medical supplies.
    Research includes a systematic investigation designed to develop or 
contribute to generalizable knowledge relating broadly to public health, 
including behavioral and social-sciences research. This term encompasses 
basic and applied research and product development.
    Third party means another individual or entity, regardless of 
whether such individual or entity is operating in the United States.

[78 FR 9521, Feb. 8, 2013, as amended at 79 FR 68000, Nov. 13, 2014]



Sec. 403.904  Reports of payments or other transfers of value to 
covered recipients.

    (a) General rule. (1) Direct and indirect payments or other 
transfers of value provided by an applicable manufacturer to a covered 
recipient during the preceding calendar year, and direct and indirect 
payments or other transfers of value provided to a third party at the 
request of or designated by the applicable manufacturer on behalf of a 
covered recipient during the preceding calendar year, must be reported 
by the

[[Page 108]]

applicable manufacturer to CMS on an annual basis.
    (2) For CY 2013, only payments or other transfers of value made on 
or after August 1, 2013 must be reported to CMS.
    (b) Limitations. Certain limitations on reporting apply in the 
following circumstances:
    (1) Applicable manufacturers for whom total (gross) revenues from 
covered drugs, devices, biologicals, or medical supplies constituted 
less than 10 percent of total (gross) revenue during the fiscal year 
preceding the reporting year are only required to report payments or 
other transfers of value that are related to one or more covered drugs, 
devices, biologicals or medical supplies.
    (2) Applicable manufacturers under paragraph (2) of the definition 
in Sec. 403.902 are only required to report payments or other transfers 
of value that are related to a covered drug, device, biological, or 
medical supply for which they provided assistance or support to an 
applicable manufacturer under paragraph (1) of the definition.
    (3) Applicable manufacturers under either paragraph (1) or (2) of 
the definition in Sec. 403.902 that have separate operating divisions 
that do not manufacture any covered drugs, devices, biologicals, or 
medical supplies (for example, animal health divisions) are only 
required to report payments to covered recipients related to the 
activities of these separate divisions if those payments or other 
transfers of value are related to a covered drug, device, biological, or 
medical supply. This includes reporting of payments or other transfers 
of value that are related to covered drugs, devices, biologicals, or 
medical supplies made by applicable manufacturers to covered recipients 
through these operating divisions.
    (4) Applicable manufacturers that do not manufacture a covered drug, 
device, biological, or medical supply except when under a written 
agreement to manufacture the covered drug, device, biological, or 
medical supply for another entity, do not hold the FDA approval, 
licensure, or clearance for the covered drug, device, biological, or 
medical supply, and are not involved in the sale, marketing, or 
distribution of the product, are only required to report payments or 
other transfers of value that are related to one or more covered drugs, 
devices, biologicals, or medical supplies.
    (c) Required information to report. A report must contain all of the 
following information for each payment or other transfer of value:
    (1) Name of the covered recipient. For physician covered recipients, 
the name must be as listed in the National Plan & Provider Enumeration 
System (if applicable) and include first and last name, middle initial, 
and suffix (for all that apply).
    (2) Address of the covered recipient. Primary business address of 
the covered recipient, including all the following:
    (i) Street address.
    (ii) Suite or office number (if applicable).
    (iii) City.
    (iv) State.
    (v) ZIP code.
    (3) Identifiers for physician covered recipients. In the case of a 
covered recipient who is a physician, the following identifiers:
    (i) The specialty.
    (ii) National Provider Identifier (if applicable and as listed in 
the NPPES). If a National Provider Identifier cannot be identified for a 
physician, the field may be left blank, indicating that the applicable 
manufacturer could not find one.
    (iii) State professional license number(s) (for at least one State 
where the physician maintains a license), and the State(s) in which the 
license is held.
    (4) Amount of payment or other transfer of value. A payment or other 
transfer of value made to a group of covered recipients should be 
distributed appropriately among the individual covered recipients who 
requested the payment, on whose behalf the payment was made, or who are 
intended to benefit from the payment or other transfer of value.
    (5) Date of payment or transfer of value. The date of each payment 
or other transfer of value.
    (i) For payments or other transfers of value made over multiple 
dates (rather

[[Page 109]]

than as a lump sum), applicable manufacturers may choose whether to 
report each payment or other transfer of value as separate line item 
using the dates the payments or other transfers of value were each made, 
or as a single line item for the total payment or other transfer of 
value using the first payment date as the reported date.
    (ii) For small payments or other transfers of value reported as a 
single line item, applicable manufacturers must report the date that the 
first bundled small payment or other transfer of value was provided to 
the covered recipient.
    (6) Form of payment or transfer of value. The form of each payment 
or other transfer of value, as described in paragraph (d) of this 
section.
    (7) Nature of payment or transfer of value. The nature of each 
payment or other transfer of value, as described in paragraph (e) of 
this section.
    (8) Related covered drug, device, biological or medical supply. 
Report the marketed name of the related covered drugs, devices, 
biologicals, or medical supplies, and therapeutic area or product 
category unless the payment or other transfer of value is not related to 
a particular covered drug, device, biological or medical supply.
    (i) For drugs and biologicals, if the marketed name has not yet been 
selected, applicable manufacturers must indicate the name registered on 
clinicaltrials.gov.
    (ii) Applicable manufacturers may report the marketed name and 
therapeutic area or product category for payments or other transfers of 
value related to a non-covered drug, device, biological, or medical 
supply.
    (iii) Applicable manufacturers must indicate if the related drug, 
device, biological, or medical supply is covered or non-covered.
    (iv) Applicable manufacturers must indicate if the payment or other 
transfer of value is not related to any covered or non-covered drug, 
device, biological or medical supply.
    (9) Eligibility for delayed publication. Applicable manufacturers 
must indicate whether a payment or other transfer of value is eligible 
for delayed publication, as described in Sec. 403.910.
    (10) Payments to third parties. (i) If the payment or other transfer 
of value was provided to a third party at the request of or designated 
on behalf of a covered recipient, the payment or transfer of value must 
be reported in the name of that covered recipient.
    (ii) If the payment or other transfer of value was provided to a 
third party at the request of or designated on behalf of a covered 
recipient, the name of the entity that received the payment or other 
transfer of value (if made to an entity) or indicate ``individual'' (if 
made to an individual). If a covered recipient performed a service, but 
neither accepted the offered payment or other transfer of value nor 
requested that it be made to a third party, the applicable manufacturer 
is not required to report the offered payment or other transfer of value 
unless the applicable manufacturer nonetheless provided it to a third 
party and designated such payment or other transfer of value as having 
been provided on behalf of the covered recipient.
    (11) Payments or transfers of value to physician owners or 
investors. Must indicate whether the payment or other transfer of value 
was provided to a physician or the immediate family of the physician who 
holds an ownership or investment interest (as defined Sec. 403.902) in 
the applicable manufacturer.
    (12) Additional information or context for payment or transfer of 
value. May provide a statement with additional context for the payment 
or other transfer of value.
    (d) Reporting the form of payment or other transfer of value. An 
applicable manufacturer must report each payment or transfer of value, 
or separable part of that payment or transfer of value, as taking one of 
the following forms of payment that best describes the form of the 
payment or other transfer of value, or separable part of that payment or 
other transfer of value.
    (1) Cash or cash equivalent.
    (2) In-kind items or services.
    (3) Stock.
    (4) Stock option.
    (5) Any other ownership interest.
    (6) Dividend, profit or other return on investment.

[[Page 110]]

    (e) Reporting the nature of the payment or other transfer of value. 
(1) General rule. The categories describing the nature of a payment or 
other transfer of value are mutually exclusive for the purposes of 
reporting under subpart I of this part.
    (2) Rules for categorizing natures of payment. An applicable 
manufacturer must categorize each payment or other transfer of value, or 
separable part of that payment or transfer of value, with one of the 
categories listed in paragraphs (e)(2)(i) through (xvii) of this 
section, using the designation that best describes the nature of the 
payment or other transfer of value, or separable part of that payment or 
other transfer of value. If a payment or other transfer of value could 
reasonably be considered as falling within more than one category, the 
applicable manufacturer should select one category that it deems to most 
accurately describe the nature of the payment or transfer of value.
    (i) Consulting fee.
    (ii) Compensation for services other than consulting, including 
serving as faculty or as a speaker at an event other than a continuing 
education program.
    (iii) Honoraria.
    (iv) Gift.
    (v) Entertainment.
    (vi) Food and beverage.
    (vii) Travel and lodging (including the specified destinations).
    (viii) Education.
    (ix) Research.
    (x) Charitable contribution.
    (xii) Royalty or license.
    (xiii) Current or prospective ownership or investment interest.
    (xiv) Compensation for serving as faculty or as a speaker for an 
unaccredited and non-certified continuing education program.
    (xv) Compensation for serving as faculty or as a speaker for an 
accredited or certified continuing education program.
    (xvi) Grant.
    (xvii) Space rental or facility fees (teaching hospital only).
    (f) Special rules for research payments. All payments or other 
transfers of value made in connection with an activity that meets the 
definition of research in this section and that are subject to a written 
agreement, a research protocol, or both, must be reported under these 
special rules.
    (1) Research-related payments or other transfers of value to covered 
recipients (either physicians or teaching hospitals), including 
research-related payments or other transfers of value made indirectly to 
a covered recipient through a third party, must be reported to CMS 
separately from other payments or transfers of value, and must include 
the following information (in lieu of the information required by 
Sec. 403.904(c)):
    (i) Name of the research institution, individual or entity receiving 
the payment or other transfer of value.
    (A) If paid to a physician covered recipient, all of the following 
must be provided:
    (1) The physician's name as listed in the NPPES (if applicable).
    (2) National Provider Identifier.
    (3) State professional license number(s) (for at least one State 
where the physician maintains a license) and State(s) in which the 
license is held.
    (4) Specialty.
    (5) Primary business address of the physician(s).
    (B) If paid to a teaching hospital covered recipient, list the name 
and primary business address of teaching hospital.
    (C) If paid to a non-covered recipient (such as a non-teaching 
hospital or clinic), list the name and primary business address of the 
entity.
    (ii) Total amount of the research payment, including all research-
related costs for activities outlined in a written agreement, research 
protocol, or both.
    (iii) Name of the research study.
    (iv) Name(s) of any related covered drugs, devices, biologicals, or 
medical supplies (subject to the requirements specified in paragraph 
(c)(8) of this section), for drugs and biologicals, the relevant 
National Drug Code(s), if any, for devices and medical supplies and 
report a therapeutic area or product category if a marketed name is not 
available.
    (v) Information about each physician covered recipient principal 
investigator (if applicable) set forth in paragraph (f)(1)(i)(A) of this 
section.

[[Page 111]]

    (vi) Contextual information for research (optional).
    (vii) ClinicalTrials.gov identifier (optional).
    (2) For pre-clinical studies (before any human studies have begun), 
only report the following information:
    (i) Research entity name (as required in paragraph (f)(1)(i) of this 
section).
    (ii) Total amount of payment (as required in paragraph (f)(1)(ii) of 
this section).
    (ii) Principal investigator(s) (as required in paragraph (f)(1)(v) 
of this section).
    (g) Special rules for reporting food and beverage. (1) When 
allocating the cost of food and beverage among covered recipients in a 
group setting where the cost of each individual covered recipient's meal 
is not separately identifiable, such as a platter provided to physicians 
in a group practice setting, applicable manufacturers must calculate the 
value per person by dividing the entire cost of the food or beverage by 
the total number of individuals who partook in the meal (including both 
covered recipients and non-covered recipients, such as office staff). 
The per person value of the meal must be reported as a payment or other 
transfer of value only for covered recipients who actually partook in 
the food or beverage.
    (2) Applicable manufacturers are not required to report or track 
buffet meals, snacks, soft drinks, or coffee made generally available to 
all participants of a large-scale conference or similar large-scale 
event.
    (h) Exclusions from reporting. The following are excluded from the 
reporting requirements specified in this section:
    (1) Indirect payments or other transfers of value (as defined in 
Sec. 403.902), where the applicable manufacturer is unaware of the 
identity of the covered recipient. An applicable manufacturer is unaware 
of the identity of a covered recipient if the applicable manufacturer 
does not know (as defined in Sec. 403.902) the identity of the covered 
recipient during the reporting year or by the end of the second quarter 
of the following reporting year.
    (2)(i) For CY 2013, payments or other transfers of value less than 
$10, unless the aggregate amount transferred to, requested by, or 
designated on behalf of the covered recipient exceeds $100 in a calendar 
year.
    (ii) For CY 2014 and subsequent calendar years, to determine if 
transfers of value are excluded under this section, the dollar amounts 
specified in paragraph (h)(2)(i) of this section must be increased by 
the same percentage as the percentage increase in the consumer price 
index for all urban consumers (all items; U.S. city average) for the 12-
month period ending with June of the previous year. CMS will publish the 
values for the next reporting year 90 days before the beginning of the 
reporting year.
    (iii) Payments or other transfers of value of less than $10 in CY 
2013 (or less than the amount described in paragraph (h)(2)(i) of this 
section for CY 2014 and subsequent calendar years) provided at large-
scale conferences and similar large-scale events, as well as events open 
to the public, do not need to be reported nor included for purposes of 
the $100 aggregate threshold in CY 2013 (or the aggregate threshold 
calculated in accordance paragraph (h)(2)(i) of this section for CY 2014 
and subsequent calendar years), even if the aggregate total for a 
covered recipient exceeds the aggregate threshold for the calendar year.
    (iv) When reporting payments or other transfers of value under the 
$10 threshold for CY 2013 (or under the amount described in paragraph 
(i)(2)(ii) of this section for CY 2014 and subsequent calendar years) 
for covered recipients that exceed the aggregate threshold for the 
reporting year, applicable manufacturers may (but are not required to) 
report all small payments to a particular covered recipient that fall 
within the same nature of payment category as a single payment or other 
transfer of value.
    (3) Product samples, including coupons and vouchers that can be used 
by a patient to obtain samples, which are not intended to be sold and 
are intended for patient use.
    (4) Educational materials and items that directly benefit patients 
or are intended to be used by or with patients, including the value of 
an applicable manufacturer's services to educate patients regarding a 
covered drug, device, biological, or medical supply.

[[Page 112]]

    (5) The loan of a covered device or a device under development, or 
the provision of a limited quantity of medical supplies for a short-term 
trial period, not to exceed a loan period of 90 days or a quantity of 90 
days of average daily use, to permit evaluation of the device or medical 
supply by the covered recipient.
    (6) Items or services provided under a contractual warranty 
(including service or maintenance agreements), whether or not the 
warranty period has expired, including the replacement of a covered 
device, where the terms of the warranty are set forth in the purchase or 
lease agreement for the covered device.
    (7) A transfer of anything of value to a physician covered recipient 
when the covered recipient is a patient, research subject or participant 
in data collection for research, and not acting in the professional 
capacity of a covered recipient.
    (8) Discounts, including rebates.
    (9) In-kind items used for the provision of charity care.
    (10) A dividend or other profit distribution from, or ownership or 
investment interest in, a publicly traded security or mutual fund.
    (11) In the case of an applicable manufacturer who offers a self-
insured plan or directly reimburses for healthcare expenses, payments 
for the provision of health care to employees and their families.
    (12) In the case of a covered recipient who is a licensed non-
medical professional, a transfer of anything of value to the covered 
recipient if the transfer is payment solely for the non-medical 
professional services of the licensed non-medical professional.
    (13) In the case of a covered recipient who is a physician, a 
transfer of anything of value to the covered recipient if the transfer 
is payment solely for the services of the covered recipient with respect 
to an administrative proceeding, legal defense, prosecution, or 
settlement or judgment of a civil or criminal action and arbitration.
    (14) A payment or transfer of value to a covered recipient if the 
payment or transfer of value is made solely in the context of a 
personal, non-business-related relationship.

[78 FR 9521, Feb. 8, 2013, as amended at 79 FR 68000, Nov. 13, 2014]



Sec. 403.906  Reports of physician ownership and investment interests.

    (a) General rule. (1) Each applicable manufacturer and applicable 
group purchasing organization must report to CMS on an annual basis all 
ownership and investment interests in the applicable manufacturer or 
applicable group purchasing organization that were held by a physician 
or an immediate family member of a physician during the preceding 
calendar year.
    (2) For CY 2013, only ownership or investment interests held on or 
after August 1, 2013 must be reported to CMS.
    (b) Identifying information. Reports on physician ownership and 
investment interests must include the following identifying information:
    (1) Name of the physician (as listed in the National Plan & Provider 
Enumeration System (if applicable), including first and last name, 
middle initial, and suffix (for all that apply), and an indication of 
whether the ownership or investment interest was held by the physician 
or an immediate family member of the physician.
    (2) Primary business address of the physician, including the 
following:
    (i) Street address.
    (ii) Suite or office number (if applicable).
    (iii) City.
    (iv) State.
    (v) ZIP code.
    (3) The following information for the physician (regardless of 
whether the ownership or investment interest is held by an immediate 
family member of the physician):
    (i) The specialty.
    (ii) National Provider Identifier (if applicable and as listed in 
NPPES).
    (iii) State professional license number(s) (for at least one State 
where the physician maintains a license), and the State(s) in which the 
license is held.
    (4) Dollar amount invested by each physician or immediate family 
member of the physician.
    (5) Value and terms of each ownership or investment interest.

[[Page 113]]

    (6) Direct and indirect payments or other transfers of value 
provided to a physician holding an ownership or investment interest, and 
direct and indirect payments or other transfers of value provided to a 
third party at the request of or designated by the applicable 
manufacturer or applicable group purchasing organization on behalf of a 
physician owner or investor, must be reported by the applicable 
manufacturer or applicable group purchasing organization in accordance 
with the requirements for reporting payments or other transfers of value 
in Sec. 403.904(c) through (h). The terms ``applicable manufacturer and 
applicable group purchasing organization'' must be substituted for 
``applicable manufacturer,'' and ``physician owner or investor'' must be 
substituted for ``covered recipient'' in each place they appear.

[78 FR 9521, Feb. 8, 2013, as amended at 79 FR 68001, Nov. 13, 2014]



Sec. 403.908  Procedures for electronic submission of reports.

    (a) File format. Reports required under this subpart must be 
electronically submitted to CMS by March 31, 2014, and by the 90th day 
of each subsequent calendar year.
    (b) General rules. (1) If an applicable manufacturer made no 
reportable payments or transfers of value in the previous calendar year, 
nor had any reportable ownership or investment interests held by a 
physician or a physician's immediate family member (as defined in 
Sec. 403.902) during the previous calendar year, the applicable 
manufacturer is not required to file a report.
    (2) If an applicable group purchasing organization had no reportable 
ownership or investment interests held by a physician or physician's 
immediate family member during the previous calendar year, the 
applicable group purchasing organization is not required to file a 
report.
    (c) Registration. (1) Applicable manufacturers that have reportable 
payments or other transfers of value, ownership or investment interests, 
or both, are required to report under this subpart and must register 
with CMS within 90 days of the end of the calendar year for which a 
report is required.
    (2) Applicable group purchasing organizations that have reportable 
ownership or investment interests are required to report under this 
subpart and must register with CMS within 90 days of the end of the 
calendar year for which a report is required.
    (3) During registration, applicable manufacturers and applicable 
group purchasing organizations must name two points of contact with 
appropriate contact information.
    (d) Other rules. (1) Consolidated reports. (i) An applicable 
manufacturer under paragraph (1) of the definition that is under common 
ownership with separate entities that are also applicable manufacturers 
under paragraph (1) of the definition may, but is not required to, file 
a consolidated report of all the payments or other transfers of value to 
covered recipients, and physician ownership or investment interests, for 
all of the entities.
    (ii) An applicable manufacturer under paragraph (1) of the 
definition of applicable manufacturer and an entity (or entities) under 
common ownership with the applicable manufacturer under paragraph (2) of 
the definition of applicable manufacturer may, but are not required to, 
file a consolidated report of all the payments or other transfers of 
value to covered recipients, and physician ownership or investment 
interests.
    (iii) If multiple applicable manufacturers (under paragraph (1) or 
(2) of the definition or both paragraphs of the definition) submit a 
consolidated report, the report must provide the names of each 
applicable manufacturer and entity (or entities) under common ownership 
that the report covers, and the report must identify the specific entity 
that provided each payment.
    (iv) A single payment or other transfer of value reported in a 
consolidated report must only be reported once by one applicable 
manufacturer.
    (v) The applicable manufacturer submitting a consolidated report on 
behalf of itself and other applicable manufacturers under common 
ownership, as permitted under this paragraph, is liable for civil 
monetary penalties imposed on each of the applicable manufacturers whose 
reportable payments

[[Page 114]]

or other transfers of value were included in the consolidated report, up 
to the annual maximum amount specified in Sec. 403.912(c) for each 
individual applicable manufacturer included in the report.
    (2) Joint ventures. If a payment or other transfer of value is 
provided in accordance with a joint venture or other cooperative 
agreement between two or more applicable manufacturers, the payment or 
other transfer of value must be reported--
    (i) In the name of the applicable manufacturer that actually 
furnished the payment or other transfer of value to the covered 
recipient, unless the terms of a written agreement between the 
applicable manufacturers specifically require otherwise, so long as the 
agreement requires that all payments or other transfers of value in 
accordance with the arrangement are reported by one of the applicable 
manufacturers; and
    (ii) Only once by one applicable manufacturer.
    (e) Attestation. Each report, including any subsequent corrections 
to a filed report, must include an attestation by the Chief Executive 
Officer, Chief Financial Officer, Chief Compliance Officer, or other 
Officer of the applicable manufacturer or applicable group purchasing 
organization that the information reported is timely, accurate, and 
complete to the best of his or her knowledge and belief. For applicable 
manufacturers choosing to submit a consolidated report in accordance 
with paragraph (d)(1) of this section, the applicable manufacturer 
submitting the consolidated report must attest on behalf of itself, in 
addition to each of the other applicable manufacturers included in the 
consolidated report.
    (f) Assumptions document. Applicable manufacturers and applicable 
group purchasing organizations may submit an assumptions document, 
explaining the reasonable assumptions made and methodologies used when 
reporting payments or other transfers of value, or ownership or 
investment interests. The assumptions documents will not be made 
available to covered recipients, physician owners or investors, or the 
public.
    (g) 45-day review period for review and error correction. (1) 
General rule. Applicable manufacturers, applicable group purchasing 
organizations, covered recipients, and physician owners or investors 
must have an opportunity to review and submit corrections to the 
information submitted for a period of not less than 45-days before CMS 
makes the information available to the public. In no case may this 45-
day period for review and submission of corrections prevent the 
information from being made available to the public.
    (2) Notification. CMS notifies the applicable manufacturers, 
applicable group purchasing organizations, covered recipients, and 
physician owners or investors when the reported information is ready for 
review.
    (i) Applicable manufacturers and applicable group purchasing 
organizations are notified through the points of contact they identified 
during registration.
    (ii) Physicians and teaching hospitals--
    (A) Are notified using an online posting and notifications on CMS's 
listserves.
    (B) May also register with CMS to receive notification about the 
review processes.
    (iii) The 45-day review period begins on the date specified in the 
online notification.
    (3) Process. (i) An applicable manufacturer, applicable group 
purchasing organization, covered recipient or a physician owner or 
investor may log into a secure Web site to view only the information 
reported specifically about itself.
    (ii) Covered recipients and physician owners or investors are able 
to review data submitted about them for the previous reporting year.
    (iii) If the applicable manufacturer, applicable group purchasing 
organization, covered recipient, or physician owner or investor agrees 
with the information reported, the applicable manufacturer, applicable 
group purchasing organization, covered recipient, or physician owner or 
investor may electronically certify that the information reported is 
accurate.
    (iv) If a covered recipient or physician owner or investor disagrees 
with

[[Page 115]]

the information reported, the covered recipient or physician owner or 
investor can initiate a dispute, which is sent to the appropriate 
applicable manufacturer or applicable group purchasing organization to 
be resolved between the parties.
    (v) Covered recipients and physician owners or investors may 
initiate disputes at any time after the 45-day period begins, but before 
the end of the calendar year, but any changes resulting from disputes 
initiated outside the 45-day period, may not be made until the next time 
the data is refreshed.
    (4) Data disputes. (i) In order to be corrected prior to the 
publication of the data, applicable manufacturers and applicable group 
purchasing organizations must notify CMS of resolved disputes and 
changes to the information submitted by no later than 15 days after the 
end of the 45-day period (that is, 60 days after the 45-day review 
period begins).
    (ii) Disputes which are not resolved by 15 days after the end of the 
review and correction period, may still be resolved, but any changes 
resulting from the disputes may be made until the next time the data is 
refreshed.
    (iii) If the dispute is not resolved by 15 days after the end of the 
45-day review and correction period, CMS publicly reports and aggregates 
the applicable manufacturer's or applicable group purchasing 
organization's version of the payment or other transfer of value, or 
ownership or investment interest data, but marks the payment or other 
transfer of value or ownership or investment interest as disputed.
    (h) Errors or omissions. (1) If an applicable manufacturer or 
applicable group purchasing organization discovers an error or omission 
in its annual report, it must submit corrected information to CMS 
immediately upon confirmation of the error or omission.
    (2) Upon receipt, CMS notifies the affected covered recipient or 
physician owner or investor that the additional information has been 
submitted and is available for review. CMS updates the Web site at least 
once annually with corrected information.



Sec. 403.910  Delayed publication for payments made under product 
research or development agreements and clinical investigations.

    (a) General rule. Certain research payments or other transfers of 
value made to a covered recipient by an applicable manufacturer under a 
product research or development agreement may be delayed from 
publication on the Web site. Publication of a payment or other transfer 
of value is delayed when made in connection with the following 
instances:
    (1) Research on or development of a new drug, device, biological, or 
medical supply, or a new application of an existing drug, device, 
biological, or medical supply.
    (2) Clinical investigations regarding a new drug, device, 
biological, or medical supply.
    (b) Research or development agreement. The research or development 
agreement must include a written agreement, a research protocol, or both 
between the applicable manufacturer and covered recipient.
    (c) Date of publication. Payments or other transfers of value 
eligible for delayed publication must be reported to CMS (in the manner 
required in Sec. 403.904(f)) on the first reporting date following the 
year in which they occur, but CMS does not publicly post the payment 
until the first annual publication date after the earlier of the 
following:
    (1) The date of the approval, licensure or clearance of the covered 
drug, device, biological, or medical supply by FDA.
    (2) Four calendar years after the date the payment or other transfer 
of value was made.
    (d) Notification of delayed publication. (1) An applicable 
manufacturer must indicate on its research report to CMS whether a 
payment or other transfer of value is eligible for a delay in 
publication. The absence of this indication in the report will result in 
CMS posting all payments publicly in the first year of public reporting.
    (2) An applicable manufacturer must continue to indicate annually in 
its report that FDA approval, licensure, or clearance of the new drug, 
device, biological or medical supply to which the

[[Page 116]]

payment or other transfer of value is related, is pending.
    (3) An applicable manufacturer must notify CMS during subsequent 
annual submissions, if the new drug, device, biological or medical 
supply, to which the payment is related (or the new application of the 
existing drug, device, biological, or medical supply), is approved by 
the FDA.
    (4) Failure to notify CMS when FDA approval occurs may be considered 
failure to report, and the applicable manufacturer may be subject to 
civil monetary penalties.
    (5) If, after 4 years from the date of a payment first appearing in 
a report to CMS, there is an indication in a report that the payment is 
subject to delayed reporting, it is reported regardless of the 
indication.
    (e) Confidentiality. Information submitted and eligible for delayed 
publication is considered confidential and will not be subject to 
disclosure under 5 U.S.C. 552, or any similar Federal, State, or local 
law, until on or after the date on which the information made available 
to the public as required in this section.



Sec. 403.912  Penalties for failure to report.

    (a) Failure to report. (1) Any applicable manufacturer or applicable 
group purchasing organization that fails to timely, accurately or 
completely report the information required in accordance with the rules 
established under this subpart is subject to a civil monetary penalty of 
not less than $1,000, but not more than $10,000, as adjusted annually 
under 45 CFR part 102 for each payment or other transfer of value or 
ownership or investment interest not reported timely, accurately, or 
completely.
    (2) The total amount of civil monetary penalties imposed on each 
applicable manufacturer or applicable group purchasing organization 
(regardless of whether the applicable manufacturer was a part of a 
consolidated report) with respect to failures to report in an annual 
submission of information will not exceed $150,000 as adjusted annually 
under 45 CFR part 102.
    (b) Knowing failure to report. (1) Any applicable manufacturer or 
applicable group purchasing organization that knowingly fails to timely, 
accurately or completely report the information required in accordance 
with the rules established under this subpart is subject to a civil 
monetary penalty of not less than $10,000, but not more than $100,000, 
as adjusted annually under 45 CFR part 102 for each payment or other 
transfer of value or ownership or investment interest not reported 
timely, accurately, or completely.
    (2) The total amount of civil monetary penalties imposed on each 
applicable manufacturer or group purchasing organization (regardless of 
whether the applicable manufacturer was a part of a consolidated report) 
with respect to knowing failures to report in an annual submission of 
information will not exceed $1,000,000 as adjusted annually under 45 CFR 
part 102.
    (c) Total annual civil monetary penalties. The amount of civil 
monetary penalties imposed on each applicable manufacturer or applicable 
group purchasing organization under paragraphs (a)(1) and (b)(1) of this 
section are--
    (1) Aggregated separately;
    (2) Subject to separate aggregate totals under paragraphs (a)(2) and 
(b)(2) of this section, with a maximum combined annual total of 
$1,150,000 as adjusted annually under 45 CFR part 102.
    (d) Determinations regarding the amount of civil monetary penalties. 
In determining the amount of the civil monetary penalty, factors to be 
considered include, but are not limited to, the following:
    (1) The length of time the applicable manufacturer or applicable 
group purchasing organization failed to report, including the length of 
time the applicable manufacturer or applicable group purchasing 
organization knew of the payment or other transfer of value, or 
ownership or investment interest.
    (2) Amount of the payment the applicable manufacturer or applicable 
group purchasing organization failed to report.
    (3) Level of culpability.
    (4) Nature and amount of information reported in error.
    (5) Degree of diligence exercised in correcting information reported 
in error.

[[Page 117]]

    (e) Record retention and audits. (1) Maintenance of records. (i) 
Applicable manufacturers and applicable group purchasing organizations 
must maintain all books, contracts, records, documents, and other 
evidence sufficient to enable the audit, evaluation, and inspection of 
the applicable manufacturer's or applicable group purchasing 
organization's compliance with the requirement to timely, accurately or 
completely submit information in accordance with the rules established 
under this subpart.
    (ii) The items described in paragraph (e)(1)(i) of this section must 
be maintained for a period of at least 5 years from the date the payment 
or other transfer of value, or ownership or investment interest is 
published publicly on the Web site.
    (2) Audit. HHS, CMS, OIG or their designees may audit, inspect, 
investigate and evaluate any books, contracts, records, documents, and 
other evidence of applicable manufacturers and applicable group 
purchasing organizations that pertain to their compliance with the 
requirement to timely, accurately or completely submit information in 
accordance with the rules established under this subpart.
    (3) The requirements in this subpart are in addition to, and do not 
limit, any other applicable requirements that may obligate applicable 
manufacturers or applicable group purchasing organizations to retain and 
allow access to records.
    (f) Use of funds. Funds collected by the Secretary as a result of 
the imposition of a civil monetary penalty under this section must be 
used to carry out the operation of this subpart.
    (g) Notice, hearings, appeals, and collection. Civil monetary 
penalties imposed under this section are subject to the provisions set 
forth in subparts A and B of part 402 of this chapter, including those 
pertaining to notice, opportunity for a hearing, appeals procedures, and 
collection of penalties.

[78 FR 9521, Feb. 8, 2013, as amended at 81 FR 61561, Sept. 6, 2016; 82 
FR 42749, Sept. 12, 2017]



Sec. 403.914  Preemption of State laws.

    (a) General rule. In the case of a payment or other transfer of 
value provided by an applicable manufacturer to a covered recipient, 
this subpart preempts any statute or regulation of a State or political 
subdivision of a State that requires an applicable manufacturer to 
disclose or report, in any format, the type of information regarding the 
payment or other transfer of value required to be reported under this 
subpart.
    (b) Information collected for public health purposes. (1) 
Information required to be reported to a Federal, State, or local 
governmental agency for public health surveillance, investigation, or 
other public health purposes or health oversight purposes must still be 
reported to appropriate Federal, State, or local governmental agencies, 
regardless of whether the same information is required to be reported 
under this subpart.
    (2) Governmental agencies include, but are not limited to, the 
following:
    (i) Agencies that are charged with preventing or controlling 
disease, injury, disability.
    (ii) Agencies that conduct oversight activities authorized by law, 
including audits, investigations, inspections, licensure or disciplinary 
actions, or other activities necessary for oversight of the health care 
system.



 Subpart K_Access to Identifiable Data for the Center for Medicare and 
                             Medicaid Models

    Source: 79 FR 68001, Nov. 13, 2014, unless otherwise noted.



Sec. 403.1100  Purpose and scope.

    The regulations in this subpart implement section 1115A of the Act. 
The intent of that section is to enable CMS to test innovative payment 
and service delivery models to reduce program expenditures while 
preserving and/or enhancing the quality of care furnished to individuals 
under titles XVIII, XIX, and XXI of the Act. The Secretary is also 
required to conduct an evaluation of each model tested.



Sec. 403.1105  Definitions.

    For purposes of this subpart--
    Applicable titles means Titles XVIII, XIX, or XXI of the Act.

[[Page 118]]



Sec. 403.1110  Evaluation of models.

    (a) Evaluation. The Secretary conducts an evaluation of each model 
tested under section 1115A of the Act. Such evaluation must include an 
analysis of the following:
    (1) The quality of care furnished under the model, including the 
measurement of patient-level outcomes and patient-centeredness criteria 
determined appropriate by the Secretary.
    (2) The changes in spending under the applicable titles by reason of 
the model.
    (b) Information. Any State or other entity participating in the 
testing of a model under section 1115A of the Act must collect and 
report such information, including ``protected health information'' as 
that term is defined at 45 CFR 160.103, as the Secretary determines is 
necessary to monitor and evaluate such model. Such data must be produced 
to the Secretary at the time and in the form and manner specified by the 
Secretary.

[[Page 119]]



                      SUBCHAPTER B_MEDICARE PROGRAM





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



Subpart A [Reserved]

Subpart B_Medical Services Coverage Decisions That Relate to Health Care 
                               Technology

Sec.
405.201  Scope of subpart and definitions.
405.203  FDA categorization of investigational devices.
405.205  Coverage of a non-experimental/investigational (Category B) 
          device.
405.207  Services related to a noncovered device.
405.209  Payment for a Category B (Nonexperimental/investigational) 
          device.
405.211  Coverage of items and services in FDA-approved IDE studies.
405.212  Medicare Coverage IDE study criteria.
405.213  Re-evaluation of a device categorization.
405.215  Confidential commercial and trade secret information.

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

                           General Provisions

405.301  Scope of subpart.

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

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

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

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

                   Repayment of Scholarships and Loans

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

                       Subpart D_Private Contracts

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

          Subpart E_Criteria for Determining Reasonable Charges

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

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

Subparts F-G [Reserved]

           Subpart H_Appeals Under the Medicare Part B Program

405.800  Appeals of CMS or a CMS contractor.
405.803  Appeals rights.
405.806  Impact of reversal of contractor determinations on claims 
          processing.
405.809  Reinstatement of provider or supplier billing privileges 
          following corrective action.
405.812  Effective date for DMEPOS supplier's billing privileges.
405.815  Submission of claims.
405.818  Deadline for processing provider enrollment initial 
          determinations.

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

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

                         Initial Determinations

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

                            Redeterminations

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

                             Reconsideration

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

                               Reopenings

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

                   Expedited Access to Judicial Review

405.990  Expedited access to judicial review.

[[Page 121]]

                              ALJ Hearings

405.1000  Hearing before an ALJ and decision by an ALJ or attorney 
          adjudicator: General rule.
405.1002  Right to an ALJ hearing.
405.1004  Right to a review of QIC notice of dismissal.
405.1006  Amount in controversy required for an ALJ hearing and judicial 
          review.
405.1008  Parties to the proceedings on a request for an ALJ hearing.
405.1010  When CMS or its contractors may participate in the proceedings 
          on a request for an ALJ hearing.
405.1012  When CMS or its contractors may be a party to a hearing.
405.1014  Request for an ALJ hearing or a review of a QIC dismissal.
405.1016  Time frames for deciding an appeal of a QIC reconsideration or 
          escalated request for a QIC reconsideration.
405.1018  Submitting evidence.
405.1020  Time and place for a hearing before an ALJ.
405.1022  Notice of a hearing before an ALJ.
405.1024  Objections to the issues.
405.1026  Disqualification of the ALJ or attorney adjudicator.
405.1028  Review of evidence submitted by parties.
405.1030  ALJ hearing procedures.
405.1032  Issues before an ALJ or attorney adjudicator.
405.1034  Requesting information from the QIC.
405.1036  Description of an ALJ hearing process.
405.1037  Discovery.
405.1038  Deciding a case without a hearing before an ALJ.
405.1040  Prehearing and posthearing conferences.
405.1042  The administrative record.
405.1044  Consolidated proceedings.
405.1046  Notice of an ALJ or attorney adjudicator decision.
405.1048  The effect of an ALJ's or attorney adjudicator's decision.
405.1050  Removal of a hearing request from an OMHA to the Council.
405.1052  Dismissal of a request for a hearing before an ALJ or request 
          for review of a QIC dismissal.
405.1054  Effect of dismissal of a request for a hearing or request for 
          review of QIC dismissal.
405.1056  Remands of requests for hearing and requests for review.
405.1058  Effect of a remand.

               Applicability of Medicare Coverage Policies

405.1060  Applicability of nation coverage determinations (NCDs).
405.1062  Applicability of local coverage determinations and other 
          policies not binding on the ALJ or attorney adjudicator and 
          Council.
405.1063  Applicability of laws, regulations, CMS Rulings, and 
          precedential decisions.

                     Medicare Appeals Council Review

405.1100  Medicare Appeals Council review: General.
405.1102  Request for Council review when ALJ or attorney adjudicator 
          issues decision or dismissal.
405.1106  Where a request for review or escalation may be filed.
405.1108  Council actions when request for review or escalation is 
          filed.
405.1110  Council reviews on its own motion.
405.1112  Content of request for review.
405.1114  Dismissal of request for review.
405.1116  Effect of dismissal of request for Council review or request 
          for hearing.
405.1118  Obtaining evidence from the Council.
405.1120  Filling briefs with the Council.
405.1122  What evidence may be submitted to the Council.
405.1124  Oral argument.
405.1126  Case remanded by the Council.
405.1128  Action of the Council.
405.1130  Effect of the Council's decision.
405.1132  Request for escalation to Federal court.
405.1134  Extension of time to file action in Federal district court.
405.1136  Judicial review.
405.1138  Case remanded by a Federal district court.
405.1140  Council review of ALJ decision in a case remanded by a Federal 
          district court.

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

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

Subparts K-Q [Reserved]

       Subpart R_Provider Reimbursement Determinations and Appeals

405.1801  Introduction.
405.1803  Contractor determination and notice of amount of program 
          reimbursement.

[[Page 122]]

405.1804  Matters not subject to administrative or judicial review under 
          prospective payment.
405.1805  Parties to contractor determination.
405.1807  Effect of contractor determination.
405.1809  Contractor hearing procedures.
405.1811  Right to contractor hearing; contents of, and adding issues 
          to, hearing request.
405.1813  Good cause extension of time limit for requesting a contractor 
          hearing.
405.1814  Contractor hearing officer jurisdiction.
405.1815  Parties to proceedings before the contractor hearing 
          officer(s).
405.1817  Hearing officer or panel of hearing officers authorized to 
          conduct contractor hearing; disqualification of officers.
405.1819  Conduct of contractor hearing.
405.1821  Prehearing discovery and other proceedings prior to the 
          contractor hearing.
405.1823  Evidence at contractor hearing.
405.1825  Witnesses at contractor hearing.
405.1827  Record of proceedings before the contractor hearing 
          officer(s).
405.1829  Scope of authority of contractor hearing officer(s).
405.1831  Contractor hearing decision.
405.1832  Contractor hearing officer review of compliance with the 
          substantive reimbursement requirement of an appropriate cost 
          report claim.
405.1833  Effect of contractor hearing decision.
405.1834  CMS reviewing official procedure.
405.1835  Right to Board hearing; contents of, and adding issues to, 
          hearing request.
405.1836  Good cause extension of time limit for requesting a Board 
          hearing.
405.1837  Group appeals.
405.1839  Amount in controversy.
405.1840  Board jurisdiction.
405.1842  Expedited judicial review.
405.1843  Parties to proceedings in a Board appeal.
405.1845  Composition of Board; hearings, decisions, and remands.
405.1847  Disqualification of Board members.
405.1849  Establishment of time and place of hearing by the Board.
405.1851  Conduct of Board hearing.
405.1853  Board proceedings prior to any hearing; discovery.
405.1855  Evidence at Board hearing.
405.1857  Subpoenas.
405.1859  Witnesses.
405.1861  Oral argument and written allegations.
405.1863  Administrative policy at issue.
405.1865  Record of administrative proceedings.
405.1867  Scope of Board's legal authority.
405.1868  Board actions in response to failure to follow Board rules.
405.1869  Scope of Board's authority in a hearing decision.
405.1871  Board hearing decision.
405.1873  Board review of compliance with the reimbursement requirement 
          of an appropriate cost report claim.
405.1875  Administrator review.
405.1877  Judicial review.
405.1881  Appointment of representative.
405.1883  Authority of representative.
405.1885  Reopening an intermediary determination or reviewing entity 
          decision.
405.1887  Notice of reopening; effect of reopening.
405.1889  Effect of a revision; issue-specific nature of appeals of 
          revised determinations and decisions.

Subparts S-T [Reserved]

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

405.2100-405.2101  [Reserved]
405.2102  Definitions.
405.2110  Designation of ESRD networks.
405.2111  [Reserved]
405.2112  ESRD network organizations.
405.2113  Medical review board.
405.2114  [Reserved]
405.2131-405.2184  [Reserved]

Subparts V-W [Reserved]

  Subpart X_Rural Health Clinic and Federally Qualified Health Center 
                                Services

405.2400  Basis.
405.2401  Scope and definitions.
405.2402  Rural health clinic basic requirements.
405.2403  Rural health clinic content and terms of the agreement with 
          the Secretary.
405.2404  Termination of rural health clinic agreements.
405.2410  Application of Part B deductible and coinsurance.
405.2411  Scope of benefits.
405.2412  Physicians' services.
405.2413  Services and supplies incident to a physician's services.
405.2414  Nurse practitioner, physician assistant, and certified nurse 
          midwife services.
405.2415  Incident to services and direct supervision.
405.2416  Visiting nurse services.
405.2417  Visiting nurse services: Determination of shortage of 
          agencies.

               Federally Qualified Health Center Services

405.2430  Basic requirements.
405.2434  Content and terms of the agreement.
405.2436  Termination of agreement.

[[Page 123]]

405.2440  Conditions for reinstatement after termination by CMS.
405.2442  Notice to the public.
405.2444  Change of ownership.
405.2446  Scope of services.
405.2448  Preventive primary services.
405.2449  Preventive services.
405.2450  Clinical psychologist and clinical social worker services.
405.2452  Services and supplies incident to clinical psychologist and 
          clinical social worker services.

 Payment for Rural Health Clinic and Federally Qualified Health Center 
                                Services

405.2460  Applicability of general payment exclusions.
405.2462  Payment for RHC and FQHC services.
405.2463  What constitutes a visit.
405.2464  Payment rate.
405.2466  Annual reconciliation.
405.2467  Requirements of the FQHC PPS.
405.2468  Allowable costs.
405.2469  FQHC supplemental payments.
405.2470  Reports and maintenance of records.
405.2472  Beneficiary appeals.

    Authority: Secs. 205(a), 1102, 1142, 1861, 1862(a), 1869, 1871, 
1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1320b-12, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).

Subpart A [Reserved]



Subpart B_Medical Services Coverage Decisions That Relate to Health Care 
                               Technology

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

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



Sec. 405.201  Scope of subpart and definitions.

    (a) Scope. This subpart establishes that--
    (1) CMS uses the FDA categorization of a device as a factor in 
making Medicare coverage decisions; and
    (2) CMS may consider for Medicare coverage certain devices with an 
FDA-approved investigational device exemption (IDE) that have been 
categorized as Category B (Nonexperimental/investigational) device.
    (3) CMS identifies criteria for coverage of items and services 
furnished in IDE studies.
    (b) Definitions. As used in this subpart--
    Category A (Experimental) device refers to a device for which 
``absolute risk'' of the device type has not been established (that is, 
initial questions of safety and effectiveness have not been resolved) 
and the FDA is unsure whether the device type can be safe and effective.
    Category B (Nonexperimental/investigational) device refers to a 
device for which the incremental risk is the primary risk in question 
(that is, initial questions of safety and effectiveness of that device 
type have been resolved), or it is known that the device type can be 
safe and effective because, for example, other manufacturers have 
obtained FDA premarket approval or clearance for that device type.
    ClinicalTrials.gov refers to the National Institutes of Health's 
National Library of Medicine's online registry and results database of 
publicly and privately supported clinical studies of human participants 
conducted around the world.
    Contractors refers to Medicare Administrative Contractors and other 
entities that contract with CMS to review and adjudicate claims for 
Medicare payment of items and services.
    Investigational device exemption (IDE) refers to an FDA-approved IDE 
application that permits a device, which would otherwise be subject to 
marketing approval or clearance, to be shipped lawfully for the purpose 
of conducting a clinical study in accordance with 21 U.S.C. 360j(g) and 
21 CFR part 812.
    Routine care items and services refers to items and services that 
are otherwise generally available to Medicare beneficiaries (that is, a 
benefit category exists, it is not statutorily excluded, and there is no 
national noncoverage decision) that are furnished during a clinical 
study and that would be otherwise furnished even if the beneficiary were 
not enrolled in a clinical study.

[60 FR 48423, Sept. 19, 1995, as amended at 78 FR 74809, Dec. 10, 2013

[[Page 124]]



Sec. 405.203  FDA categorization of investigational devices.

    (a) The FDA assigns a device with an FDA-approved IDE to one of two 
categories:
    (1) Category A (Experimental) devices.
    (2) Category B (Nonexperimental/investigational) devices.
    (b) The FDA notifies CMS, when it notifies the sponsor, that the 
device is categorized by FDA as Category A (Experimental) or Category B 
(Nonexperimental).
    (c) CMS uses the categorization of the device as a factor in making 
Medicare coverage decisions.

[60 FR 48423, Sept. 19, 1995, as amended at 78 FR 74809, Dec. 10, 2013



Sec. 405.205  Coverage of a Category B (Nonexperimental
/investigational)device.

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

[60 FR 48423, Sept. 19, 1995, as amended at 78 FR 74809, Dec. 10, 2013



Sec. 405.207  Services related to a noncovered device.

    (a) When payment is not made. Medicare payment is not made for 
medical and hospital services that are related to the use of a device 
that is not covered because CMS determines the device is not 
``reasonable'' and ``necessary'' under section 1862(a)(1)(A) of the Act 
or because it is excluded from coverage for other reasons. These 
services include all services furnished in preparation for the use of a 
noncovered device, services furnished contemporaneously with and 
necessary to the use of a noncovered device, and services furnished as 
necessary after-care that are incident to recovery from the use of the 
device or from receiving related noncovered services.
    (b) When payment is made. Medicare payment may be made for--
    (1) Covered services to treat a condition or complication that 
arises due to the use of a noncovered device or a noncovered device-
related service; or
    (2) Routine care items and services related to Category A 
(Experimental) devices as defined in Sec. 405.201(b), and furnished in 
conjunction with FDA-approved clinical studies that meet the coverage 
requirements in Sec. 405.211.
    (3) Routine care items and services related to Category B 
(Nonexperimental/investigational) devices as defined in Sec. 405.201(b), 
and furnished in conjunction with FDA-approved clinical studies that 
meet the coverage requirements in Sec. 405.211.

[60 FR 48423, Sept. 19, 1995, as amended at 69 FR 66420, Nov. 15, 2004; 
78 FR 74809, Dec. 10, 2013]



Sec. 405.209  Payment for a Category B (Nonexperimental/
investigational) device.

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

[78 FR 74809, Dec. 10, 2013]



Sec. 405.211  Coverage of items and services in FDA-approved IDE
studies.

    (a) Coverage of routine care items and services for Category A 
(Experimental) devices. Medicare covers routine care items and services 
furnished in an FDA-approved Category A (Experimental) IDE study if CMS 
(or its designated entity) determines that the Medicare coverage IDE 
study criteria in Sec. 405.212 are met.
    (b) Coverage of Category B (Nonexperimental/investigational) IDE 
devices and routine care items and services. Medicare may make payment 
for a Category B (Nonexperimental/investigational) IDE

[[Page 125]]

device and routine care items and services furnished in an FDA-approved 
Category B (Nonexperimental/investigational) IDE study if CMS (or its 
designated entity) determines prior to the submission of the first 
related claim that the Medicare coverage IDE study criteria in 
Sec. 405.212 are met.
    (c) CMS (or its designated entity) must review the following to 
determine if the Medicare coverage IDE study criteria in Sec. 405.212 
are met for purposes of coverage of items and services described in 
paragraphs (a) and (b) of this section:
    (1) FDA approval letter of the IDE.
    (2) IDE study protocol.
    (3) IRB approval letter.
    (4) NCT number.
    (5) Supporting materials, as needed.
    (d) Notification. A listing of all CMS-approved Category A 
(Experimental) IDE studies and Category B (Nonexperimental/
investigational) IDE studies shall be posted on the CMS Web site and 
published in the Federal Register.

[78 FR 74809, Dec. 10, 2013]



Sec. 405.212  Medicare Coverage IDE study criteria.

    (a) For Medicare coverage of items and services described in 
Sec. 405.211, a Category A (Experimental) or Category B 
(Nonexperimental/investigational) IDE study must meet all of the 
following criteria:
    (1) The principal purpose of the study is to test whether the device 
improves health outcomes of appropriately selected patients.
    (2) The rationale for the study is well supported by available 
scientific and medical information, or it is intended to clarify or 
establish the health outcomes of interventions already in common 
clinical use.
    (3) The study results are not anticipated to unjustifiably duplicate 
existing knowledge.
    (4) The study design is methodologically appropriate and the 
anticipated number of enrolled subjects is adequate to confidently 
answer the research question(s) being asked in the study.
    (5) The study is sponsored by an organization or individual capable 
of successfully completing the study.
    (6) The study is in compliance with all applicable Federal 
regulations concerning the protection of human subjects found at 21 CFR 
parts 50, 56, and 812 and 45 CFR part 46.
    (7) Where appropriate, the study is not designed to exclusively test 
toxicity or disease pathophysiology in healthy individuals. Studies of 
all medical technologies measuring therapeutic outcomes as one of the 
objectives may be exempt from this criterion only if the disease or 
condition being studied is life threatening and the patient has no other 
viable treatment options.
    (8) The study is registered with the National Institutes of Health's 
National Library of Medicine's ClinicalTrials.gov.
    (9) The study protocol describes the method and timing of release of 
results on all pre-specified outcomes, including release of negative 
outcomes and that the release should be hastened if the study is 
terminated early.
    (10) The study protocol must describe how Medicare beneficiaries may 
be affected by the device under investigation, and how the study results 
are or are not expected to be generalizable to the Medicare beneficiary 
population. Generalizability to populations eligible for Medicare due to 
age, disability, or other eligibility status must be explicitly 
described.
    (b) [Reserved]

[78 FR 74809, Dec. 10, 2013]



Sec. 405.213  Re-evaluation of a device categorization.

    (a) General rules. (1) Any sponsor that does not agree with an FDA 
decision that categorizes its device as Category A (experimental) may 
request re-evaluation of the categorization decision.
    (2) A sponsor may request review by CMS only after the requirements 
of paragraph (b) of this section are met.
    (3) No reviews other than those described in paragraphs (b) and (c) 
of this section are available to the sponsor.
    (4) Neither the FDA original categorization or re-evaluation 
(described in paragraph (b) of this section) nor CMS's review (described 
in paragraph (c) of this section) constitute an initial determination 
for purposes of the Medicare appeals processes under part

[[Page 126]]

405, subpart G or subpart H, or parts 417, 473, or 498 of this chapter.
    (b) Request to FDA. A sponsor that does not agree with the FDA's 
categorization of its device may submit a written request to the FDA at 
any time requesting re-evaluation of its original categorization 
decision, together with any information and rationale that it believes 
support recategorization. The FDA notifies both CMS and the sponsor of 
its decision.
    (c) Request to CMS. If the FDA does not agree to recategorize the 
device, the sponsor may seek review from CMS. A device sponsor must 
submit its request in writing to CMS. CMS obtains copies of relevant 
portions of the application, the original categorization decision, and 
supplementary materials. CMS reviews all material submitted by the 
sponsor and the FDA's recommendation. CMS reviews only information in 
the FDA record to determine whether to change the categorization of the 
device. CMS issues a written decision and notifies the sponsor of the 
IDE and the FDA.

[60 FR 48423, Sept. 19, 1995, as amended at 78 FR 74810, Dec. 10, 2013



Sec. 405.215  Confidential commercial and trade secret information.

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



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

    Authority: Secs. 1102, 1815, 1833, 1842, 1862, 1866, 1870, 1871, 
1879 and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g, 1395l, 
1395u, 1395y, 1395cc, 1395gg, 1395hh, 1395pp and 1395ccc) and 31 U.S.C. 
3711.

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

    Editorial Note: Nomenclature changes to subpart C of part 405 appear 
at 76 FR 5961, Feb. 2, 2011.

                           General Provisions



Sec. 405.301  Scope of subpart.

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

[54 FR 41733, Oct. 11, 1989]

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



Sec. 405.350  Individual's liability for payments made to providers
and other persons for items and services furnished the individual.

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

[41 FR 1492, Jan. 8, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, 
as amended at 61 FR 49271, Sept. 19, 1996; 78 FR 74810, Dec. 10, 2013]

[[Page 127]]



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

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



Sec. 405.352  Adjustment of title XVIII incorrect payments.

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

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



Sec. 405.353  Certification of amount that will be adjusted against
individual title II or railroad retirement benefits.

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



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

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

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



Sec. 405.355  Waiver of adjustment or recovery.

    (a) The provisions of Sec. 405.352 may not be applied and there may 
be no adjustment or recovery of an incorrect payment (i.e., a payment 
made under Sec. 405.350(a) or Sec. 405.350(b)) in any case where such 
incorrect payment has been made with respect to an individual who is 
without fault, or where such adjustment or recovery would be made by 
decreasing payments to which another person who is without fault is 
entitled as provided in section 1870(b) of the Act where such adjustment 
or recovery would defeat the purpose of title II or title XVIII of the 
Act or would be against equity and good conscience. (See 20 CFR 404.509 
and 404.512.)
    (b) Adjustment or recovery of an incorrect payment (or only such 
part of an incorrect payment as may be determined to be inconsistent 
with the purposes of Title XVIII of the Act) against an individual who 
is without fault will be deemed to be against equity and good conscience 
if the incorrect payment was made for items and services that are not 
payable under section 1862(a)(1) or (a)(9) of the Act and if the 
determination that such payment was incorrect was made subsequent to the 
fifth year following the year in which notice of such payment was sent 
to such individual.

[41 FR 1493, Jan. 8, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977; 
78 FR 74810, Dec. 10, 2013]



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

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

[61 FR 49271, Sept. 19, 1996]



Sec. 405.357  Notice of right to waiver consideration.

    Whenever an initial determination is made that more than the correct 
amount of payment has been made, notice of the provisions of section 
1870(c) of the Act regarding waiver of adjustment or recovery shall be 
sent to the overpaid individual and to any other individual against whom 
adjustment or

[[Page 128]]

recovery of the overpayment is to be effected (see Sec. 405.358).

[61 FR 49271, Sept. 19, 1996]



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

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

[61 FR 49271, Sept. 19, 1996]



Sec. 405.359  Liability of certifying or disbursing officer.

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

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



Sec. 405.370  Definitions.

    (a) For purposes of this subpart, the following definitions apply:
    Credible allegation of fraud. A credible allegation of fraud is an 
allegation from any source, including but not limited to the following:
    (1) Fraud hotline complaints.
    (2) Claims data mining.
    (3) Patterns identified through provider audits, civil false claims 
cases, and law enforcement investigations. Allegations are considered to 
be credible when they have indicia of reliability.
    Medicare contractor. Unless the context otherwise requires, 
includes, but is not limited to the any of following:
    (1) A fiscal intermediary.
    (2) A carrier.
    (3) Program safeguard contractor.
    (4) Zone program integrity contractor.
    (5) Part A/Part B Medicare administrative contractor.
    Offset. The recovery by Medicare of a non-Medicare debt by reducing 
present or future Medicare payments and applying the amount withheld to 
the indebtedness. (Examples are Public Health Service debts or Medicaid 
debts recovered by CMS).
    Recoupment. The recovery by Medicare of any outstanding Medicare 
debt by reducing present or future Medicare payments and applying the 
amount withheld to the indebtedness.
    Resolution of an investigation. An investigation of credible 
allegations of fraud will be considered resolved when legal action is 
terminated by settlement, judgment, or dismissal, or when the case is 
closed or dropped because of insufficient evidence to support the 
allegations of fraud.
    Suspension of payment. The withholding of payment by a Medicare 
contractor from a provider or supplier of an approved Medicare payment 
amount before a determination of the amount of the overpayment exists, 
or until the resolution of an investigation of a credible allegation of 
fraud.
    (b) For purposes of Secs. 405.378 and 405.379, the following terms 
apply:
    Appellant means the beneficiary, assignee or other person or entity 
that has filed and pursued an appeal concerning a particular initial 
determination. Designation as an appellant does not in itself convey 
standing to appeal the determination in question.
    Fiscal intermediary means an organization that has entered into a 
contract with CMS in accordance with section 1816 of the Act and is 
authorized to make determinations and payments for Part A of title XVIII 
of the Act, and Part B provider services as specified in Sec. 421.5(c) 
of this chapter.
    Medicare Appeals Council means the council within the Departmental 
Appeals Board of the U.S. Department of Health and Human Services.

[[Page 129]]

    Medicare contractor, unless the context otherwise requires, 
includes, but is not limited to, a fiscal intermediary, carrier, 
recovery audit contractor, and Medicare administrative contractor.
    Party means an individual or entity listed in Sec. 405.906 that has 
standing to appeal an initial determination and/or a subsequent 
administrative appeal determination.
    Qualified Independent Contractor (QIC) Qualified Independent 
Contractor (QIC) means an entity which contracts with the Secretary in 
accordance with section 1869 of the Act to perform reconsiderations 
under Sec. 405.960 through Sec. 405.978.
    Remand means to vacate a lower level appeal decision, or a portion 
of the decision, and return the case, or a portion of the case, to that 
level for a new decision.
    Vacate means to set aside a previous action.

[61 FR 63745, Dec. 2, 1996, as amended at 74 FR 47468, Sept. 16, 2009; 
76 FR 5961, Feb. 2, 2011]



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

    (a) General rules. Medicare payments to providers and suppliers, as 
authorized under this subchapter (excluding payments to beneficiaries), 
may be--
    (1) Suspended, in whole or in part, by CMS or a Medicare contractor 
if CMS or the Medicare contractor possesses reliable information that an 
overpayment exists or that the payments to be made may not be correct, 
although additional information may be needed for a determination;
    (2) In cases of suspected fraud, suspended, in whole or in part, by 
CMS or a Medicare contractor if CMS or the Medicare contractor has 
consulted with the OIG, and, as appropriate, the Department of Justice, 
and determined that a credible allegation of fraud exists against a 
provider or supplier, unless there is good cause not to suspend 
payments; or
    (3) Offset or recouped, in whole or in part, by a Medicare 
contractor if the Medicare contractor or CMS has determined that the 
provider or supplier to whom payments are to be made has been overpaid.
    (b) Good cause exceptions applicable to payment suspensions. (1) CMS 
may find that good cause exists not to suspend payments or not to 
continue to suspend payments to an individual or entity against which 
there are credible allegations of fraud if--
    (i) OIG or other law enforcement agency has specifically requested 
that a payment suspension not be imposed because such a payment 
suspension may compromise or jeopardize an investigation;
    (ii) It is determined that beneficiary access to items or services 
would be so jeopardized by a payment suspension in whole or part as to 
cause a danger to life or health;
    (iii) It is determined that other available remedies implemented by 
CMS or a Medicare contractor more effectively or quickly protect 
Medicare funds than would implementing a payment suspension; or
    (iv) CMS determines that a payment suspension or a continuation of a 
payment suspension is not in the best interests of the Medicare program.
    (2) Every 180 days after the initiation of a suspension of payments 
based on credible allegations of fraud, CMS will--
    (i) Evaluate whether there is good cause to not continue such 
suspension under this section; and
    (ii) Request a certification from the OIG or other law enforcement 
agency that the matter continues to be under investigation warranting 
continuation of the suspension.
    (3) Good cause not to continue to suspend payments to an individual 
or entity against which there are credible allegations of fraud must be 
deemed to exist if a payment suspension has been in effect for 18 months 
and there has not been a resolution of the investigation, except CMS may 
extend a payment suspension beyond that point if--
    (i) The case has been referred to, and is being considered by, the 
OIG for administrative action (for example, civil money penalties); or 
such administrative action is pending or
    (ii) The Department of Justice submits a written request to CMS that 
the suspension of payments be continued

[[Page 130]]

based on the ongoing investigation and anticipated filing of criminal or 
civil action or both or based on a pending criminal or civil action or 
both. At a minimum, the request must include the following:
    (A) Identification of the entity under suspension.
    (B) The amount of time needed for continued suspension in order to 
conclude the criminal or civil proceeding or both.
    (C) A statement of why or how criminal or civil action or both may 
be affected if the requested extension is not granted.
    (c) Steps necessary for suspension of payment, offset, and 
recoupment. (1) Except as provided in paragraphs (d) and (e) of this 
section, CMS or the Medicare contractor suspends payments only after it 
has complied with the procedural requirements set forth at Sec. 405.372.
    (2) The Medicare contractor offsets or recoups payments only after 
it has complied with the procedural requirements set forth at 
Sec. 405.373.
    (d) Suspension of payment in the case of unfiled cost reports. (1) 
If a provider has failed to timely file an acceptable cost report, 
payment to the provider is immediately suspended in whole or in part 
until a cost report is filed and determined by the Medicare contractor 
to be acceptable.
    (2) In the case of an unfiled cost report, the provisions of 
Sec. 405.372 do not apply. (See Sec. 405.372(a)(2) concerning failure to 
furnish other information.)
    (e) Suspension of payment in the case of unfiled hospice cap 
determination reports. (1) If a provider has failed to timely file an 
acceptable hospice cap determination report, payment to the provider is 
immediately suspended in whole or in part until a cap determination 
report is filed and determined by the Medicare contractor to be 
acceptable.
    (2) In the case of an unfiled hospice cap determination report, the 
provisions of Sec. 405.372 do not apply. (See Sec. 405.372(a)(2) 
concerning failure to furnish other information.)

[76 FR 5961, Feb. 2, 2011, as amended at 79 FR 50509, Aug. 22, 2014]



Sec. 405.372  Proceeding for suspension of payment.

    (a) Notice of intention to suspend--(1) General rule. Except as 
provided in paragraphs (a)(2) through (a)(4) of this section, if the 
Medicare contractor, or CMS has determined that a suspension of payments 
under Sec. 405.371(a)(1) should be put into effect, the Medicare 
contractor must notify the provider or supplier of the intention to 
suspend payments, in whole or in part, and the reasons for making the 
suspension.
    (2) Failure to furnish information. The notice requirement of 
paragraph (a)(1) of this section does not apply if the Medicare 
contractor suspends payments to a provider or supplier in accordance 
with section 1815(a) or section 1833(e) of the Act, respectively, 
because the provider or supplier has failed to submit information 
requested by the Medicare contractor that is needed to determine the 
amounts due the provider or supplier. (See Sec. 405.371(c) concerning 
failure to file timely acceptable cost reports.)
    (3) Harm to trust funds. A suspension of payment may be imposed 
without prior notice if CMS, the intermediary, or carrier determines 
that the Medicare Trust Funds would be harmed by giving prior notice. 
CMS may base its determination on an intermediary's or carrier's belief 
that giving prior notice would hinder the possibility of recovering the 
money.
    (4) Fraud. If the intended suspension of payment involves credible 
allegations of fraud under Sec. 405.371(a)(2), CMS--
    (i) In consultation with OIG and, as appropriate, the Department of 
Justice, determines whether to impose the suspension and if prior notice 
is appropriate;
    (ii) Directs the Medicare contractor as to the timing and content of 
the notification to the provider or supplier; and
    (iii) Is the real party in interest and is responsible for the 
decision.
    (b) Rebuttal--(1) If prior notice is required. If prior notice is 
required under paragraph (a) of this section, the Medicare contractor 
must give the provider or supplier an opportunity for rebuttal in 
accordance with Sec. 405.374. If a rebuttal statement is received within 
the

[[Page 131]]

specified time period, the suspension of payment goes into effect on the 
date stated in the notice, and the procedures and provisions set forth 
in Sec. 405.375 apply. If by the end of the period specified in the 
notice no statement has been received, the suspension goes into effect 
automatically, and the procedures set forth in paragraph (c) of this 
section are followed.
    (2) If prior notice is not required. If, under the provisions of 
paragraphs (a)(2) through (a)(4) of this section, a suspension of 
payment is put into effect without prior notice to the provider or 
supplier, the Medicare contractor must, once the suspension is in 
effect, give the provider or supplier an opportunity to submit a 
rebuttal statement as to why the suspension should be removed.
    (c) Subsequent action. (1) If a suspension of payment is put into 
effect under Sec. 405.371(a)(1), CMS or the Medicare contractor takes 
timely action after the suspension to obtain the additional information 
it may need to make a determination as to whether an overpayment exists 
or the payments may be made.
    (i) CMS or the Medicare contractor makes all reasonable efforts to 
expedite the determination.
    (ii) As soon as the determination is made, CMS or the Medicare 
contractor informs the provider or supplier and, if appropriate, the 
suspension is rescinded or any existing recoupment or offset is adjusted 
to take into account the determination.
    (2)(i) If a suspension of payment is based upon credible allegations 
of fraud in accordance with Sec. 405.371(a)(2), subsequent action must 
be taken by CMS or the Medicare contractor to make a determination as to 
whether an overpayment exists.
    (ii) The rescission of the suspension and the issuance of a final 
overpayment determination to the provider or supplier may be delayed 
until resolution of the investigation.
    (d) Duration of suspension of payment--(1) General rule. Except as 
provided in paragraphs (d)(2) and (d)(3) of this section, a suspension 
of payment is limited to 180 days, starting with the date the suspension 
begins.
    (2) 180-day extension. (i) An intermediary, a carrier, or, in cases 
of fraud and misrepresentation, OIG or a law enforcement agency, may 
request a one-time only extension of the suspension period for up to 180 
additional days if it is unable to complete its examination of the 
information or investigation, as appropriate, within the 180-day time 
limit. The request must be submitted in writing to CMS.
    (ii) Upon receipt of a request for an extension, CMS notifies the 
provider or supplier of the requested extension. CMS then either extends 
the suspension of payment for up to an additional 180 days or determines 
that the suspended payments are to be released to the provider or 
supplier.
    (3) Exceptions to the time limits. (i) The time limits specified in 
paragraphs (d)(1) and (d)(2) of this section do not apply if the 
suspension of payments is based upon credible allegations of fraud under 
Sec. 405.371(a)(2).
    (ii) Although the time limits specified in paragraphs (d)(1) and 
(d)(2) of this section do not apply to suspensions based on credible 
allegations of fraud, all suspensions of payment in accordance with 
Sec. 405.371(a)(2) will be temporary and will not continue after the 
resolution of an investigation, unless a suspension is warranted because 
of reliable evidence of an overpayment or that the payments to be made 
may not be correct, as specified in Sec. 405.371(a)(1).
    (e) Disposition of suspended payments. Payments suspended under the 
authority of Sec. 405.371(a) are first applied to reduce or eliminate 
any overpayments determined by the Medicare contractor, or CMS, 
including any interest assessed under the provisions of Sec. 405.378, 
and then applied to reduce any other obligation to CMS or to HHS. In the 
absence of a legal requirement that the excess be paid to another 
entity, the excess is released to the provider or supplier.

[61 FR 63746, Dec. 2, 1996, as amended at 76 FR 5962, Feb. 2, 2011]



Sec. 405.373  Proceeding for offset or recoupment.

    (a) General rule. Except as specified in paragraphs (b) and (f) of 
this section, if

[[Page 132]]

the Medicare Administrative Contractor or CMS has determined that an 
offset or recoupment of payments under Sec. 405.371(a)(3) should be put 
into effect, the Medicare Administrative Contractor must--
    (1) Notify the provider or supplier of its intention to offset or 
recoup payment, in whole or in part, and the reasons for making the 
offset or recoupment; and
    (2) Give the provider or supplier an opportunity for rebuttal in 
accordance with Sec. 405.374.
    (b) Exception to recouping payment. Paragraph (a) of this section 
does not apply if the Medicare Administrative Contractor, after 
furnishing a provider a written notice of the amount of program 
reimbursement in accordance with Sec. 405.1803, recoups payment under 
paragraph (c) of Sec. 405.1803. (For provider rights in this 
circumstance, see Secs. 405.1809, 405.1811, 405.1815, 405.1835, and 
405.1843.)
    (c) Actions following receipt of rebuttal statement. If a provider 
or supplier submits, in accordance with Sec. 405.374, a statement as to 
why an offset or recoupment should not be put into effect on the date 
specified in the notice, the Medicare contractor must comply with the 
time limits and notification requirements of Sec. 405.375.
    (d) No rebuttal statement received. If, by the end of the time 
period specified in the notice, no statement has been received, the 
recoupment or offset goes into effect automatically.
    (e) Duration of recoupment or offset. Except as provided in 
Sec. 405.379, if a recoupment or offset is put into effect, it remains 
in effect until the earliest of the following:
    (1) The overpayment and any assessed interest are liquidated.
    (2) The Medicare contractor obtains a satisfactory agreement from 
the provider or supplier for liquidation of the overpayment.
    (3) The Medicare contractor, on the basis of subsequently acquired 
evidence or otherwise, determines that there is no overpayment.
    (f) Exception to offset or recoupment of payments for shared 
Taxpayer Identification Number. Paragraph (a) of this section does not 
apply in instances where the Medicare Administrative Contractor intends 
to offset or recoup payments to the applicable provider of services or 
supplier to satisfy an amount due from an obligated provider of services 
or supplier when the applicable and obligated provider of services or 
supplier share the same Taxpayer Identification Number.

[61 FR 63747, Dec. 2, 1996, as amended at 74 FR 47468, Sept. 16, 2009; 
81 FR 80551, Nov. 15, 2016]



Sec. 405.374  Opportunity for rebuttal.

    (a) General rule. If prior notice of the suspension of payment, 
offset, or recoupment is given under Sec. 405.372 or Sec. 405.373, the 
Medicare contractor must give the provider or supplier an opportunity, 
before the suspension, offset, or recoupment takes effect, to submit any 
statement (to include any pertinent information) as to why it should not 
be put into effect on the date specified in the notice. Except as 
provided in paragraph (b) of this section, the provider or supplier has 
at least 15 days following the date of notification to submit the 
statement.
    (b) Exception. The Medicare contractor may for cause--
    (1) Impose a shorter period for rebuttal; or
    (2) Extend the time within which the statement must be submitted.

[61 FR 63747, Dec. 2, 1996]



Sec. 405.375  Time limits for, and notification of, administrative
determination after receipt of rebuttal statement.

    (a) Submission and disposition of evidence. If the provider or 
supplier submits a statement, under Sec. 405.374, as to why a suspension 
of payment, offset, or recoupment should not be put into effect, or, 
under Sec. 405.372(b)(2), why a suspension should be terminated, CMS, 
the intermediary, or carrier must within 15 days, from the date the 
statement is received, consider the statement (including any pertinent 
evidence submitted), together with any other material bearing upon the 
case, and determine whether the facts justify the suspension, offset, or 
recoupment or, if already initiated, justify the termination of the 
suspension, offset, or recoupment. Suspension, offset, or recoupment is 
not delayed beyond the

[[Page 133]]

date stated in the notice in order to review the statement.
    (b) Notification of determination. The Medicare contractor must send 
written notice of the determination made under paragraph (a) of this 
section to the provider or supplier. The notice must--
    (1) In the case of offset or recoupment, contain rationale for the 
determination; and
    (2) In the case of suspension of payment, contain specific findings 
on the conditions upon which the suspension is initiated, continued, or 
removed and an explanatory statement of the determination.
    (c) Determination is not appealable. A determination made under 
paragraph (a) of this section is not an initial determination and is not 
appealable.

[61 FR 63747, Dec. 2, 1996]



Sec. 405.376  Suspension and termination of collection action and
compromise of claims for overpayment.

    (a) Basis and purpose. This section contains requirements and 
procedures for the compromise of, or suspension or termination of 
collection action on, claims for overpayments against a provider or a 
supplier under the Medicare program. It is adopted under the authority 
of the Federal Claims Collection Act (31 U.S.C. 3711). Collection and 
compromise of claims against Medicare beneficiaries are explained at 20 
CFR 404.515.
    (b) Definitions. As used in this section, debtor means a provider of 
services or a physician or other supplier of services that has been 
overpaid under title XVIII of the Social Security Act. It includes an 
individual, partnership, corporation, estate, trust, or other legal 
entity.
    (c) Basic conditions. A claim for recovery of Medicare overpayments 
against a debtor may be compromised, or collection action on it may be 
suspended or terminated, by the Centers for Medicare & Medicaid Services 
(CMS) if;
    (1) The claim does not exceed $100,000, or such higher amount as the 
Attorney General may from time to time prescribe, exclusive of interest; 
and
    (2) There is no indication of fraud, the filing of a false claim, or 
misrepresentation on the part of the debtor or any director, partner, 
manager, or other party having an interest in the claim.
    (d) Basis for compromise. A claim may be compromised for one or more 
of the following reasons:
    (1) The debtor, or the estate of a deceased debtor, does not have 
the present or prospective ability to pay the full amount within a 
reasonable time;
    (2) The debtor refuses to pay the claim in full and the United 
States is unable to collect the full amount within a reasonable time by 
legal proceedings;
    (3) There is real doubt the United States can prove its case in 
court; or
    (4) The cost of collecting the claim does not justify enforced 
collection of the full amount.
    (e) Basis for termination of collection action. Collection action 
may be terminated for one or more of the following reasons:
    (1) The United States cannot enforce collection of any significant 
sum;
    (2) The debtor cannot be located, there is no security to be 
liquidated, the statute of limitations has run, and the prospects of 
collecting by offset are too remote to justify retention of the claim;
    (3) The cost of further collection action is likely to exceed any 
recovery;
    (4) It is determined the claim is without merit; or
    (5) Evidence to substantiate the claim is no longer available.
    (f) Basis for suspension of collection action. Collection action may 
be suspended for either of the following reasons if future collection 
action is justified based on potential productivity, including 
foreseeable ability to pay, and size of claim:
    (1) The debtor cannot be located; or
    (2) The debtor is unable to make payments on the claim or to fulfill 
an acceptable compromise.
    (g) Factors considered. In determining whether a claim will be 
compromised, or collection action terminated or suspended, CMS will 
consider the following factors:
    (1) Age and health of the debtor, present and potential income, 
inheritance prospects, possible concealment or fraudulent transfer of 
assets, and

[[Page 134]]

the availability of assets which may be reached by enforced collection 
proceedings, for compromise under paragraph (d)(1) of this section, 
termination under paragraph (e)(1) of this section, and suspension under 
paragraph (f)(2) of this section;
    (2) Applicable exemptions available to a debtor and uncertainty 
concerning the price of the property in a forced sale, for compromise 
under paragraph (d)(2) of this section and termination under paragraph 
(e)(1) of this section; and
    (3) The probability of proving the claim in court, the probability 
of full or partial recovery, the availability of necessary evidence, and 
related pragmatic considerations, for compromise under paragraph (d)(3) 
of this section.
    (h) Amount of compromise. The amount accepted in compromise will be 
reasonable in relation to the amount that can be recovered by enforced 
collection proceedings.

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

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



Sec. 405.377  Withholding Medicare payments to recover Medicaid
overpayments.

    (a) Basis and purpose. This section implements section 1885 of the 
Act, which provides for withholding Medicare payments to certain 
Medicaid providers that have not arranged to repay Medicaid overpayments 
as determined by the Medicaid State agency or have failed to provide 
information necessary to determine the amount (if any) of overpayments.
    (b) When withholding may be used. CMS may withhold Medicare payment 
to offset Medicaid overpayments that a Medicaid agency has been unable 
to collect if--
    (1) The Medicaid agency has followed the procedure specified in 
Sec. 447.31 of this chapter; and
    (2) The institution or person is one described in paragraph (c) of 
this section and either--
    (i) Has not made arrangements satisfactory to the Medicaid agency to 
repay the overpayment; or
    (ii) Has not provided information to the Medicaid agency necessary 
to enable the agency to determine the existence or amount of Medicaid 
overpayment.
    (c) Institutions or persons affected. Withholding under paragraph 
(b) of this section may be made with respect to any of the following 
entities that has or had in effect an agreement with a Medicaid agency 
to furnish services under an approved Medicaid State plan:
    (1) An institutional provider that has in effect an agreement under 
section 1866 of the Act. (Part 489 (Provider and Supplier Agreements) 
implements section 1866 of the Act.)
    (2) A physician or supplier that has accepted payment on the basis 
of an assignment under section 1842(b)(3)(B)(ii) of the Act. (Section 
424.55 sets forth

[[Page 135]]

the conditions a supplier agrees to in accepting assignment.)
    (d) Amount to be withheld. (1) CMS contacts the appropriate Medicare 
contractor to determine the amount of Medicare payment to which the 
institution or person is entitled.
    (2) CMS may require the Medicare contractor to withhold Medicare 
payments to the institution or person by the lesser of the following 
amounts:
    (i) The amount of the Medicare payments to which the institution or 
person would otherwise be entitled.
    (ii) The total Medicaid overpayment to the institution or person.
    (e) Notice of withholding. If CMS intends to withhold payments under 
this section, it notifies by certified mail, return receipt requested, 
the institution or person and the appropriate Medicare contractor of the 
intention to withhold Medicare payments and follows the procedure in 
Sec. 405.374. The notice includes--
    (1) Identification of the institution or person; and
    (2) The amount of Medicaid overpayment to be withheld from payments 
to which the institution or person would otherwise be entitled under 
Medicare.
    (f) Termination of withholding. CMS terminates the withholding if--
    (1) The Medicaid overpayment is completely recovered;
    (2) The institution or person enters into an agreement satisfactory 
to the Medicaid agency to repay the overpayment; or
    (3) The Medicaid agency determines that there is no overpayment 
based on newly acquired evidence or a subsequent audit.
    (g) Disposition of funds withheld. CMS releases amounts withheld 
under this section to the Medicaid agency to be applied against the 
Medicaid overpayment made by the State agency.

[61 FR 63747, Dec. 2, 1996]



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

    (a) Basis and purpose. This section, which implements sections 
1815(d), 1833(j) and 1893(f)(2)(B) of the Act and common law, and 
authority granted under the Federal Claims Collection Act, provides for 
the charging and payment of interest on overpayments and underpayments 
to Medicare providers, suppliers, HMOs, competitive medical plans 
(CMPs), and health care prepayment plans (HCPPs).
    (b) Basic rules. (1) CMS will charge interest on overpayments, and 
pay interest on underpayments, to providers and suppliers of services 
(including physicians and other practitioners), except as specified in 
paragraphs (f) and (h) of this section.
    (2) Except as provided in paragraph (j) of this section, interest 
accrues from the date of the final determination as defined in paragraph 
(c) of this section, and either is charged on the overpayment balance or 
paid on the underpayment balance for each full 30-day period that 
payment is delayed.
    (c) Definition of final determination. (1) For purposes of this 
section, any of the following constitutes a final determination:
    (i) A Notice of Amount of Program Reimbursement (NPR) is issued, as 
discussed in Secs. 405.1803, 417.576, and 417.810, and either--
    (A) A written demand for payment is made; or
    (B) A written determination of an underpayment is made by the 
intermediary after a cost report is filed.
    (ii) In cases in which an NPR is not used as a notice of 
determination (that is, primarily under part B), one of the following 
constitutes a final determination--
    (A) A written determination that an overpayment exists and a written 
demand for payment; or
    (B) A written determination of an underpayment.
    (iii) Other examples of cases in which an NPR is not used are 
carrier reasonable charge determinations under subpart E of this part, 
interim cost settlements made for HMOs, CMPs, and HCPPs under 
Secs. 417.574 and 417.810(e) of this chapter, and initial retroactive 
adjustment determinations under Sec. 413.64(f)(2) of this chapter. In 
the case of interim cost settlements and initial retroactive adjustment 
determinations, if the debtor does not dispute the adjustment 
determination within the timeframe designated in the notice of the 
determination (generally at least 15 days), a final determination is

[[Page 136]]

deemed to have been made. If the provider or supplier does dispute 
portions of the determination, a final determination is deemed to have 
been made on those portions when the intermediary issues a new 
determination in response to the dispute.
    (iv) The due date of a timely-filed cost report that indicates an 
amount is due CMS, and is not accompanied by payment in full. (If an 
additional overpayment or underpayment is determined by the carrier or 
intermediary, a final determination on the additional amount is made in 
accordance with paragraphs (c)(1)(i), (c)(1)(ii), or (c)(1)(iii), of 
this section.)
    (v) With respect to a cost report that is not filed on time, the day 
following the date the cost report was due (plus a single extension of 
time not to exceed 30 days if granted for good cause), until the time as 
a cost report is filed. (When the cost report is subsequently filed, 
there is an additional determination as specified in paragraphs (c)(1) 
(i), (ii), (iii), or (iv) of this section.)
    (2) Except as required by any subsequent administrative or judicial 
reversal and specifically as provided in paragraphs (i) and (j) of this 
section, interest accrues from the date of final determination as 
specified in this section.
    (d) Rate of interest. (1) The interest rate on overpayments and 
underpayments is the higher of--
    (i) The rate as fixed by the Secretary of the Treasury after taking 
into consideration private consumer rates of interest prevailing on the 
date of final determination as defined in paragraph (c) of this section 
(this rate is published quarterly in the Federal Register by the 
Department under 45 CFR 30.13(a)); or
    (ii) The current value of funds rate (this rate is published 
annually in the Federal Register by the Secretary of the Treasury, 
subject to quarterly revisions).
    (2) [Reserved]
    (e) Accrual of interest. (1) If a cost report is filed that does not 
indicate an amount is due CMS but the intermediary makes a final 
determination that an overpayment exists, or if a carrier makes a final 
determination that an overpayment to a physician or supplier exists, 
interest will accrue beginning with the date of such final 
determination. Interest will continue to accrue during periods of 
administrative and judicial appeal and until final disposition of the 
claim.
    (2)(i) If a cost report is filed and indicates that an amount is due 
CMS, interest on the amount due will accrue from the due date of the 
cost report unless--
    (A) Full payment on the amount due accompanies the cost report; or
    (B) The provider and the intermediary agree in advance to liquidate 
the overpayment through a reduction in interim payments over the next 
30-day period.
    (ii) If the intermediary determines an additional overpayment during 
the cost settlement process, interest will accrue from the date of each 
determination.
    (iii) The interest rate on each of the final determinations of an 
overpayment will be the rate of interest in effect on the date the 
determination is made.
    (3) In the case of a cost report that is not filed on time, interest 
also will accrue on a determined overpayment from the day following the 
due date of the report (plus a single extension of time not to exceed 30 
days if granted for good cause, as specified in Sec. 413.24(f)) of this 
chapter, to the time the cost report is filed.
    (4) If an intermediary or a carrier makes a final determination that 
an underpayment exists, interest to the provider or the supplier will 
accrue from the date of notification of the underpayment.
    (f) Waiver of interest charges. (1) When an intermediary or a 
carrier makes a final determination that an overpayment or underpayment 
exists, as specified in paragraphs (e)(1), (e)(2)(ii), and (e)(4)--
    (i) Interest charges will be waived if the overpayment or 
underpayment is completely liquidated within 30 days from the date of 
the final determination.
    (ii) CMS may waive interest charges if it determines that the 
administrative cost of collecting them exceeds the interest charges.
    (2) Interest will not be waived for that period of time during which 
the

[[Page 137]]

cost report was due but remained unfiled for more than 30 days, as 
specified in paragraph (e)(3) of this section.
    (g) Rules applicable to partial payments. If an overpayment is 
repaid in installments or recouped by withholding from several payments 
due the provider or supplier of services--
    (1) Each payment or recoupment will be applied first to accrued 
interest and then to the principal; and
    (2) After each payment or recoupment, interest will accrue on the 
remaining unpaid balance.
    (h) Nonallowable cost. As specified in Secs. 412.113 and 413.153 of 
this chapter, interest accrued on overpayments and interest on funds 
borrowed specifically to repay overpayments are not considered allowable 
costs, up to the amount of the overpayment, unless the provider had made 
a prior commitment to borrow funds for other purposes (for example, 
capital improvements).


(See Sec. 413.153(a)(2) of this chapter for exceptions based on 
administrative or judicial reversal.)
    (i) Exceptions to applicability. (1) The provisions of this section 
do not apply to the time period for which interest is payable under 
Sec. 413.64(j) of this chapter because the provider seeks judicial 
review of a decision of the Provider Reimbursement Review Board, or a 
subsequent reversal, affirmance, or modification of that decision by the 
Administrator. Prior to that time, until the provider seeks judicial 
review, interest accrues at the rate specified in this section on 
outstanding unpaid balances resulting from final determinations as 
defined in paragraph (c) of this section.
    (2) If an overpayment or an underpayment determination is reversed 
administratively or judicially, and the reversal is no longer subject to 
appeal, appropriate adjustments will be made with respect to the 
overpayment or underpayment and the amount of interest charged.
    (j) Special rule for provider or supplier overpayments subject to 
Sec. 405.379. If an overpayment determination subject to the limitation 
on recoupment under Sec. 405.379 is reversed in whole or in part by an 
Administrative Law Judge (ALJ) or at subsequent administrative or 
judicial levels of appeal and if funds have been recouped and retained 
by the Medicare contractor, interest will be paid to the provider or 
supplier as follows:
    (1) The applicable rate of interest is that provided in paragraph 
(d) of this section.
    (2) The interest rate in effect on the date the ALJ, the Medicare 
Appeals Council, the Federal district court or subsequent appellate 
court issues a decision reversing the overpayment determination in whole 
or in part is the rate used to calculate the interest due the provider 
or supplier.
    (3) Interest will be calculated as follows:
    (i) Interest will be paid on the principal amount recouped only.
    (ii) Interest will be calculated on a simple rather than a compound 
basis.
    (iii) Interest will be calculated in full 30-day periods and will 
not be payable on amounts recouped for any periods of less than 30 days 
in which the Medicare contractor had possession of the funds.
    (iv) In calculating the period in which the amount was recouped, 
days in which the ALJ's adjudication period to conduct a hearing are 
tolled under 42 CFR 405.1014 shall not be counted.
    (v) In calculating the period in which the amount was recouped, days 
in which the Medicare Appeals Council's adjudication period to conduct a 
review are tolled under 42 CFR 405.1106 shall not be counted.
    (4) If the decision by the ALJ, Medicare Appeals Council, Federal 
district court or a subsequent Federal reviewing court, reverses the 
overpayment determination, as modified by prior levels of administrative 
or judicial review, in part, the Medicare contractor in effectuating the 
decision may allocate recouped monies to that part of the overpayment 
determination affirmed by the decision. Interest will be paid to the 
provider or supplier on recouped amounts that remain after this 
allocation in accordance with this paragraph (j) of this section.

[47 FR 54814, Dec. 6, 1982, as amended at 49 FR 36102, Sept. 14, 1984; 
49 FR 44472, Nov. 7, 1984; 51 FR 34792, Sept. 30, 1986; 56 FR 31336, 
July 10, 1991. Redesignated at 61 FR 63745, Dec. 2, 1996; 69 FR 45607, 
July 30, 2004; 74 FR 47468, Sept. 16, 2009]

[[Page 138]]



Sec. 405.379  Limitation on recoupment of provider and supplier 
overpayments.

    (a) Basis and purpose. This section implements section 1893(f)(2)(A) 
of the Act which limits recoupment of Medicare overpayments if a 
provider of services or supplier seeks a reconsideration until a 
decision is rendered by a Qualified Independent Contractor (QIC). This 
section also limits recoupment of Medicare overpayments when a provider 
or supplier seeks a redetermination until a redetermination decision is 
rendered.
    (b) Overpayments subject to limitation. (1) This section applies to 
overpayments that meet the following criteria:
    (i) Is one of the following types of overpayments:
    (A) Post-pay denial of claims for benefits under Medicare Part A 
which is determined and for which a written demand for payment has been 
made on or after November 24, 2003; or
    (B) Post-pay denial of claims for benefits under Medicare Part B 
which is determined and for which a written demand for payment has been 
made on or after October 29, 2003; or
    (C) Medicare Secondary Payer (MSP) recovery where the provider or 
supplier received a duplicate primary payment and for which a written 
demand for payment was issued on or after October 10, 2003; or
    (D) Medicare Secondary Payer (MSP) recovery based on the provider's 
or supplier's failure to file a proper claim with the third party payer 
plan, program, or insurer for payment and, if Part A, demanded on or 
after November 24, 2003, or, if Part B, demanded on or after October 29, 
2003; and
    (ii) The provider or supplier can appeal the overpayment as a 
revised initial determination under the Medicare claims appeal process 
at 42 CFR parts 401 and 405 or as an initial determination for provider/
supplier MSP duplicate primary payment recoveries.
    (2) This section does not apply to all other overpayments including, 
but not limited to, the following:
    (i) All Medicare Secondary Payer recoveries except those expressly 
identified in paragraphs (b)(1)(i)(C) and (D) of this section;
    (ii) Beneficiary overpayments; and
    (iii) Overpayments that arise from a cost report determination and 
are appealed under the provider reimbursement process of 42 CFR part 405 
Subpart R--Provider Reimbursement Determinations and Appeals.
    (c) Rules of construction. (1) For purposes of this section, what 
constitutes a valid and timely request for a redetermination is to be 
determined in accordance with Sec. 405.940 through Sec. 405.958.
    (2) For purposes of this section, what constitutes a valid and 
timely request for a reconsideration is to be determined in accordance 
with Sec. 405.960 through Sec. 405.978.
    (d) General rules. (1) Medicare contractors can begin recoupment no 
earlier than 41 days from the date of the initial overpayment demand but 
shall cease recoupment of the overpayment in question, upon receipt of a 
timely and valid request for a redetermination of an overpayment. If the 
recoupment has not yet gone into effect, the contractor shall not 
initiate recoupment.
    (2) If the redetermination decision is an affirmation in whole or in 
part of the overpayment determination, recoupment may be initiated or 
resumed in accordance with paragraph (e) of this section.
    (3) Upon receipt of a timely and valid request for a reconsideration 
of an overpayment, the Medicare contractor shall cease recoupment of the 
overpayment in question. If the recoupment has not yet gone into effect, 
the contractor must not initiate recoupment.
    (4) The contractor may initiate or resume recoupment following 
action by the QIC in accordance with paragraph (f) of this section.
    (5) If the provider or supplier subsequently appeals the overpayment 
to the ALJ, the Medicare Appeals Council, or Federal court, recoupment 
remains in effect as provided in Sec. 405.373(e).
    (6) If an overpayment determination is appealed and recoupment 
stopped, the contractor may continue to recoup other overpayments owed 
by the provider or supplier in accordance with this section.
    (7) Amounts recouped prior to a reconsideration decision may be 
retained by the Medicare contractor in accordance with paragraph (g) of 
this section.

[[Page 139]]

    (8) If either the redetermination or reconsideration decision is a 
full reversal of the overpayment determination or if the overpayment 
determination is reversed in whole or in part at subsequent levels of 
administrative or judicial appeal, adjustments shall be made with 
respect to the overpayment and the amount of interest charged.
    (9) Interest accrues and is payable in accordance with the 
provisions of Sec. 405.378.
    (e) Initiating or resuming recoupment after redetermination 
decision. (1) Recoupment that has been deferred or stopped may be 
initiated or resumed if the debt (remaining unpaid principal balance and 
interest) has not been satisfied in full and the provider or supplier 
has been afforded the opportunity for rebuttal in accordance with the 
requirements of Sec. 405.373 through Sec. 405.375. Recoupment may be 
resumed under any of the following circumstances:
    (i) Immediately upon receipt by the Medicare contractor of the 
provider's or supplier's request for a withdrawal of a request for a 
redetermination in accordance with Sec. 405.952(a).
    (ii) On the 60th calendar day after the date of the notice of 
redetermination issued under Sec. 405.956 if the redetermination 
decision is an affirmation in whole of the overpayment determination in 
question.
    (iii) On the 60th calendar day after the date of the written notice 
to the provider or supplier of the revised overpayment amount, if the 
redetermination decision is an affirmation in part, which has the effect 
of reducing the amount of the overpayment.
    (2) Notwithstanding paragraphs (e)(i), (ii) and (iii) of this 
section, recoupment must not be resumed, or if resumed, must cease upon 
receipt of a timely and valid request for a reconsideration by the QIC.
    (f) Initiating or resuming recoupment following action by the QIC on 
the reconsideration request. (1) Recoupment may be initiated or resumed 
upon action by the QIC subject to the following limitations:
    (i) The provider or supplier has been afforded the opportunity for 
rebuttal in accordance with the requirements of Sec. 405.373 through 
Sec. 405.375; and
    (ii) The debt (remaining unpaid principal balance and interest) has 
not been satisfied in full; and
    (iii) If the action by the QIC is the notice of the reconsideration, 
the reconsideration decision either affirms in whole or in part the 
overpayment determination, including the redetermination, in question.
    (2) For purposes of this paragraph (f), the action by the QIC on the 
reconsideration request is the earliest to occur of the following:
    (i) The QIC mails or otherwise transmits written notice of the 
dismissal of the reconsideration request in its entirety in accordance 
with Sec. 405.972; or
    (ii) The QIC receives a timely and valid request to withdraw the 
request for the reconsideration in accordance with Sec. 405.972; or
    (iii) The QIC transmits written notice of the reconsideration in 
accordance with Sec. 405.976; or
    (iv) The QIC notifies the parties in writing that the 
reconsideration is being escalated to an ALJ in accordance with 
Sec. 405.970.
    (g) Disposition of funds recouped. (1) If the Medicare contractor 
recouped funds before a timely and valid request for a redetermination 
was received, the amount recouped may be retained and applied first to 
accrued interest and then to reduce or eliminate the principal balance 
of the overpayment subject to the following:
    (i) If the redetermination results in a reversal, the amount 
recouped may be applied to any other debt, including interest, owed by 
the provider or supplier before any excess is released to the provider.
    (ii) If the redetermination results in a partial reversal and the 
decision reduces the overpayment plus assessed interest below the amount 
already recouped, the excess may be applied to any other debt, including 
interest, owed by the provider or supplier before any excess is released 
to the provider or supplier.
    (iii) If the redetermination results in an affirmation and the 
provider or supplier subsequently requests a reconsideration, the 
Medicare contractor may retain the amount recouped and apply the funds 
first to accrued interest and then to outstanding principal pending

[[Page 140]]

action by the QIC on the reconsideration request.
    (2) If the Medicare contractor also recouped funds in accordance 
with paragraph (e) of this section, the amount recouped may be retained 
by the Medicare contractor and applied first to accrued interest and 
then to reduce or eliminate the outstanding principal balance pending 
action by the QIC on the reconsideration request.
    (3) If the action by the QIC is a dismissal, receipt of a 
withdrawal, a notice that the reconsideration is being escalated to an 
ALJ, or a reconsideration which affirms in whole the overpayment 
determination, including the redetermination, in question, the amount 
recouped is applied to interest first, then to reduce the outstanding 
principal balance and recoupment may be resumed as provided under 
paragraph (f) of this section.
    (4) If the action by the QIC is a reconsideration, which reverses in 
whole the overpayment determination, including the redetermination, in 
question, the amount recouped may be applied to any other debt, 
including interest, owed by the provider or supplier to CMS or to HHS 
before any excess is released to the provider or supplier.
    (5) If the action by the QIC is a reconsideration which results in a 
partial reversal and the decision reduces the overpayment plus assessed 
interest below the amount already recouped, the excess may be applied to 
any other debt, including interest, owed by the provider or supplier to 
CMS or to HHS before any excess is released to the provider or supplier.
    (h) Relationship to extended repayment schedules. Notwithstanding 
Sec. 401.607 (c)(2)(v) of this chapter regarding an extended repayment 
schedule (ERS), a provider or supplier will not be deemed in default if 
recoupment of an overpayment is not effectuated or stopped in accordance 
with this section, and the following conditions are met:
    (1) The provider or supplier has been granted an ERS under 
Sec. 401.607(c) of this chapter.
    (2) The ERS has been granted for an overpayment that is listed in 
paragraph (b) of this section.
    (3) The provider or supplier has submitted a valid and timely 
request to the Medicare contractor for a redetermination of the 
overpayment in accordance with Secs. 405.940 through 405.958 or 
reconsideration of the overpayment in accordance with Secs. 405.960 
through 405.978.

[74 FR 47469, Sept. 16, 2009]

                   Repayment of Scholarships and Loans



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

    (a) Basis and purpose. This section implements section 1892 of the 
Act, which authorizes the Secretary to deduct from Medicare payments for 
services amounts considered as past-due obligations under the National 
Health Service Corps Scholarship program, the Physician Shortage Area 
Scholarship program, and the Health Education Assistance Loan program.
    (b) Offsetting against Medicare payment. (1) Medicare carriers and 
intermediaries offset against Medicare payments in accordance with the 
signed repayment agreement between the Public Health Service and 
individuals who have breached their scholarship or loan obligations and 
who--
    (i) Accept Medicare assignment for services;
    (ii) Are employed by or affiliated with a provider, HMO, or 
Competitive Medical Plan (CMP) that receives Medicare payment for 
services; or
    (iii) Are members of a group practice that receives Medicare payment 
for services.
    (2) For purposes of this section, ``provider'' includes all entities 
eligible to receive Medicare payment in accordance with an agreement 
under section 1866 of the Act.
    (c) Beginning of offset. (1) The Medicare carrier offsets Medicare 
payments beginning six months after it notifies the individual or the 
group practice of the amount to be deducted and the particular 
individual to whom the deductions are attributable.
    (2) The Medicare intermediary offsets payments beginning six months 
after it notifies the provider, HMO, CMP or group practice of the amount 
to be deducted and the particular individuals

[[Page 141]]

to whom the deductions are attributable. Offset of payments is made in 
accordance with the terms of the repayment agreement. If the individual 
ceases to be employed by the provider, HMO, or CMP, or leaves the group 
practice, no deduction is made.
    (d) Refusal to offset against Medicare payment. If the individual 
refuses to enter into a repayment agreement, or breaches any provision 
of the agreement, or if Medicare payment is insufficient to maintain the 
offset collection according to the agreed upon formula, then--
    (1) The Department, within 30 days if feasible, informs the Attorney 
General; and
    (2) The Department excludes the individual from Medicare until the 
entire past due obligation has been repaid, unless the individual is a 
sole community practitioner or the sole source of essential specialized 
services in a community and the State requests that the individual not 
be excluded.

[57 FR 19092, May 4, 1992]



                       Subpart D_Private Contracts

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

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



Sec. 405.400  Definitions.

    For purposes of this subpart, the following definitions apply:
    Beneficiary means an individual who is enrolled in Part B of 
Medicare.
    Emergency care services means inpatient or outpatient hospital 
services that are necessary to prevent death or serious impairment of 
health and, because of the danger to life or health, require use of the 
most accessible hospital available and equipped to furnish those 
services.
    Legal representative means one or more individuals who, as 
determined by applicable State law, has the legal authority to enter 
into the contract with the physician or practitioner on behalf of the 
beneficiary.
    Opt-out means the status of meeting the conditions specified in 
Sec. 405.410.
    Opt-out period means, with respect to an affidavit that meets the 
requirements of Sec. 405.420, a 2-year period beginning on the date the 
affidavit is signed, as specified by Sec. 405.410(c)(1) or (2) as 
applicable, and each successive 2-year period unless the physician or 
practitioner properly cancels opt-out in accordance with Sec. 405.445.
    Participating physician means a ``physician'' as defined in this 
section who has signed an agreement to participate in Part B of 
Medicare.
    Physician means a doctor of medicine; doctor of osteopathy; doctor 
of dental surgery or of dental medicine; doctor of podiatric medicine; 
or doctor of optometry who is legally authorized to practice medicine, 
osteopathy, dental surgery, dental medicine, podiatric medicine, or 
optometry by the State in which he performs such function and who is 
acting within the scope of his license when he performs such functions.
    Practitioner means a physician assistant, nurse practitioner, 
clinical nurse specialist, certified registered nurse anesthetist, 
certified nurse midwife, clinical psychologist, clinical social worker, 
registered dietitian or nutrition professional, who is currently legally 
authorized to practice in that capacity by each State in which he or she 
furnishes services to patients or clients.
    Private contract means a document that meets the criteria specified 
in Sec. 405.415.
    Properly opt-out means to complete, without defect, the requirements 
for opt-out as specified in Sec. 405.410.
    Properly terminate opt-out means to complete, without defect, the 
requirements for terminating opt-out as specified in Sec. 405.445.
    Urgent care services means services furnished to an individual who 
requires services to be furnished within 12 hours in order to avoid the 
likely onset of an emergency medical condition.

[63 FR 58901, Nov. 2, 1998, as amended at 69 FR 1116, Jan. 7, 2004; 71 
FR 69782, Dec. 1, 2006; 79 FR 68001, Nov. 13, 2014; 80 FR 71370, Nov. 
16, 2015]



Sec. 405.405  General rules.

    (a) A physician or practitioner may enter into one or more private 
contracts with Medicare beneficiaries for

[[Page 142]]

the purpose of furnishing items or services that would otherwise be 
covered by Medicare, provided the conditions of this subpart are met.
    (b) A physician or practitioner who enters into at least one private 
contract with a Medicare beneficiary under the conditions of this 
subpart, and who submits one or more affidavits in accordance with this 
subpart, opts out of Medicare for the opt-out period described in 
Sec. 405.400 unless the opt-out is terminated early according to 
Sec. 405.445.
    (c) Both the private contracts described in paragraph (a) of this 
section and the physician's or practitioner's opt-out described in 
paragraph (b) of this section are null and void if the physician or 
practitioner fails to properly opt-out in accordance with the conditions 
of this subpart.
    (d) Both the private contracts described in paragraph (a) of this 
section and the physician's or practitioner's opt-out described in 
paragraph (b) of this section are null and void for the remainder of the 
opt-out period if the physician or practitioner fails to remain in 
compliance with the conditions of this subpart during the opt-out 
period.
    (e) Services furnished under private contracts meeting the 
requirements of this subpart are not covered services under Medicare, 
and no Medicare payment will be made for such services either directly 
or indirectly, except as permitted in accordance with Sec. 405.435(c).

[63 FR 58901, Nov. 2, 1998, as amended at 80 FR 71370, Nov. 16, 2015]



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

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

[63 FR 58901, Nov. 2, 1998, as amended at 80 FR 71370, Nov. 16, 2015]



Sec. 405.415  Requirements of the private contract.

    A private contract under this subpart must:
    (a) Be in writing and in print sufficiently large to ensure that the 
beneficiary is able to read the contract.
    (b) Clearly state whether the physician or practitioner is excluded 
from Medicare under sections 1128, 1156, or

[[Page 143]]

1892 or any other section of the Social Security Act.
    (c) State that the beneficiary or his or her legal representative 
accepts full responsibility for payment of the physician's or 
practitioner's charge for all services furnished by the physician or 
practitioner.
    (d) State that the beneficiary or his or her legal representative 
understands that Medicare limits do not apply to what the physician or 
practitioner may charge for items or services furnished by the physician 
or practitioner.
    (e) State that the beneficiary or his or her legal representative 
agrees not to submit a claim to Medicare or to ask the physician or 
practitioner to submit a claim to Medicare.
    (f) State that the beneficiary or his or her legal representative 
understands that Medicare payment will not be made for any items or 
services furnished by the physician or practitioner that would have 
otherwise been covered by Medicare if there was no private contract and 
a proper Medicare claim had been submitted.
    (g) State that the beneficiary or his or her legal representative 
enters into this contract with the knowledge that he or she has the 
right to obtain Medicare-covered items and services from physicians and 
practitioners who have not opted-out of Medicare, and that the 
beneficiary is not compelled to enter into private contracts that apply 
to other Medicare-covered services furnished by other physicians or 
practitioners who have not opted-out.
    (h) State the expected or known effective date and the expected or 
known expiration date of the current 2-year opt-out period.
    (i) State that the beneficiary or his or her legal representative 
understands that Medigap plans do not, and that other supplemental plans 
may elect not to, make payments for items and services not paid for by 
Medicare.
    (j) Be signed by the beneficiary or his or her legal representative 
and by the physician or practitioner.
    (k) Not be entered into by the beneficiary or by the beneficiary's 
legal representative during a time when the beneficiary requires 
emergency care services or urgent care services. (However, a physician 
or practitioner may furnish emergency or urgent care services to a 
Medicare beneficiary in accordance with Sec. 405.440.)
    (l) Be provided (a photocopy is permissible) to the beneficiary or 
to his or her legal representative before items or services are 
furnished to the beneficiary under the terms of the contract.
    (m) Be retained (original signatures of both parties required) by 
the physician or practitioner for the duration of the current 2-year 
opt-out period.
    (n) Be made available to CMS upon request.
    (o) Be entered into for each 2-year opt-out period.

[63 FR 58901, Nov. 2, 1998, as amended at 80 FR 71370, Nov. 16, 2015]



Sec. 405.420  Requirements of the opt-out affidavit.

    An affidavit under this subpart must:
    (a) Be in writing and be signed by the physician or practitioner.
    (b) Contain the physician's or practitioner's full name, address, 
telephone number, national provider identifier (NPI) or billing number, 
if one has been assigned, uniform provider identification number (UPIN) 
if one has been assigned, or, if neither an NPI nor a UPIN has been 
assigned, the physician's or practitioner's tax identification number 
(TIN).
    (c) State that, except for emergency or urgent care services (as 
specified in Sec. 405.440), during the opt-out period the physician or 
practitioner will provide services to Medicare beneficiaries only 
through private contracts that meet the criteria of paragraph 
Sec. 405.415 for services that, but for their provision under a private 
contract, would have been Medicare-covered services.
    (d) State that the physician or practitioner will not submit a claim 
to Medicare for any service furnished to a Medicare beneficiary during 
the opt-out period, nor will the physician or practitioner permit any 
entity acting on his or her behalf to submit a claim to Medicare for 
services furnished to a Medicare beneficiary, except as specified in 
Sec. 405.440.
    (e) State that, during the opt-out period, the physician or 
practitioner understands that he or she may receive no direct or 
indirect Medicare payment for services that he or she furnishes to

[[Page 144]]

Medicare beneficiaries with whom he or she has privately contracted, 
whether as an individual, an employee of an organization, a partner in a 
partnership, under a reassignment of benefits, or as payment for a 
service furnished to a Medicare beneficiary under a Medicare Advantage 
plan.
    (f) State that a physician or practitioner who opts-out of Medicare 
acknowledges that, during the opt-out period, his or her services are 
not covered under Medicare and that no Medicare payment may be made to 
any entity for his or her services, directly or on a capitated basis.
    (g) State a promise by the physician or practitioner to the effect 
that, during the opt-out period, the physician or practitioner agrees to 
be bound by the terms of both the affidavit and the private contracts 
that he or she has entered into.
    (h) Acknowledge that the physician or practitioner recognizes that 
the terms of the affidavit apply to all Medicare-covered items and 
services furnished to Medicare beneficiaries by the physician or 
practitioner during the opt-out period (except for emergency or urgent 
care services furnished to the beneficiaries with whom he or she has not 
previously privately contracted) without regard to any payment 
arrangements the physician or practitioner may make.
    (i) With respect to a physician who has signed a Part B 
participation agreement, acknowledge that such agreement terminates on 
the effective date of the affidavit.
    (j) Acknowledge that the physician or practitioner understands that 
a beneficiary who has not entered into a private contract and who 
requires emergency or urgent care services may not be asked to enter 
into a private contract with respect to receiving such services and that 
the rules of Sec. 405.440 apply if the physician furnishes such 
services.

[63 FR 58901, Nov. 2, 1998, as amended at 79 FR 68001, Nov. 13, 2014]



Sec. 405.425  Effects of opting-out of Medicare.

    If a physician or practitioner opts-out of Medicare in accordance 
with this subpart, the following results obtain during the opt-out 
period:
    (a) Except as provided in Sec. 405.440, no payment may be made 
directly by Medicare or by any Medicare Advantage plan to the physician 
or practitioner or to any entity to which the physician or practitioner 
reassigns his right to receive payment for services.
    (b) The physician or practitioner may not furnish any item or 
service that would otherwise be covered by Medicare (except for 
emergency or urgent care services) to any Medicare beneficiary except 
through a private contract that meets the requirements of this subpart.
    (c) The physician or practitioner is not subject to the requirement 
to submit a claim for items or services furnished to a Medicare 
beneficiary, as specified in Sec. 424.5(a)(6) of this chapter, except as 
provided in Sec. 405.440.
    (d) The physician or practitioner is prohibited from submitting a 
claim to Medicare for items or services furnished to a Medicare 
beneficiary except as provided in Sec. 405.440.
    (e) In the case of a physician, he or she is not subject to the 
limiting charge provisions of Sec. 414.48 of this chapter, except for 
services provided under Sec. 405.440.
    (f) The physician or practitioner is not subject to the prohibition-
on-reassignment provisions of Sec. 414.80 of this chapter, except for 
services provided under Sec. 405.440.
    (g) In the case of a practitioner, he or she is not prohibited from 
billing or collecting amounts from beneficiaries (as provided in 42 
U.S.C. 1395u(b)(18)(B)).
    (h) The death of a beneficiary who has entered into a private 
contract (or whose legal representative has done so) does not invoke 
Sec. 424.62 or Sec. 424.64 of this chapter with respect to the physician 
or practitioner with whom the beneficiary (or legal representative) has 
privately contracted.
    (i) The physician or practitioner who has not been excluded under 
sections 1128, 1156, or 1892 of the Social Security Act may order, 
certify the need for, or refer a beneficiary for Medicare-covered items 
and services, provided the physician or practitioner is not paid,

[[Page 145]]

directly or indirectly, for such services (except as provided in 
Sec. 405.440).
    (j) The physician or practitioner who is excluded under sections 
1128, 1156, or 1892 of the Social Security Act may not order, prescribe, 
or certify the need for Medicare-covered items and services except as 
provided in Sec. 1001.1901 of this title, and must otherwise comply with 
the terms of the exclusion in accordance with Sec. 1001.1901 effective 
with the date of the exclusion.

[63 FR 58901, Nov. 2, 1998, as amended at 79 FR 68001, Nov. 13, 2014; 80 
FR 71370, Nov. 16, 2015]



Sec. 405.430  Failure to properly opt-out.

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



Sec. 405.435  Failure to maintain opt-out.

    (a) A physician or practitioner fails to maintain opt-out under this 
subpart if, during the opt-out period--
    (1) He or she knowingly and willfully--
    (i) Submits a claim for Medicare payment (except as provided in 
Sec. 405.440); or
    (ii) Receives Medicare payment directly or indirectly for Medicare-
covered services furnished to a Medicare beneficiary (except as provided 
in Sec. 405.440).
    (2) He or she fails to enter into private contracts with Medicare 
beneficiaries for the purpose of furnishing items and services that 
would otherwise be covered by Medicare, or enters into contracts that 
fail to meet the specifications of Sec. 405.415; or
    (3) He or she fails to comply with the provisions of Sec. 405.440 
regarding billing for emergency care services or urgent care services; 
or
    (4) He or she fails to retain a copy of each private contract that 
he or she has entered into for the duration of the current 2-year period 
for which the contracts are applicable or fails to permit CMS to inspect 
them upon request.
    (b) If a physician or practitioner fails to maintain opt-out in 
accordance with paragraph (a) of this section, then, for the remainder 
of the opt-out period, except as provided by paragraph (d) of this 
section--
    (1) All of the private contracts between the physician or 
practitioner and Medicare beneficiaries are deemed null and void.
    (2) The physician's or practitioner's opt-out of Medicare is 
nullified.
    (3) The physician or practitioner must submit claims to Medicare for 
all Medicare-covered items and services furnished to Medicare 
beneficiaries.
    (4) The physician or practitioner or beneficiary will not receive 
Medicare payment on Medicare claims for the remainder of the opt-out 
period, except as provided in paragraph (c) of this section.

[[Page 146]]

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

[63 FR 58901, Nov. 2, 1998, as amended at 70 FR 70329, Nov. 21, 2005; 80 
FR 71370, Nov. 16, 2015]



Sec. 405.440  Emergency and urgent care services.

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

[[Page 147]]

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



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

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

[63 FR 58901, Nov. 2, 1998, as amended at 80 FR 71371, Nov. 16, 2015]



Sec. 405.450  Appeals.

    (a) A determination by CMS that a physician or practitioner has 
failed to properly opt out, failed to maintain opt-out, failed to timely 
renew opt-out, failed to privately contract, failed to properly 
terminate opt-out, or failed to properly cancel opt-out is an initial 
determination for purposes of Sec. 498.3(b) of this chapter.
    (b) A determination by CMS that no payment can be made to a 
beneficiary for the services of a physician who has opted-out is an 
initial determination for purposes of Sec. 405.924.

[63 FR 58901, Nov. 2, 1998, as amended at 79 FR 68001, Nov. 13, 2014; 80 
FR 71371, Nov. 16, 2015]



Sec. 405.455  Application to Medicare Advantage contracts.

    An organization that has a contract with CMS to provide one or more 
Medicare Advantage (M + C) plans to beneficiaries (part 422 of this 
chapter):
    (a) Must acquire and maintain information from Medicare carriers on 
physicians and practitioners who have opted-out of Medicare.
    (b) Must make no payment directly or indirectly for Medicare covered 
services furnished to a Medicare beneficiary by a physician or 
practitioner who has opted-out of Medicare.

[[Page 148]]

    (c) May make payment to a physician or practitioner who furnishes 
emergency or urgent care services to a beneficiary who has not 
previously entered into a private contract with the physician or 
practitioner in accordance with Sec. 405.440.

[63 FR 58901, Nov. 2, 1998, as amended at 79 FR 68001, Nov. 13, 2014]



          Subpart E_Criteria for Determining Reasonable Charges

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

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



Sec. 405.500  Basis.

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

[60 FR 63175, Dec. 8, 1995]



Sec. 405.501  Determination of reasonable charges.

    (a) Except as specified in paragraphs (b), (c), and (d) of this 
section, Medicare pays no more for Part B medical and other health 
services than the ``reasonable charge'' for such service. The reasonable 
charge is determined by the carriers (subject to any deductible and 
coinsurance amounts as specified in Secs. 410.152 and 410.160 of this 
chapter).
    (b) Part B of Medicare pays on the basis of ``reasonable cost'' (see 
part 413 of this chapter) for certain institutional services, certain 
services furnished under arrangements with institutions, and services 
furnished by entities that elect to be paid on a cost basis (including 
health maintenance organizations, rural health clinics, FQHCs that are 
authorized to bill under a reasonable cost system, and end-stage renal 
disease facilities).
    (c) Carriers will determine the reasonable charge on the basis of 
the criteria specified in Sec. 405.502, and the customary and prevailing 
charge screens in effect when the service was furnished. (Also see 
Secs. 415.55 through 415.70 and Secs. 415.100 through 415.130 of this

[[Page 149]]

chapter, which pertain to the determination of reimbursement for 
services performed by hospital-based physicians.) However, when services 
are furnished more than 12 months before the beginning of the fee screen 
year (January 1 through December 30) in which a request for payment is 
made, payment is based on the customary and prevailing charge screens in 
effect for the fee screen year that ends immediately preceding the fee 
screen year in which the claim or request for payment is made.
    (d) Payment under Medicare Part B for durable medical equipment and 
prosthetic and orthotic devices is determined in accordance with the 
provisions of subpart D of part 414 of this chapter.

[47 FR 63274, Dec. 31, 1981, as amended at 51 FR 34978, Oct. 1, 1986; 51 
FR 37911, Oct. 27, 1986; 54 FR 9003, Mar. 2, 1989; 57 FR 24975, June 12, 
1992; 57 FR 33896, July 31, 1992; 57 FR 57688, Dec. 7, 1992; 60 FR 
63176, Dec. 8, 1995; 79 FR 25473, May 2, 2014]



Sec. 405.502  Criteria for determining reasonable charges.

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

[[Page 150]]

the charges made by physicians to patients generally and by other 
persons to the public in general and on special factors that may exist 
in individual cases so that determinations of reasonable charge are 
realistic and equitable.
    (d) Responsibility of Administration and carriers. Determinations by 
carriers of reasonable charge are not reviewed on a case-by-case basis 
by the Centers for Medicare & Medicaid Services, although the general 
procedures and performance of functions by carriers are evaluated. In 
making determinations, carriers apply the provisions of the law under 
broad principles issued by the Centers for Medicare & Medicaid Services. 
These principles are intended to assure overall consistency among 
carriers in their determinations of reasonable charge. The principles in 
Secs. 405.503 through 405.507 establish the criteria for making such 
determinations in accordance with the statutory provisions.
    (e) Determination of reasonable charges under the End-Stage Renal 
Disease (ESRD) Program--(1) General. Reasonable charges for renal-
related items and services (furnished in connection with transplantation 
or dialysis) must be related to costs and allowances that are reasonable 
when the treatments are furnished in an effective and economical manner.
    (2) Nonprovider (independent) dialysis facilities. Reasonable 
charges for renal-related items and services furnished before August 1, 
1983 must be determined related to costs and charges prior to July, 
1973, in accordance with the regulations at Sec. 405.541. Items and 
services related to outpatient maintenance dialysis that are furnished 
after that date are paid for in accordance with Secs. 405.544 and 
413.170 of this chapter.
    (3) Provider services and (hospital-based) dialysis facilities. 
Renal-related items and services furnished by providers, or by ESRD 
facilities based in hospitals, before August 1, 1983 are paid for under 
the provider reimbursement provisions found generally in part 413 of 
this chapter. Items and services related to outpatient maintenance 
dialysis that are furnished after that date are paid for in accordance 
with Secs. 405.544 and 413.170 of this chapter.
    (4) Physicians' services. Reasonable charges for renal-related 
physicians' services must be determined considering charges made for 
other services involving comparable physicians' time and skill 
requirements, in accordance with regulations at Secs. 405.542 and 
405.543.
    (5) Health maintenance organizations (HMOs). For special rules 
concerning the reimbursement of ESRD services furnished by risk-basis 
HMOs, or by facilities owned or operated by or related to such HMOs by 
common ownership or control, see Secs. 405.2042(b)(14) and 405.2050(c).
    (f) Determining payments for certain physician services furnished in 
outpatient hospital settings--(1) General rule. If physician services of 
the type routinely furnished in physicians' offices are furnished in 
outpatient hospital settings before January 1, 1992, carriers determine 
the reasonable charge for those services by applying the limits 
described in paragraph (f)(5) of this section.
    (2) Definition. As used in this paragraph (f), outpatient settings 
means--
    (i) Hospital outpatient departments, including clinics and emergency 
rooms; and
    (ii) Comprehensive outpatient rehabilitation facilities.
    (3) Services covered by limits. The carrier establishes a list of 
services routinely furnished in physicians' offices in the area. The 
carrier has the discretion to determine which professional services are 
routinely furnished in physicians' offices, based on current medical 
practice in the area. Listed below are some examples of routine services 
furnished by office-based physicians.

                                Examples

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

    (4) Services excluded from limits. The limits established under this 
paragraph do not apply to the following:
    (i) Rural health clinic services.

[[Page 151]]

    (ii) Surgical services included on the ambulatory surgical center 
list of procedures published under Sec. 416.65(c) of this chapter.
    (iii) Services furnished in a hospital emergency room after the 
sudden onset of a medical condition manifesting itself by acute symptoms 
of sufficient severity (including severe pain) such that the absence of 
immediate medical attention could reasonably be expected to result in--
    (A) Placing the patient's health in serious jeopardy;
    (B) Serious impairment to bodily functions; or
    (C) Serious dysfunction of any bodily organ or part.
    (iv) Anesthesiology services and diagnostic and therapeutic 
radiology services.
    (v) Federally qualified health center services paid under the rules 
in part 405 subpart X.
    (5) Methodology for developing limits--(i) Development of a charge 
base. The carrier establishes a charge base for each service identified 
as a routine office-based physician service. The charge base consists of 
the prevailing charge in the locality for each such service adjusted by 
the economic index. The carrier uses the prevailing charges that apply 
to services by nonspecialists in office practices in the locality in 
which the outpatient setting is located.
    (ii) Calculation of the outpatient limits. The carrier calculates 
the charge limit for each service by multiplying the charge base amount 
for each service by .60.
    (6) Application of limits. The reasonable charge for physician 
services of the type described in paragraph (f)(3) of this section that 
are furnished in an outpatient setting is the lowest of the actual 
charges, the customary charges in accordance with Sec. 405.503, the 
prevailing charges applicable to these services in accordance with 
Sec. 405.504, or the charge limits calculated in paragraph (f)(5)(ii) of 
this section.
    (g) Determination of payment amounts in special circumstances--(1) 
General. (i) For purposes of this paragraph (g), a ``category of items 
or services'' may consist of a single item or service or any number of 
items or services.
    (ii) CMS or a carrier may determine that the standard rules for 
calculating payment amounts set forth in this subpart for a category of 
items or services identified in section 1861(s) of the Act (other than 
physicians' services paid under section 1848 of the Act and those items 
and services for which payment is made under a prospective payment 
system, such as outpatient hospital services or home health services) 
will result in grossly deficient or excessive amounts. A payment amount 
will not be considered grossly excessive or deficient if it is 
determined that an overall payment adjustment of less than 15 percent is 
necessary to produce a realistic and equitable payment amount. For CMS-
initiated adjustments, CMS will publish in the Federal Register an 
analysis of payment adjustments that exceed $100 million per year in 
compliance with Executive Order 12866. If CMS makes adjustments that 
have a significant effect on a substantial number of small entities, it 
will publish an analysis in compliance with the Regulatory Flexibility 
Act.
    (iii) If CMS or the carrier determines that the standard rules for 
calculating payment amounts for a category of items or services will 
result in grossly deficient or excessive amounts, CMS, or the carrier, 
may establish special payment limits that are realistic and equitable 
for a category of items or services. If CMS makes a determination, it is 
considered a national determination. A carrier determination is one made 
by a carrier or intermediary or groups of carriers or intermediaries 
even if the determination applies to payment in all States.
    (iv) The limit on the payment amount is either an upper limit to 
correct a grossly excessive payment amount or a lower limit to correct a 
grossly deficient payment amount.
    (v) The limit is either a specific dollar amount or is based on a 
special method to be used in determining the payment amount.
    (vi) Except as provided in paragraph (h) of this section, a payment 
limit for a given year may not vary by more than 15 percent from the 
payment amount established for the preceding year.

[[Page 152]]

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

[[Page 153]]

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

[[Page 154]]

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

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

[32 FR 12599, Aug. 31, 1967]

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



Sec. 405.503  Determining customary charges.

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

[[Page 155]]

    (b) Variation of charges. If the individual physician or other 
person varies his charges for a specific medical procedure or service, 
so that no one amount is charged in the majority of cases, it will be 
necessary for the carrier to exercise judgment in the establishment of a 
``customary charge'' for such physician or other person. In making this 
judgment, an important guide, to be utilized when a sufficient volume of 
data on the physician's or other person's charges is available, would be 
the median or midpoint of his charges, excluding token and substandard 
charges as well as exceptional charges on the high side. A significant 
clustering of charges in the vicinity of the median amount might 
indicate that a point of such clustering should be taken as the 
physician's or other person's ``customary'' charge. Use of relative 
value scales will help in arriving at a decision in such instances.
    (c) Use of relative value scales. If, for a particular medical 
procedure or service, the carrier is unable to determine the customary 
charge on the basis of reliable statistical data (for example, because 
the carrier does not yet have sufficient data or because the performance 
of the particular medical procedure or service by the physician or other 
person is infrequent), the carrier may use appropriate relative value 
scales to determine the customary charge for such procedure or service 
in relation to customary charges of the same physician or person for 
other medical procedures and services.
    (d) Revision of customary charge. A physician's or other person's 
customary charge is not necessarily a static amount. Where a physician 
or other person alters his charges, a revised pattern of charges for his 
services may develop. Where on the basis of adequate evidence, the 
carrier finds that the physician or other person furnishing services has 
changed his charge for a service to the public in general, the customary 
charge resulting from the revised charge for the service should be 
recognized as the customary charge in making determinations of 
reasonable charges for such service when rendered thereafter to 
supplementary insurance beneficiaries. If the new customary charge is 
not above the top of the range of prevailing charges (see 
Sec. 405.504(a)), it should be deemed to be reasonable by the carrier, 
subject to the provisions of Sec. 405.508.



Sec. 405.504  Determining prevailing charges.

    (a) Ranges of charges. (1) In the case of physicians' services 
furnished beginning January 1, 1987, the prevailing charges for a 
nonparticipating physician as defined in this paragraph will be no 
higher than the same level that was set for services furnished during 
the previous calendar year for a physician who was a participating 
physician during that year. A nonparticipating physician is a physician 
who has not entered into an agreement with the Medicare program to 
accept payment on an assignment-related basis (in accordance with 
Sec. 424.55 of this chapter) for all items and services furnished to 
individuals enrolled under Part B of Medicare during a given calendar 
year.
    (2) No charge for Part B medical or other health services may be 
considered to be reasonable if it exceeds the higher of:
    (i) The prevailing charge for similar services in the same locality 
in effect on December 31, 1970, provided such prevailing charge had been 
found acceptable by CMS; or
    (ii) The prevailing charge that, on the basis of statistical data 
and methodology acceptable to CMS, would cover:
    (A) 75 percent of the customary charges made for similar services in 
the same locality during the 12-month period of July 1 through June 30 
preceding the fee screen year (January 1 through December 31) in which 
the service was furnished; or
    (B) In the case of services furnished more than 12 months before the 
beginning of the fee screen year (January 1 through December 31) in 
which the claim or request for payment is submitted, 75 percent of the 
customary charges made for similar services in the same locality during 
the 12 month period of July 1 through June 30 preceding the fee screen 
year that ends immediately preceding the fee screen year in which the 
claim or request for payment is submitted.

[[Page 156]]

    (3)(i) In the case of physicians' services, furnished before January 
1, 1992, each prevailing charge in each locality may not exceed the 
prevailing charge determined for the FY ending June 30, 1973 (without 
reference to the adjustments made in accordance with the economic 
stabilization program then in effect), except on the basis of 
appropriate economic index data that demonstrate the higher prevailing 
charge level is justified by:
    (A) Changes in general earnings levels of workers that are 
attributable to factors other than increases in their productivity; and
    (B) changes in expenses of the kind incurred by physicians in office 
practice. The office-expense component and the earnings component of 
such index shall be given the relative weights shown in data on self-
employed physicians' gross incomes.

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

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

[[Page 157]]

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

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


[[Page 158]]

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

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



Sec. 405.505  Determination of locality.

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

[57 FR 27305, June 18, 1992]



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

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

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

[43 FR 32300, July 26, 1978]



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

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

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

[[Page 159]]

    The reasonable charge for Doctor C could not be more than $100, the 
top of the range of prevailing charges.
    The reasonable charge for Doctor D would be $80, because that is his 
customary charge. Even though his actual charge of $100 falls within the 
range of prevailing charges, the reasonable charge cannot exceed his 
customary charge in the absence of special circumstances.



Sec. 405.508  Determination of comparable circumstances; limitation.

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



Sec. 405.509  Determining the inflation-indexed charge.

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

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

[[Page 160]]



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

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

[[Page 161]]

the prevailing charge for that item or service.)

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

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



Sec. 405.512  Carriers' procedural terminology and coding systems.

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

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



Sec. 405.515  Reimbursement for clinical laboratory services billed
by physicians.

    This section implements section 1842(h) of the Social Security Act, 
which places a limitation on reimbursement for markups on clinical 
laboratory services billed by physicians. If a physician's bill, or a 
request for payment for a physician's services, includes a charge for a 
laboratory test for which payment may be made under this part, the 
amount payable with respect to the test shall be determined as

[[Page 162]]

follows (subject to the coinsurance and deductible provisions at 
Secs. 410.152 and 410.160 of this chapter):
    (a) If the bill or request for payment indicates that the test was 
personally performed or supervised either by the physician who submitted 
the bill (or for whose services the request for payment was made), or by 
another physician with whom that physician shares his or her practice, 
the payment will be based on the physician's reasonable charge for the 
test (as determined in accordance with Sec. 405.502).
    (b) If the bill or request for payment indicates that the test was 
performed by an outside laboratory, and identifies both the laboratory 
and the amount the laboratory charged, payment for the test will be 
based on the lower of--
    (1) The laboratory's reasonable charge for the service (as 
determined in accordance with Sec. 405.502), or
    (2) The amount that the laboratory charged the physician for the 
service.
    (c) If the bill or request for payment does not indicate that the 
conditions specified in paragraph (a) of this section were met, and does 
not identify both the laboratory and the amount the laboratory charged, 
payment will be based on the lowest charge at which the carrier 
estimates the test could have been secured from a laboratory serving the 
physician's locality. The carrier will estimate this lowest amount twice 
a year by (i) obtaining lists of charges laboratories make to physicians 
from as many commercial laboratories serving the carrier's area as 
possible (including laboratories in other States from which tests may be 
obtained by physicians in the carrier's service area) and (ii) 
establishing a schedule of lowest prices based on this information. The 
carrier will take into consideration specific circumstances, such as a 
need for emergency services that may be costlier than routine services, 
in making the estimate in a particular case. However, in no case may 
this estimate be higher than the lowest customary charge for commercial 
laboratories, or when applicable to the laboratory service, the lowest 
charge level determined in accordance with Sec. 405.511, in the 
carrier's service area.
    (d) When a physician bills, in accordance with paragraph (b) or (c) 
of this section, for a laboratory test and indicates that it was 
performed by an independent laboratory, a nominal payment will also be 
made to the physician for collecting, handling, and shipping the 
specimen to the laboratory, if the physician bills for such a service.

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



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

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

[[Page 163]]

the drug or biological or the lowest average wholesale price of the 
brand name forms of the drug or biological.

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



Sec. 405.520  Payment for a physician assistant's, nurse 
practitioner's, and clinical nurse specialists' services and
services furnished incident to their professional services.

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

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



Sec. 405.534  Limitation on payment for screening mammography services.

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

[[Page 164]]

amount of payment, subject to the deductible, is equal to 80 percent of 
the least of the following:
    (1) The actual charge for the technical component of the service.
    (2) The amount established for the technical component of a 
diagnostic bilateral mammogram under the fee schedule for physicians' 
services.
    (3) The technical component of the payment limit for screening 
mammography services described in paragraph (b)(3) of this section.

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



Sec. 405.535  Special rule for nonparticipating physicians and
suppliers furnishing screening mammography services before 
January 1, 2002.

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

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

Subparts F-G [Reserved]



           Subpart H_Appeals Under the Medicare Part B Program

    Authority: Secs. 1102, 1866(j), and 1871 of the Social Security Act 
(42 U.S.C. 1302, 1395cc(j), and 1395hh).

    Source: 77 FR 29028, May 16, 2012, unless otherwise noted.



Sec. 405.800  Appeals of CMS or a CMS contractor.

    A CMS contractor's (that is, a carrier, Fiscal Intermediary or 
Medicare Administrative Contractor (MAC)) determination that a provider 
or supplier fails to meet the requirements for Medicare billing 
privileges.
    (a) Denial of a provider or supplier enrollment application. If CMS 
or a CMS contractor denies a provider's or supplier's enrollment 
application, CMS or the CMS contractor notifies the provider or supplier 
by certified mail. The notice includes the following:
    (1) The reason for the denial in sufficient detail to allow the 
provider or supplier to understand the nature of its deficiencies.
    (2) The right to appeal in accordance with part 498 of this chapter.
    (3) The address to which the written appeal must be mailed.
    (b) Revocation of Medicare billing privileges--(1) Notice of 
revocation. If CMS or a CMS contractor revokes a provider's or 
supplier's Medicare billing privileges, CMS or a CMS contractor notifies 
the supplier by certified mail. The notice must include the following:
    (i) The reason for the revocation in sufficient detail for the 
provider or supplier to understand the nature of its deficiencies.
    (ii) The right to appeal in accordance with part 498 of this 
chapter.
    (iii) The address to which the written appeal must be mailed.
    (2) Effective date of revocation. The revocation of a provider's or 
supplier's billing privileges is effective 30 days after CMS or the CMS 
contractor mails notice of its determination to the provider or 
supplier, except if the revocation is based on a Federal exclusion or 
debarment, felony conviction, license suspension or revocation, or the 
practice location is determined by CMS or its contractor not to be 
operational.

[[Page 165]]

When a revocation is based on a Federal exclusion or debarment, felony 
conviction, license suspension or revocation, or the practice location 
is determined by CMS or its contractor not to be operational, the 
revocation is effective with the date of exclusion or debarment, felony 
conviction, license suspension or revocation or the date that CMS or its 
contractor determined that the provider or supplier was no longer 
operational.
    (3) Payment after revocation. Medicare does not pay, and the CMS 
contractor rejects, claims for services submitted with a service date on 
or after the effective date of a provider's or supplier's revocation.



Sec. 405.803  Appeals rights.

    (a) A provider or supplier may appeal the initial determination to 
deny a provider or supplier's enrollment application, or if applicable, 
to revoke current billing privileges by following the procedures 
specified in part 498 of this chapter.
    (b) The reconsideration of a determination to deny or revoke a 
provider or supplier's Medicare billing privileges is handled by a CMS 
Regional Office or a contractor hearing officer not involved in the 
initial determination.
    (c) Providers and suppliers have the opportunity to submit evidence 
related to the enrollment action. Providers and suppliers must, at the 
time of their request, submit all evidence that they want to be 
considered.
    (d) If supporting evidence is not submitted with the appeal request, 
the contractor contacts the provider or supplier to try to obtain the 
evidence.
    (e) If the provider or supplier fails to submit the evidence before 
the contractor issues its decision, the provider or supplier is 
precluded from introducing new evidence at higher levels of the appeals 
process.



Sec. 405.806  Impact of reversal of contractor determinations 
on claims processing.

    (a) Claims for services furnished to Medicare beneficiaries during a 
period in which the supplier billing privileges were not effective are 
rejected.
    (b) If a supplier is determined not to have qualified for billing 
privileges in one period but qualified in another, Medicare contractors 
process claims for services furnished to beneficiaries during the period 
for which the supplier was Medicare-qualified. Subpart C of this part 
sets forth the requirements for the recovery of overpayments.
    (c) If a revocation of a supplier's billing privileges is reversed 
upon appeal, the supplier's billing privileges are reinstated back to 
the date that the revocation became effective.
    (d) If the denial of a supplier's billing privileges is reversed 
upon appeal and becomes binding, then the appeal decision establishes 
the date that the supplier's billing privileges become effective.



Sec. 405.809  Reinstatement of provider or supplier billing privileges
following corrective action.

    (a) General rule. A provider or supplier--
    (1) May only submit a corrective action plan for a revocation for 
noncompliance under Sec. 424.535(a)(1) of this chapter; and
    (2) Subject to paragraph (a)(1) of this section, has only one 
opportunity to correct all deficiencies that served as the basis of its 
revocation through a corrective action plan.
    (b) Review of a corrective action plan. Subject to paragraph (a)(1) 
of this section, CMS or its contractor reviews a submitted corrective 
action plan and does either of the following:
    (1) Reinstates the provider or supplier's billing privileges if the 
provider or supplier provides sufficient evidence to CMS or its 
contractor that it has complied fully with the Medicare requirements, in 
which case--
    (i) The effective date of the reinstatement is based on the date the 
provider or supplier is in compliance with all Medicare requirements; 
and
    (ii) CMS or its contractor may pay for services furnished on or 
after the effective date of the reinstatement.
    (2) Refuses to reinstate a provider or supplier's billing 
privileges. The refusal of CMS or its contractor to reinstate a provider 
or supplier's billing privileges based on a corrective action plan is 
not an initial determination under part 498 of this chapter.

[79 FR 72530, Dec. 5, 2014]

[[Page 166]]



Sec. 405.812  Effective date for DMEPOS supplier's billing privileges.

    If a CMS contractor, contractor hearing officer, or ALJ determines 
that a DMEPOS supplier's denied enrollment application meets the 
standards in Sec. 424.57 of this chapter and any other requirements that 
may apply, the determination establishes the effective date of the 
billing privileges as not earlier than the date the carrier made the 
determination to deny the DMEPOS supplier's enrollment application. 
Claims are rejected for services furnished before that effective date.



Sec. 405.815  Submission of claims.

    A provider or supplier succeeding in having its enrollment 
application denial or billing privileges revocation reversed in a 
binding decision, or in having its billing privileges reinstated, may 
submit claims to the CMS contractor for services furnished during 
periods of Medicare qualification, subject to the limitations in 
Sec. 424.44 of this chapter, regarding the timely filing of claims. If 
the claims previously were filed timely but were rejected, they are 
considered filed timely upon resubmission. Previously denied claims for 
items or services furnished during a period of denial or revocation may 
be resubmitted to CMS within 1 year after the date of reinstatement or 
reversal.



Sec. 405.818  Deadline for processing provider enrollment initial
determinations.

    Contractors approve or deny complete provider or supplier enrollment 
applications to approval or denial within the following timeframes:
    (a) Initial enrollments. Contractors process new enrollment 
applications within 180 days of receipt.
    (b) Revalidation of existing enrollments. Contractors process 
revalidations within 180 days of receipt.
    (c) Change-of-information and reassignment of payment request. 
Contractors process change-of-information and reassignment of payment 
requests within 90 days of receipt.



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

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



Sec. 405.900  Basis and scope.

    (a) Statutory basis. This subpart is based on the following 
provisions of the Act:
    (1) Section 1869(a) through (e) and (g) of the Act.
    (2) Section 1862(b)(2)(B)(viii) of the Act.
    (b) Scope. This subpart establishes the requirements for appeals of 
initial determinations for benefits under Part A or Part B of Medicare, 
including the following:
    (1) The initial determination of whether an individual is entitled 
to benefits under Part A or Part B. (Regulations governing 
reconsiderations of these initial determinations are at 20 CFR, part 
404, subpart J).
    (2) The initial determination of the amount of benefits available to 
an individual under Part A or Part B.
    (3) Any other initial determination relating to a claim for benefits 
under Part A or Part B, including an initial determination made by a 
quality improvement organization under section 1154(a)(2) of the Act or 
by an entity under contract with the Secretary (other than a contract 
under section 1852 of the Act) to administer provisions of titles XVIII 
or XI of the Act.

[70 FR 11472, Mar. 8, 2005, as amended at 80 FR 10617, Feb. 27, 2015]



Sec. 405.902  Definitions.

    For the purposes of this subpart, the term--
    ALJ means an Administrative Law Judge of the Department of Health 
and Human Services.
    Appellant means the beneficiary, assignee or other person or entity 
that has filed and pursued an appeal concerning a particular initial 
determination. Designation as an appellant does not in itself convey 
standing to appeal the determination in question.

[[Page 167]]

    Applicable plan means liability insurance (including self-
insurance), no-fault insurance, or a workers' compensation law or plan.
    Appointed representative means an individual appointed by a party to 
represent the party in a Medicare claim or claim appeal.
    Assignee means:
    (1) A supplier that furnishes items or services to a beneficiary and 
has accepted a valid assignment of a claim or
    (2) A provider or supplier that furnishes items or services to a 
beneficiary, who is not already a party, and has accepted a valid 
assignment of the right to appeal a claim executed by the beneficiary.
    Assignment of a claim means the transfer by a beneficiary of his or 
her claim for payment to the supplier in return for the latter's promise 
not to charge more for his or her services than what the carrier finds 
to be the Medicare-approved amount, as provided in Secs. 424.55 and 
424.56 of this chapter.
    Assignment of appeal rights means the transfer by a beneficiary of 
his or her right to appeal under this subpart to a provider or supplier 
who is not already a party, as provided in section 1869(b)(1)(C) of the 
Act.
    Assignor means a beneficiary whose provider of services or supplier 
has taken assignment of a claim or an appeal of a claim.
    Attorney Adjudicator means a licensed attorney employed by OMHA with 
knowledge of Medicare coverage and payment laws and guidance, and 
authorized to take the actions provided for in this subpart on requests 
for ALJ hearing and requests for reviews of QIC dismissals.
    Authorized representative means an individual authorized under State 
or other applicable law to act on behalf of a beneficiary or other party 
involved in the appeal. The authorized representative will have all of 
the rights and responsibilities of a beneficiary or party, as 
applicable, throughout the appeals process.
    Beneficiary means an individual who is enrolled to receive benefits 
under Medicare Part A or Part B.
    Carrier means an organization that has entered into a contract with 
the Secretary in accordance to section 1842 of the Act and is authorized 
to make determinations for Part B of title XVIII of the Act.
    Clean claim means a claim that has no defect or impropriety 
(including any lack of required substantiating documentation) or 
particular circumstance requiring special treatment that prevents timely 
payment from being made on the claim under title XVIII within the time 
periods specified in sections 1816(c) and 1842(c) of the Act.
    Contractor means an entity that contracts with the Federal 
government to review and/or adjudicate claims, determinations and/or 
decisions.
    Council stands for the Medicare Appeals Council within the 
Departmental Appeals Board of the U.S. Department of Health and Human 
Services.
    Family member means for purposes of the QIC reconsideration panel 
under Sec. 405.968 the following persons as they relate to the physician 
or healthcare provider.
    (1) The spouse (other than a spouse who is legally separated from 
the physician or health care professional under a decree of divorce or 
separate maintenance);
    (2) Children (including stepchildren and legally adopted children);
    (3) Grandchildren;
    (4) Parents; and
    (5) Grandparents.
    Fiscal Intermediary means an organization that has entered into a 
contract with CMS in accordance with section 1816 of the Act and is 
authorized to make determinations and payments for Part A of title XVIII 
of the Act, and Part B provider services as specified in Sec. 421.5(c) 
of this chapter.
    OMHA stands for the Office of Medicare Hearings and Appeals within 
the U.S. Department of Health and Human Services, which administers the 
ALJ hearing process in accordance with section 1869(b)(1) of the Act.
    Party means an individual or entity listed in Sec. 405.906 that has 
standing to appeal an initial determination and/or a subsequent 
administrative appeal determination.
    Provider means a hospital, critical access hospital, skilled nursing 
facility, comprehensive outpatient rehabilitation facility, home health 
agency, or

[[Page 168]]

hospice that has in effect an agreement to participate in Medicare, or 
clinic, rehabilitation agency, or public health agency that has in 
effect a similar agreement, but only to furnish outpatient physical 
therapy or speech pathology services, or a community mental health 
center that has in effect a similar agreement but only to furnish 
partial hospitalization services.
    Qualified Independent Contractor (QIC) means an entity which 
contracts with the Secretary in accordance with section 1869 of the Act 
to perform reconsiderations under Sec. 405.960 through Sec. 405.978.
    Quality Improvement Organization (QIO) means an entity that 
contracts with the Secretary in accordance with sections 1152 and 1153 
of the Act and 42 CFR subchapter F, to perform the functions described 
in section 1154 of the Act and 42 CFR subchapter F, including expedited 
determinations as described in Sec. 405.1200 through Sec. 405.1208.
    Reliable evidence means evidence that is relevant, credible, and 
material.
    Remand means to vacate a lower level appeal decision, or a portion 
of the decision, and return the case, or a portion of the case, to that 
level for a new decision.
    Similar fault means to obtain, retain, convert, seek, or receive 
Medicare funds to which a person knows or should reasonably be expected 
to know that he or she or another for whose benefit Medicare funds are 
obtained, retained, converted, sought, or received is not legally 
entitled. This includes, but is not limited to, a failure to demonstrate 
that he or she filed a proper claim as defined in part 411 of this 
chapter.
    Supplier means, unless the context otherwise requires, a physician 
or other practitioner, a facility, or other entity (other than a 
provider of services) that furnishes items or services under Medicare.
    Vacate means to set aside a previous action.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65333, Dec. 9, 2009; 80 
FR 10617, Feb. 27, 2015; 82 FR 5106, Jan. 17, 2017]



Sec. 405.904  Medicare initial determinations, redeterminations and 
appeals: General description.

    (a) General overview--(1) Entitlement appeals. The SSA makes an 
initial determination on an application for Medicare benefits and/or 
entitlement of an individual to receive Medicare benefits. A beneficiary 
who is dissatisfied with the initial determination may request, and SSA 
will perform, a reconsideration in accordance with 20 CFR part 404, 
subpart J if the requirements for obtaining a reconsideration are met. 
Following the reconsideration, the beneficiary may request a hearing 
before an ALJ under this subpart (42 CFR part 405, subpart I). If the 
beneficiary obtains a hearing before an ALJ and is dissatisfied with the 
decision of the ALJ, or if the beneficiary requests a hearing and no 
hearing is conducted, and the beneficiary is dissatisfied with the 
decision of an ALJ or an attorney adjudicator, he or she may request the 
Council to review the case. Following the action of the Council, the 
beneficiary may be entitled to file suit in Federal district court.
    (2) Claim appeals. The Medicare contractor makes an initial 
determination when a claim for Medicare benefits under Part A or Part B 
is submitted. A beneficiary who is dissatisfied with the initial 
determination may request that the contractor perform a redetermination 
of the claim if the requirements for obtaining a redetermination are 
met. Following the contractor's redetermination, the beneficiary may 
request, and the Qualified Independent Contractor (QIC) will perform, a 
reconsideration of the claim if the requirements for obtaining a 
reconsideration are met. Following the reconsideration, the beneficiary 
may request a hearing before an ALJ. If the beneficiary obtains a 
hearing before the ALJ and is dissatisfied with the decision of the ALJ, 
or if the beneficiary requests a hearing and no hearing is conducted, 
and the beneficiary is dissatisfied with the decision of an ALJ or 
attorney adjudicator, he or she may request the Council to review the 
case. If the Council reviews the case and issues a decision, and the 
beneficiary is dissatisfied with the decision, the beneficiary may file 
suit in Federal district

[[Page 169]]

court if the amount remaining in controversy and the other requirements 
for judicial review are met.
    (b) Non-beneficiary appellants. In general, the procedures described 
in paragraph (a) of this section are also available to parties other 
than beneficiaries either directly or through a representative acting on 
a party's behalf, consistent with the requirements of this subpart I. A 
provider generally has the right to judicial review only as provided 
under section 1879(d) of the Act; that is, when a determination involves 
a finding that services are not covered because--
    (1) They were custodial care (see Sec. 411.15(g) of this chapter); 
they were not reasonable and necessary (see Sec. 411.15(k) of this 
chapter); they did not qualify as covered home health services because 
the beneficiary was not confined to the home or did not need skilled 
nursing care on an intermittent basis (see Sec. 409.42(a) and (c)(1) of 
this chapter); or they were hospice services provided to a non-
terminally ill individual (see Sec. 418.22 of this chapter); and
    (2) Either the provider or the beneficiary, or both, knew or could 
reasonably be expected to know that those services were not covered 
under Medicare.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5106, Jan. 17, 2017]



Sec. 405.906  Parties to the initial determinations, redeterminations,
reconsiderations, hearings, and reviews.

    (a) Parties to the initial determination. The parties to the initial 
determination are the following individuals and entities:
    (1) A beneficiary who files a claim for payment under Medicare Part 
A or Part B or has had a claim for payment filed on his or her behalf, 
or in the case of a deceased beneficiary, when there is no estate, any 
person obligated to make or entitled to receive payment in accordance 
with part 424, subpart E of this chapter. Payment by a third party payer 
does not entitle that entity to party status.
    (2) A supplier who has accepted assignment for items or services 
furnished to a beneficiary that are at issue in the claim.
    (3) A provider of services who files a claim for items or services 
furnished to a beneficiary.
    (4) An applicable plan for an initial determination under 
Sec. 405.924(b)(16) where Medicare is pursuing recovery directly from 
the applicable plan. The applicable plan is the sole party to an initial 
determination under Sec. 405.924(b)(16) (that is, where Medicare is 
pursuing recovery directly from the applicable plan).
    (b) Parties to the redetermination, reconsideration, proceedings on 
a request for hearing, and Council review. The parties to the 
redetermination, reconsideration, proceedings on a request for hearing, 
and Council review are--
    (1) The parties to the initial determination in accordance with 
paragraph (a) of this section, except under paragraph (a)(1) of this 
section where a beneficiary has assigned appeal rights under 
Sec. 405.912;
    (2) A State agency in accordance with Sec. 405.908;
    (3) A provider or supplier that has accepted an assignment of appeal 
rights from the beneficiary according to Sec. 405.912;
    (4) A non-participating physician not billing on an assigned basis 
who, in accordance with section 1842(l) of the Act, may be liable to 
refund monies collected for services furnished to the beneficiary 
because those services were denied on the basis of section 1862(a)(1) of 
the Act; and
    (5) A non-participating supplier not billing on an assigned basis 
who, in accordance with sections 1834(a)(18) and 1834(j)(4) of the Act, 
may be liable to refund monies collected for items furnished to the 
beneficiary.
    (c) Appeals by providers and suppliers when there is no other party 
available. If a provider or supplier is not already a party to the 
proceeding in accordance with paragraphs (a) and (b) of this section, a 
provider of services or supplier may appeal an initial determination 
relating to services it rendered to a beneficiary who subsequently dies 
if there is no other party available to appeal the determination. This 
paragraph

[[Page 170]]

(c) does not apply to an initial determination with respect to an 
applicable plan under Sec. 405.924(b)(16).

[70 FR 11472, Mar. 8, 2005, as amended at 80 FR 10617, Feb. 27, 2015; 82 
FR 5106, Jan. 17, 2017]



Sec. 405.908  Medicaid State agencies.

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

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5106, Jan. 17, 2017]



Sec. 405.910  Appointed representatives.

    (a) Scope of representation. An appointed representative may act on 
behalf of an individual or entity in exercising his or her right to an 
initial determination or appeal. Appointed representatives do not have 
party status and may take action only on behalf of the individual or 
entity that they represent.
    (b) Persons not qualified. A party may not name as an appointed 
representative, an individual who is disqualified, suspended, or 
otherwise prohibited by law from acting as a representative in any 
proceedings before DHHS, or in entitlement appeals, before SSA.
    (c) Completing a valid appointment. For purposes of this subpart, an 
appointment of representation must:
    (1) Be in writing and signed and dated by both the party and 
individual agreeing to be the representative;
    (2) Provide a statement appointing the representative to act on 
behalf of the party, and in the case of a beneficiary, authorizing the 
adjudicator to release identifiable health information to the appointed 
representative.
    (3) Include a written explanation of the purpose and scope of the 
representation;
    (4) Contain both the party's and appointed representative's name, 
phone number, and address;
    (5) Identify the beneficiary's Medicare health insurance claim 
number when the beneficiary is the party appointing a representative, or 
identify the Medicare National Provider Identifier number of the 
provider or supplier that furnished the item or service when the 
provider or supplier is the party appointing a representative;
    (6) Include the appointed representative's professional status or 
relationship to the party;
    (7) Be filed with the entity processing the party's initial 
determination or appeal.
    (d) Curing a defective appointment of representative. (1) If any one 
of the seven elements named in paragraph (c) of this section is missing 
from the appointment, the adjudicator should contact the party and 
provide a description of the missing documentation or information.
    (2) Unless the defect is cured, the prospective appointed 
representative lacks the authority to act on behalf of the party, and is 
not entitled to obtain or receive any information related to the appeal, 
including the appeal decision.
    (3) If an adjudication time frame applies, the time from the later 
of the date that a defective appointment of representative was filed or 
the current appeal request was filed by the prospective appointed 
representative, to the date when the defect was cured or the party 
notifies the adjudicator that he or she will proceed with the appeal 
without a representative does not count towards the adjudication time 
frame.
    (e) Duration of appointment. (1) Unless revoked, an appointment is 
considered valid for 1 year from the date that the Appointment of 
Representative (AOR) form or other conforming written instrument 
contains the signatures of both the party and the appointed 
representative.
    (2) To initiate an appeal within the 1-year time frame, the 
representative

[[Page 171]]

must file a copy of the AOR form, or other conforming written 
instrument, with the appeal request. Unless revoked, the representation 
is valid for the duration of an individual's appeal of an initial 
determination.
    (3) For an initial determination of a Medicare Secondary Payer 
recovery claim, an appointment signed in connection with the party's 
efforts to make a claim for third party payment is valid from the date 
that appointment is signed for the duration of any subsequent appeal, 
unless the appointment is specifically revoked.
    (4) For an initial determination of a Medicare Secondary Payer 
recovery claim, an appointment signed by an applicable plan which has 
party status in accordance with Sec. 405.906(a)(1)(iv) is valid from the 
date that appointment is signed for the duration of any subsequent 
appeal, unless the appointment is specifically revoked.
    (f) Appointed representative fees--(1) General rule. An appointed 
representative for a beneficiary who wishes to charge a fee for services 
rendered in connection with an appeal before the Secretary must obtain 
approval of the fee from the Secretary. Services rendered below the OMHA 
level are not considered proceedings before the Secretary.
    (2) No fees or costs against trust funds. No award of attorney or 
any other representative's fees or any costs in connection with an 
appeal may be made against the Medicare trust funds.
    (3) Special rules for providers and suppliers. A provider or 
supplier that furnished the items or services to a beneficiary that are 
the subject of the appeal may represent that beneficiary in an appeal 
under this subpart, but the provider or supplier may not charge the 
beneficiary any fee associated with the representation. If a provider or 
supplier furnishes services or items to a beneficiary, the provider or 
supplier may not represent the beneficiary on the issues described in 
section 1879(a)(2) of the Act, unless the provider or supplier waives 
the right to payment from the beneficiary for the services or items 
involved in the appeal.
    (4) Special rules for purposes of third party payment. The Secretary 
does not review fee arrangements made by a beneficiary for purposes of 
making a claim for third party payment (as defined in 42 CFR 411.21) 
even though the representation may ultimately include representation for 
a Medicare Secondary Payer recovery claim.
    (5) Reasonableness of representative fees. In determining the 
reasonableness of a representative's fee, the Secretary will not apply 
the test specified in sections 206(a)(2) and (a)(3) of the Act.
    (g) Responsibilities of an appointed representative. (1) An 
appointed representative has an affirmative duty to--
    (i) Inform the party of the scope and responsibilities of the 
representation;
    (ii) Inform the party of the status of the appeal and the results of 
actions taken on behalf of the party, including, but not limited to, 
notification of appeal determinations, decisions, and further appeal 
rights;
    (iii) Disclose to a beneficiary any financial risk and liability of 
a non-assigned claim that the beneficiary may have;
    (iv) Not act contrary to the interest of the party; and
    (v) Comply with all laws and CMS regulations, CMS Rulings, and 
instructions.
    (2) An appeal request filed by a provider or supplier described in 
paragraph (f)(3) of this section must also include a statement signed by 
the provider or supplier stating that no financial liability is imposed 
on the beneficiary in connection with that representation. If 
applicable, the appeal request must also include a signed statement that 
the provider or supplier waives the right to payment from the 
beneficiary for services or items regarding issues described in section 
1879(a)(2) of the Act.
    (h) Authority of an appointed representative. An appointed 
representative may, on behalf of the party--
    (1) Obtain appeals information about the claim to the same extent as 
the party;
    (2) Submit evidence;
    (3) Make statements about facts and law; and
    (4) Make any request, or give, or receive, any notice about the 
appeal proceedings.
    (i) Notice or request to an appointed representative--(1) Initial 
determinations.

[[Page 172]]

When a contractor takes an action or issues an initial determination, it 
sends the action or notice to the party.
    (2) Appeals. When a contractor, QIC, ALJ or attorney adjudicator, or 
the Council takes an action or issues a redetermination, 
reconsideration, or appeal decision, in connection with an initial 
determination, it sends notice of the action to the appointed 
representative.
    (3) The contractor, QIC, ALJ or attorney adjudicator, or Council 
sends any requests for information or evidence regarding a claim that is 
appealed to the appointed representative. The contractor sends any 
requests for information or evidence regarding an initial determination 
to the party.
    (4) For initial determinations and appeals involving Medicare 
Secondary Payer recovery claims where the beneficiary is a party, the 
adjudicator sends notices and requests to both the beneficiary and the 
beneficiary's representative, if the beneficiary has a representative.
    (j) Effect of notice or request to an appointed representative. A 
notice or request sent to the appointed representative has the same 
force and effect as if was sent to the party.
    (k) Information available to the appointed representative. An 
appointed representative may obtain any and all appeals information 
applicable to the claim at issue that is available to the party.
    (l) Delegation of appointment by appointed representative. (1) An 
appointed representative may not designate another individual to act as 
the appointed representative of the party unless--
    (i) The appointed representative provides written notice to the 
party of the appointed representative's intent to delegate to another 
individual, which contains the name of the designee and the designee's 
acceptance to be obligated by and comply with the requirements of 
representation under this subpart; and
    (ii) The party accepts the designation as evidenced by a written 
statement signed by the party. The written statement signed by the party 
is not required when the appointed representative and designee are 
attorneys in the same law firm or organization and the notice described 
in paragraph (l)(1)(i) of this section so indicates.
    (2) A delegation is not effective until the adjudicator receives a 
copy of the acceptance described in paragraph (l)(1)(ii) of this 
section, unless the appointed representative and designee are attorneys 
in the same law firm or organization, in which case the notice described 
in paragraph (l)(1)(i) of this section may be submitted even though the 
acceptance described in paragraph (l)(1)(ii) of this section is not 
required.
    (3) A party's or representative's failure to notify the adjudicator 
that an appointment of representative has been delegated is not good 
cause for missing a deadline or not appearing at a hearing.
    (m) Revoking the appointment of representative. (1) A party may 
revoke an appointment of representative without cause at any time.
    (2) Revocation. Revocation is not effective until the adjudicator 
receives a signed, written statement from the party.
    (3) Death of the party. (i) The death of a party terminates the 
authority of the appointed representative, except as specified in 
paragraph (m)(3)(ii) of this section.
    (ii) A party's death does not terminate an appeal that is in 
progress if another individual or entity may be entitled to receive or 
obligated to make payment for the items or services that are the subject 
of the appeal. The appointment of representative remains in effect for 
the duration of the appeal except for MSP recovery claims.
    (4) A party's or representative's failure to notify the adjudicator 
that an appointment of representative has been revoked is not good cause 
for missing a deadline or not appearing at a hearing.

[70 FR 11472, Mar. 8, 2005, as amended at 80 FR 10617, Feb. 27, 2015; 82 
FR 5106, Jan. 17, 2017]



Sec. 405.912  Assignment of appeal rights.

    (a) Who may be an assignee. Only a provider, or supplier that--
    (1) Is not a party to the initial determination as defined in 
Sec. 405.906; and
    (2) Furnished an item or service to the beneficiary may seek 
assignment

[[Page 173]]

of appeal rights from the beneficiary for that item or service.
    (b) Who may not be an assignee. An individual or entity who is not a 
provider or supplier may not be an assignee. A provider or supplier that 
furnishes an item or service to a beneficiary may not seek assignment 
for that item or service when considered a party to the initial 
determination as defined in Sec. 405.906.
    (c) Requirements for a valid assignment of appeal right. The 
assignment of appeal rights must--
    (1) Be executed using a CMS standard form;
    (2) Be in writing and signed by both the beneficiary assigning his 
or her appeal rights and by the assignee;
    (3) Indicate the item or service for which the assignment of appeal 
rights is authorized;
    (4) Contain a waiver of the assignee's right to collect payment from 
the assignor for the specific item or service that are the subject of 
the appeal except as set forth in paragraph (d)(2) of this section; and
    (5) Be submitted at the same time the request for redetermination or 
other appeal is filed.
    (d) Waiver of right to collect payment. (1) Except as specified in 
paragraph (d)(2) of this section, the assignee must waive the right to 
collect payment for the item or service for which the assignment of 
appeal rights is made. If the assignment is revoked under paragraph 
(g)(2) or (g)(3) of this section, the waiver of the right to collect 
payment nevertheless remains valid. A waiver of the right to collect 
payment remains in effect regardless of the outcome of the appeal 
decision.
    (2) The assignee is not prohibited from recovering payment 
associated with coinsurance or deductibles or when an advance 
beneficiary notice is properly executed.
    (e) Duration of a valid assignment of appeal rights. Unless revoked, 
the assignment of appeal rights is valid for all administrative and 
judicial review associated with the item or service as indicated on the 
standard CMS form, even in the event of the death of the assignor.
    (f) Rights of the assignee. When a valid assignment of appeal rights 
is executed, the assignor transfers all appeal rights involving the 
particular item or service to the assignee. These include, but are not 
limited to--
    (1) Obtaining information about the claim to the same extent as the 
assignor;
    (2) Submitting evidence;
    (3) Making statements about facts or law; and
    (4) Making any request, or giving, or receiving any notice about 
appeal proceedings.
    (g) Revocation of assignment. When an assignment of appeal rights is 
revoked, the rights to appeal revert to the assignor. An assignment of 
appeal rights may be revoked in any of the following ways:
    (1) In writing by the assignor. The revocation of assignment must be 
delivered to the adjudicator and the assignee, and is effective on the 
date of receipt by the adjudicator.
    (2) By abandonment if the assignee does not file an appeal of an 
unfavorable decision.
    (3) By act or omission by the assignee that is determined by an 
adjudicator to be contrary to the financial interests of the assignor.
    (h) Responsibilities of the assignee. Once the assignee files an 
appeal, the assignee becomes a party to the appeal. The assignee must 
meet all requirements for appeals that apply to any other party.

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

                         Initial Determinations



Sec. 405.920  Initial determinations.

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

[[Page 174]]



Sec. 405.921  Notice of initial determination.

    (a) Notice of initial determination sent to the beneficiary. (1) The 
notice must be written in a manner calculated to be understood by the 
beneficiary, and sent to the last known address of the beneficiary.
    (2) Content of the notice. The notice of initial determination must 
contain all of the following:
    (i) The reasons for the determination, including whether a local 
medical review policy, a local coverage determination, or national 
coverage determination was applied.
    (ii) The procedures for obtaining additional information concerning 
the contractor's determination, such as a specific provision of the 
policy, manual, law or regulation used in making the determination.
    (iii) Information on the right to a redetermination if the 
beneficiary is dissatisfied with the outcome of the initial 
determination and instructions on how to request a redetermination.
    (iv) Any other requirements specified by CMS.
    (b) Notice of initial determination sent to providers and suppliers. 
(1) An electronic or paper remittance advice (RA) notice is the notice 
of initial determination sent to providers and suppliers that accept 
assignment.
    (i) The electronic RA must comply with the format and content 
requirements of the standard adopted for national use by covered 
entities under the Health Insurance Portability and Accountability Act 
(HIPAA) and related CMS manual instructions.
    (ii) When a paper RA is mailed, it must comply with CMS manual 
instructions that parallel the HIPAA data content and coding 
requirements.
    (2) The notice of initial determination must contain all of the 
following:
    (i) The basis for any full or partial denial determination of 
services or items on the claim.
    (ii) Information on the right to a redetermination if the provider 
or supplier is dissatisfied with the outcome of the initial 
determination.
    (iii) All applicable claim adjustment reason and remark codes to 
explain the determination.
    (iv) The source of the RA and who may be contacted if the provider 
or supplier requires further information.
    (v) All content requirements of the standard adopted for national 
use by covered entities under HIPAA.
    (vi) Any other requirements specified by CMS.
    (c) Notice of initial determination sent to an applicable plan--(1) 
Content of the notice. The notice of initial determination under 
Sec. 405.924(b)(16) must contain all of the following:
    (i) The reasons for the determination.
    (ii) The procedures for obtaining additional information concerning 
the contractor's determination, such as a specific provision of the 
policy, manual, law or regulation used in making the determination.
    (iii) Information on the right to a redetermination if the liability 
insurance (including self-insurance), no-fault insurance, or workers' 
compensation law or plan is dissatisfied with the outcome of the initial 
determination and instructions on how to request a redetermination.
    (iv) Any other requirements specified by CMS.
    (2) [Reserved]

[70 FR 11472, Mar. 8, 2005, as amended at 80 FR 10617, Feb. 27, 2015]



Sec. 405.922  Time frame for processing initial determinations.

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

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65333, Dec. 9, 2009]



Sec. 405.924  Actions that are initial determinations.

    (a) Applications and entitlement of individuals. SSA makes initial 
determinations and processes reconsiderations with respect to an 
individual on the following:
    (1) A determination with respect to entitlement to hospital 
insurance or

[[Page 175]]

supplementary medical insurance under Medicare.
    (2) A disallowance of an individual's application for entitlement to 
hospital or supplementary medical insurance, if the individual fails to 
submit evidence requested by SSA to support the application. (SSA 
specifies in the initial determination the conditions of entitlement 
that the applicant failed to establish by not submitting the requested 
evidence).
    (3) A denial of a request for withdrawal of an application for 
hospital or supplementary medical insurance, or a denial of a request 
for cancellation of a request for withdrawal.
    (4) A determination as to whether an individual, previously 
determined as entitled to hospital or supplementary medical insurance, 
is no longer entitled to those benefits, including a determination based 
on nonpayment of premiums.
    (b) Claims made by or on behalf of beneficiaries. The Medicare 
contractor makes initial determinations regarding claims for benefits 
under Medicare Part A and Part B. A finding that a request for payment 
or other submission does not meet the requirements for a Medicare claim 
as defined in Sec. 424.32 of this chapter, is not considered an initial 
determination. An initial determination for purposes of this subpart 
includes, but is not limited to, determinations with respect to any of 
the following:
    (1) If the items and/or services furnished are covered under title 
XVIII.
    (2) In the case of determinations on the basis of section 1879(b) or 
(c) of the Act, if the beneficiary, or supplier who accepts assignment 
under Sec. 424.55 of this chapter knew, or could reasonably have 
expected to know at the time the items or services were furnished, that 
the items or services were not covered.
    (3) In the case of determinations on the basis of section 1842(l)(1) 
of the Act, if the beneficiary or physician knew, or could reasonably 
have expected to know at the time the services were furnished, that the 
services were not covered.
    (4) Whether the deductible is met.
    (5) The computation of the coinsurance amount.
    (6) The number of days used for inpatient hospital, psychiatric 
hospital, or post-hospital extended care.
    (7) Periods of hospice care used.
    (8) Requirements for certification and plan of treatment for 
physician services, durable medical equipment, therapies, inpatient 
hospitalization, skilled nursing care, home health, hospice, and partial 
hospitalization services.
    (9) The beginning and ending of a spell of illness, including a 
determination made under the presumptions established under 
Sec. 409.60(c)(2) of this chapter, and as specified in Sec. 409.60(c)(4) 
of this chapter.
    (10) The medical necessity of services, or the reasonableness or 
appropriateness of placement of an individual at an acute level of 
patient care made by the Quality Improvement Organization (QIO) on 
behalf of the contractor in accordance with Sec. 476.86(c)(1) of this 
chapter.
    (11) Any other issues having a present or potential effect on the 
amount of benefits to be paid under Part A or Part B of Medicare, 
including a determination as to whether there was an underpayment of 
benefits paid under Part A or Part B, and if so, the amount thereof.
    (12) If a waiver of adjustment or recovery under sections 1870(b) 
and (c) of the Act is appropriate--
    (i) When an overpayment of hospital insurance benefits or 
supplementary medical insurance benefits (including a payment under 
section 1814(e) of the Act) was made for an individual; or
    (ii) For a Medicare Secondary Payer recovery claim against a 
beneficiary or against a provider or supplier.
    (13) If a particular claim is not payable by Medicare based upon the 
application of the Medicare Secondary Payer provisions of section 
1862(b) of the Act.
    (14) Under the Medicare Secondary Payer provisions of sections 
1862(b) of the Act that Medicare has a recovery claim against a 
provider, supplier, or beneficiary for services or items that were 
already paid by the Medicare program, except when the Medicare Secondary 
Payer recovery claim against the provider or supplier is based upon 
failure to file a proper claim as defined

[[Page 176]]

in part 411 of this chapter because this action is a reopening.
    (15) A claim not payable to a beneficiary for the services of a 
physician who has opted-out.
    (16) Under the Medicare Secondary Payer provisions of section 
1862(b) of the Act that Medicare has a recovery claim if Medicare is 
pursuing recovery directly from an applicable plan. That is, there is an 
initial determination with respect to the amount and existence of the 
recovery claim.
    (c) Determinations by QIOs. An initial determination for purposes of 
this subpart also includes a determination made by a QIO that:
    (1) A provider can terminate services provided to an individual when 
a physician certified that failure to continue the provision of those 
services is likely to place the individual's health at significant risk; 
or
    (2) A provider can discharge an individual from the provider of 
services.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65333, Dec. 9, 2009; 79 
FR 68001, Nov. 13, 2014; 80 FR 10618, Feb. 27, 2015]



Sec. 405.925  Decisions of utilization review committees.

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

[48 FR 39831, Sept. 1, 1983. Redesignated at 77 FR 29028, May 16, 2012]



Sec. 405.926  Actions that are not initial determinations.

    Actions that are not initial determinations and are not appealable 
under this subpart include, but are not limited to the following:
    (a) Any determination for which CMS has sole responsibility, for 
example one of the following:
    (1) If an entity meets the conditions for participation in the 
program.
    (2) If an independent laboratory meets the conditions for coverage 
of services.
    (3) Determination under the Medicare Secondary Payer provisions of 
section 1862(b) of the Act of the debtor for a particular recovery 
claim.
    (b) The coinsurance amounts prescribed by regulation for outpatient 
services under the prospective payment system.
    (c) Any issue regarding the computation of the payment amount of 
program reimbursement of general applicability for which CMS or a 
carrier has sole responsibility under Part B such as the establishment 
of a fee schedule set forth in part 414 of this chapter, or an inherent 
reasonableness adjustment pursuant to Sec. 405.502(g), and any issue 
regarding the cost report settlement process under Part A.
    (d) Whether an individual's appeal meets the qualifications for 
expedited access to judicial review provided in Sec. 405.990.
    (e) Any determination regarding whether a Medicare overpayment claim 
must be compromised, or collection action terminated or suspended under 
the Federal Claims Collection Act of 1966, as amended.
    (f) Determinations regarding the transfer or discharge of residents 
of skilled nursing facilities in accordance with Secs. 483.5(n) and 
483.15 of this chapter.
    (g) Determinations regarding the readmission screening and annual 
resident review processes required by subparts C and E of part 483 of 
this chapter.

[[Page 177]]

    (h) Determinations for a waiver of Medicare Secondary Payer recovery 
under section 1862(b) of the Act.
    (i) Determinations for a waiver of interest.
    (j) Determinations for a finding regarding the general applicability 
of the Medicare Secondary Payer provisions (as opposed to the 
application of these provisions to a particular claim or claims for 
Medicare payment for benefits).
    (k) Except as specified in Sec. 405.924(b)(16), determinations under 
the Medicare Secondary Payer provisions of section 1862(b) of the Act 
that Medicare has a recovery against an entity that was or is required 
or responsible (directly, as an insurer or self-insurer; as a third 
party administrator; as an employer that sponsors, contributes to or 
facilitates a group health plan or a large group health plan; or 
otherwise) to make payment for services or items that were already 
reimbursed by the Medicare program.
    (l) A contractor's, QIC's, ALJ's or attorney adjudicator's, or 
Council's determination or decision to reopen or not to reopen an 
initial determination, redetermination, reconsideration, decision, or 
review decision.
    (m) Determinations that CMS or its contractors may participate in 
the proceedings on a request for an ALJ hearing or act as parties in an 
ALJ hearing or Council review.
    (n) Determinations that a provider or supplier failed to submit a 
claim timely or failed to submit a timely claim despite being requested 
to do so by the beneficiary or the beneficiary's subrogee.
    (o) Determinations with respect to whether an entity qualifies for 
an exception to the electronic claims submission requirement under part 
424 of this chapter.
    (p) Determinations by the Secretary of sustained or high levels of 
payment errors in accordance with section 1893(f)(3)(A) of the Act.
    (q) A contractor's prior determination related to coverage of 
physicians' services.
    (r) Requests for anticipated payment under the home health 
prospective payment system under Sec. 409.43(c)(ii)(2) of this chapter.
    (s) Claim submissions on forms or formats that are incomplete, 
invalid, or do not meet the requirements for a Medicare claim and 
returned or rejected to the provider or supplier.
    (t) A contractor's prior authorization determination related to 
coverage of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS).
    (u) Issuance of notice to an individual entitled to Medicare 
benefits under Title XVIII of the Act when such individual received 
observation services as an outpatient for more than 24 hours, as 
specified under Sec. 489.20(y) of this chapter.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005; 80 
FR 10618, Feb. 27, 2015; 80 FR 81706, Dec. 30, 2015; 81 FR 57267, Aug. 
22, 2016; 81 FR 68847, Oct. 4, 2016; 82 FR 5107, Jan. 17, 2017]



Sec. 405.927  Initial determinations subject to the reopenings 
process.

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



Sec. 405.928  Effect of the initial determination.

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

[[Page 178]]

                            Redeterminations



Sec. 405.940  Right to a redetermination.

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



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

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

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65333, Dec. 9, 2009]



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

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

[[Page 179]]

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



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

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

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005; 74 
FR 65333, Dec. 9, 2009]



Sec. 405.947  Notice to the beneficiary of applicable plan's request
for a redetermination.

    (a) A CMS contractor must send notice of the applicable plan's 
appeal to the beneficiary.
    (b) Issuance and content of the notice must comply with CMS 
instructions.

[80 FR 10618, Feb. 27, 2015]



Sec. 405.948  Conduct of a redetermination.

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



Sec. 405.950  Time frame for making a redetermination.

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

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005; 74 
FR 65333, Dec. 9, 2009]



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

    (a) Withdrawing a request. A party that files a request for 
redetermination may withdraw its request by filing a written and signed 
request for withdrawal. The request for withdrawal must contain a clear 
statement that the appellant is withdrawing the request for a 
redetermination and does not intend to proceed further with the appeal. 
The request must be received in the contractor's mailroom before a 
redetermination is issued. The appeal will proceed with respect to any 
other parties that have filed a timely request for redetermination.

[[Page 180]]

    (b) Dismissing a request. A contractor dismisses a redetermination 
request, either entirely or as to any stated issue, under any of the 
following circumstances:
    (1) When the person or entity requesting a redetermination is not a 
proper party under Sec. 405.906(b) or does not otherwise have a right to 
a redetermination under section 1869(a) of the Act;
    (2) When the contractor determines the party failed to make out a 
valid request for redetermination that substantially complies with 
Sec. 405.944;
    (3) When the party fails to file the redetermination request within 
the proper filing time frame in accordance with Sec. 405.942;
    (4) When a beneficiary or the beneficiary's representative files a 
request for redetermination, but the beneficiary dies while the request 
is pending, and all of the following criteria apply:
    (i) The beneficiary's surviving spouse or estate has no remaining 
financial interest in the case. In deciding this issue, the contractor 
considers if the surviving spouse or estate remains liable for the 
services for which payment was denied or a Medicare contractor held the 
beneficiary liable for subsequent similar services under the limitation 
of liability provisions based on the denial of payment for services at 
issue;
    (ii) No other individual or entity with a financial interest in the 
case wishes to pursue the appeal; and
    (iii) No other party filed a valid and timely redetermination 
request under Secs. 405.942 and 405.944;
    (5) When a party filing the redetermination request submits a timely 
written request for withdrawal with the contractor; or
    (6) When the contractor has not issued an initial determination on 
the claim or the matter for which a redetermination is sought.
    (c) Notice of dismissal. A contractor mails or otherwise transmits a 
written notice of the dismissal of the redetermination request to the 
parties at their last known addresses. The notice states that there is a 
right to request that the contractor vacate the dismissal action.
    (d) Vacating a dismissal. If good and sufficient cause is 
established, a contractor may vacate its dismissal of a request for 
redetermination within 6 months from the date of the notice of 
dismissal.
    (e) Effect of dismissal. The dismissal of a request for 
redetermination is binding unless it is modified or reversed by a QIC 
under Sec. 405.974(b) or vacated under paragraph (d) of this section.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65333, Dec. 9, 2009]



Sec. 405.954  Redetermination.

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



Sec. 405.956  Notice of a redetermination.

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

[[Page 181]]

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

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5107, Jan. 17, 2017]



Sec. 405.958  Effect of a redetermination.

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

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65333, Dec. 9, 2009]

                             Reconsideration



Sec. 405.960  Right to a reconsideration.

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



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

    (a) Timeframe for filing a request. Except as provided in paragraph 
(b) of this section and in Sec. 405.974(b)(1), regarding a request for 
QIC reconsideration of a contractor's dismissal of a redetermination 
request, any request for a reconsideration must be filed within 180 
calendar days from the date the party receives the notice of the 
redetermination.
    (1) For purposes of this section, the date of receipt of the 
redetermination will be presumed to be 5 calendar days after the date of 
the notice of redetermination, unless there is evidence to the contrary.
    (2) For purposes of meeting the 180 calendar day filing deadline, 
the request is considered as filed on the date it is received by the 
QIC.
    (b) Extending the time for filing a request--(1) General rule. A QIC 
may extend the 180 calendar day timeframe

[[Page 182]]

for filing a request for reconsideration for good cause.
    (2) How to request an extension. A party to the redetermination must 
file its request for an extension of the time for filing the 
reconsideration request with its request for reconsideration. A party 
should include evidence to support the request for extension. The 
request for reconsideration and request for extension must--
    (i) Be in writing;
    (ii) State why the request for reconsideration was not filed within 
the required timeframe; and
    (iii) Meet the requirements of Sec. 405.964.
    (3) How the QIC determines whether good cause exists. In determining 
whether a party has good cause for missing a deadline to request 
reconsideration, the QIC applies the good cause provisions contained in 
Sec. 405.942(b)(2) and (b)(3).

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65334, Dec. 9, 2009]



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

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



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

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

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65334, Dec. 9, 2009]



Sec. 405.968  Conduct of a reconsideration.

    (a) General rules. (1) A reconsideration consists of an independent, 
on-the-record review of an initial determination, including the 
redetermination and all issues related to payment

[[Page 183]]

of the claim. In conducting a reconsideration, the QIC reviews the 
evidence and findings upon which the initial determination, including 
the redetermination, was based, and any additional evidence the parties 
submit or that the QIC obtains on its own. If the initial determination 
involves a finding on whether an item or service is reasonable and 
necessary for the diagnosis or treatment of illness or injury (under 
section 1862(a)(1)(A) of the Act), a QIC's reconsideration must involve 
consideration by a panel of physicians or other appropriate health care 
professionals, and be based on clinical experience, the patient's 
medical records, and medical, technical, and scientific evidence of 
record to the extent applicable.
    (b) Authority of the QIC. (1) National coverage determinations 
(NCDs), CMS Rulings, Council decisions designated by the Chair of the 
Departmental Appeals Board as having precedential effect under 
Sec. 401.109 of this chapter, and applicable laws and regulations are 
binding on the QIC.
    (2) QICs are not bound by LCDs, LMRPs, or CMS program guidance, such 
as program memoranda and manual instructions, but give substantial 
deference to these policies if they are applicable to a particular case. 
A QIC may decline to follow a policy, if the QIC determines, either at a 
party's request or at its own discretion, that the policy does not apply 
to the facts of the particular case.
    (3) If a QIC declines to follow a policy in a particular case, the 
QIC's reconsideration explains the reasons why the policy was not 
followed.
    (4) A QIC's decision to decline to follow a policy under this 
section applies only to the specific claim being reconsidered and does 
not have precedential effect.
    (5) A QIC may raise and develop new issues that are relevant to the 
claims in a particular case provided that the contractor rendered a 
redetermination with respect to the claims.
    (c) Qualifications of the QIC's panel members. (1) Members of a 
QIC's panel who conduct reconsiderations must have sufficient medical, 
legal, and other expertise, including knowledge of the Medicare program.
    (2) When a redetermination is made with respect to whether an item 
or service is reasonable and necessary (section 1862(a)(1)(A) of the 
Act), the QIC designates a panel of physicians or other appropriate 
health care professionals to consider the facts and circumstances of the 
redetermination.
    (3) Where a claim pertains to the furnishing of treatment by a 
physician, or the provision of items or services by a physician, a 
reviewing professional must be a physician.
    (d) Disqualification of a QIC panel member. No physician or health 
care professional employed by or otherwise working for a QIC may review 
determinations regarding--
    (1) Health care services furnished to a patient if that physician or 
health care professional was directly responsible for furnishing those 
services; or
    (2) Health care services provided in or by an institution, 
organization, or agency, if that physician or health care professional 
or any member of the physician's family or health care professional's 
family has, directly or indirectly, a significant financial interest in 
that institution, organization, or agency (see the term family member as 
defined in Sec. 405.902).

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5107, Jan. 17, 2017]



Sec. 405.970  Timeframe for making a reconsideration following
a contractor redetermination.

    (a) General rule. Within 60 calendar days of the date the QIC 
receives a timely filed request for reconsideration following a 
contractor redetermination or any additional time provided by paragraph 
(b) of this section, the QIC mails, or otherwise transmits to the 
parties at their last known addresses, written notice of--
    (1) The reconsideration;
    (2) Its inability to complete its review within 60 calendar days in 
accordance with paragraphs (c) through (e) of this section; or
    (3) Dismissal.
    (b) Exceptions. (1) If a QIC grants an appellant's request for an 
extension of the 180 calendar day filing deadline made in accordance 
with Sec. 405.962(b), the QIC's 60 calendar day decision-making 
timeframe begins on the date

[[Page 184]]

the QIC receives the late filed request for reconsideration following a 
contractor redetermination, or when the request for an extension that 
meets the requirements of Sec. 405.962(b) is granted, whichever is 
later.
    (2) If a QIC receives timely requests for reconsideration following 
a contractor redetermination from multiple parties, consistent with 
Sec. 405.964(c), the QIC must issue a reconsideration, notice that it 
cannot complete its review, or dismissal within 60 calendar days for 
each submission of the latest filed request.
    (3) Each time a party submits additional evidence after the request 
for reconsideration following a contractor redetermination is filed, the 
QIC's 60 calendar day decisionmaking timeframe is extended by up to 14 
calendar days for each submission, consistent with Sec. 405.966(b).
    (c) Responsibilities of the QIC. Within 60 calendar days of 
receiving a request for a reconsideration following a contractor 
redetermination, or any additional time provided for under paragraph (b) 
of this section, a QIC must take one of the following actions:
    (1) Notify all parties of its reconsideration, consistent with 
Sec. 405.976.
    (2) Notify the parties that it cannot complete the reconsideration 
by the deadline specified in paragraph (b) of this section and offer the 
appellant the opportunity to escalate the appeal to an ALJ. The QIC 
continues to process the reconsideration unless it receives a written 
request from the appellant to escalate the case to an ALJ after the 
adjudication period has expired.
    (d) Responsibilities of the appellant. If an appellant wishes to 
exercise the option of escalating the case to an ALJ, the appellant must 
notify the QIC in writing.
    (e) Actions following appellant's notice. (1) If the appellant fails 
to notify the QIC, or notifies the QIC that the appellant does not 
choose to escalate the case, the QIC completes its reconsideration 
following a contractor redetermination and notifies the appellant of its 
action consistent with Sec. 405.972 or Sec. 405.976.
    (2) If the appellant notifies the QIC that the appellant wishes to 
escalate the case, the QIC must take one of the following actions within 
5 calendar days of receipt of the notice or 5 calendar days from the end 
of the applicable adjudication period under paragraph (a) or (b) of this 
section:
    (i) Complete its reconsideration following a contractor 
redetermination and notify all parties of its decision consistent with 
Sec. 405.972 or Sec. 405.976.
    (ii) Acknowledge the escalation notice in writing and forward the 
case file to OMHA.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37702, June 30, 2005; 74 
FR 65334, Dec. 9, 2009; 82 FR 5107, Jan. 17, 2017]



Sec. 405.972  Withdrawal or dismissal of a request for reconsideration
or review of a contractor's dismissal of a request for redetermination.

    (a) Withdrawing a request. An appellant that files a request for 
reconsideration may withdraw its request by filing a written and signed 
request for withdrawal. The request for withdrawal must--
    (1) Contain a clear statement that the appellant is withdrawing the 
request for reconsideration and does not intend to proceed further with 
the appeal.
    (2) Be received in the QIC's mailroom before the reconsideration is 
issued.
    (b) Dismissing a request. A QIC dismisses a reconsideration request, 
either entirely or as to any stated issue, under any of the following 
circumstances:
    (1) When the person or entity requesting reconsideration is not a 
proper party under Sec. 405.906(b) or does not otherwise have a right to 
a reconsideration under section 1869(b) of the Act;
    (2) When the QIC determines that the party failed to make out a 
valid request for reconsideration that substantially complies with 
Sec. 405.964(a) and (b);
    (3) When the party fails to file the reconsideration request in 
accordance with the timeframes established in Sec. 405.962, or fails to 
file the request for review of a contractor's dismissal of a 
redetermination request in accordance with the timeframes established in 
Sec. 405.974(b)(1);
    (4) When a beneficiary or the beneficiary's representative files a 
request for reconsideration, but the beneficiary

[[Page 185]]

dies while the request is pending, and all of the following criteria 
apply:
    (i) The beneficiary's surviving spouse or estate has no remaining 
financial interest in the case. In deciding this issue, the QIC 
considers if the surviving spouse or estate remains liable for the 
services for which payment was denied or a Medicare contractor held the 
beneficiary liable for subsequent similar services under the limitation 
of liability provisions based on the denial of payment for services at 
issue;
    (ii) No other individual or entity with a financial interest in the 
case wishes to pursue the appeal; and
    (iii) No other party to the redetermination filed a valid and timely 
request for reconsideration under Secs. 405.962 and 405.964.
    (5) When a party filing for the reconsideration submits a written 
request of withdrawal to the QIC and satisfies the criteria set forth in 
paragraph (a) of this section before the reconsideration has been 
issued; or
    (6) When the contractor has not issued a redetermination on the 
initial determination for which a reconsideration is sought.
    (c) Notice of dismissal. A QIC mails or otherwise transmits written 
notice of the dismissal of the reconsideration request to the parties at 
their last known addresses. The notice states that there is a right to 
request that the contractor vacate the dismissal action. The appeal will 
proceed with respect to any other parties that have filed a timely 
request for reconsideration.
    (d) Vacating a dismissal. If good and sufficient cause is 
established, a QIC may vacate its dismissal of a request for 
reconsideration within 6 months of the date of the notice of dismissal.
    (e) Effect of dismissal. The dismissal of a request for 
reconsideration is binding unless it is modified or reversed by an ALJ 
or attorney adjudicator under Sec. 405.1004 or vacated under paragraph 
(d) of this section. The dismissal of a request for review of a 
contractor's dismissal of a redetermination request is binding and not 
subject to further review unless vacated under paragraph (d) of this 
section.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65334, Dec. 9, 2009; 82 
FR 5107, Jan. 17, 2017]



Sec. 405.974  Reconsideration and review of a contractor's dismissal
of a request for redetermination.

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

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005; 74 
FR 65334, Dec. 9, 2009; 82 FR 5108, Jan. 17, 2017]



Sec. 405.976  Notice of a reconsideration.

    (a) Notification to parties--(1) General rules. (i) Written notice 
of the reconsideration must be mailed or otherwise transmitted to all 
parties at their last known addresses, in accordance with the timeframes 
established in Sec. 405.970(a) or (b).
    (ii) The notice must be written in a manner reasonably calculated to 
be understood by a beneficiary.
    (iii) The QIC must promptly notify the entity responsible for 
payment of claims under Part A or Part B of its reconsideration. If the 
reconsideration

[[Page 186]]

results in issuance of supplemental payment to a provider or supplier, 
the Medicare contractor must also issue an electronic or paper RA notice 
to the provider or supplier.
    (2) Overpayment cases involving multiple beneficiaries who have no 
liability. In an overpayment case involving multiple beneficiaries who 
have no liability, the QIC may issue a written notice only to the 
appellant.
    (b) Content of the notice. The reconsideration must be in writing 
and contain--
    (1) A clear statement indicating whether the reconsideration is 
favorable or unfavorable;
    (2) A summary of the facts, including as appropriate, a summary of 
the clinical or scientific evidence used in making the reconsideration;
    (3) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies, apply to the facts of the case, including, 
where applicable, the rationale for declining to follow an LCD, LMRP, or 
CMS program guidance;
    (4) In the case of a determination on whether an item or service is 
reasonable or necessary under section 1862(a)(1)(A) of the Act, an 
explanation of the medical and scientific rationale for the decision;
    (5) A summary of the rationale for the reconsideration.
    (i) If the notice of redetermination indicated that specific 
documentation should be submitted with the reconsideration request, and 
the documentation was not submitted with the request for 
reconsideration, the summary must indicate how the missing documentation 
affected the reconsideration; and
    (ii) The summary must also specify that, consistent with 
Secs. 405.956(b)(8) and 405.966(b), all evidence, including evidence 
requested in the notice of redetermination, that is not submitted prior 
to the issuance of the reconsideration will not be considered at the 
OMHA level, unless the appellant demonstrates good cause as to why the 
evidence was not provided prior to the issuance of the QIC's 
reconsideration. This requirement does not apply to beneficiaries, 
unless the beneficiary is represented by a provider or supplier or to 
State Medicaid Agencies;
    (6) Information concerning to the parties' right to an ALJ hearing, 
including the applicable amount in controversy requirement and 
aggregation provisions;
    (7) A statement of whether the amount in controversy is estimated to 
meet or not meet the amount required for an ALJ hearing, if--
    (i) The request for reconsideration was filed by a beneficiary who 
is not represented by a provider, supplier, or Medicaid State agency; 
and
    (ii) The reconsideration decision is partially or fully unfavorable.
    (8) A description of the procedures that a party must follow in 
order to obtain an ALJ hearing of an expedited reconsideration, 
including the time frame under which a request for an ALJ hearing must 
be filed;
    (9) If appropriate, advice as to the requirements for use of the 
expedited access to judicial review process set forth in Sec. 405.990;
    (10) The procedures for obtaining additional information concerning 
the reconsideration, such as specific provisions of the policy, manual, 
or regulation used in making the reconsideration; and
    (11) Any other requirements specified by CMS.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5108, Jan. 17, 2017]



Sec. 405.978  Effect of a reconsideration.

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

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65334, Dec. 9, 2009; 82 
FR 5108, Jan. 17, 2017]

[[Page 187]]

                               Reopenings



Sec. 405.980  Reopening of initial determinations, redeterminations,
reconsiderations, decisions, and reviews.

    (a) General rules. (1) A reopening is a remedial action taken to 
change a binding determination or decision that resulted in either an 
overpayment or underpayment, even though the binding determination or 
decision may have been correct at the time it was made based on the 
evidence of record. That action may be taken by--
    (i) A contractor to revise the initial determination or 
redetermination;
    (ii) A QIC to revise the reconsideration;
    (iii) An ALJ or attorney adjudicator to revise his or her decision; 
or
    (iv) The Council to revise the ALJ or attorney adjudicator decision, 
or its review decision.
    (2) If a contractor issues a denial of a claim because it did not 
receive requested documentation during medical review and the party 
subsequently requests a redetermination, the contractor must process the 
request as a reopening.
    (3) Notwithstanding paragraph (a)(4) of this section, a contractor 
must process clerical errors (which includes minor errors and omissions) 
as reopenings, instead of as redeterminations as specified in 
Sec. 405.940. If the contractor receives a request for reopening and 
disagrees that the issue is a clerical error, the contractor must 
dismiss the reopening request and advise the party of any appeal rights, 
provided the timeframe to request an appeal on the original denial has 
not expired. For purposes of this section, clerical error includes human 
or mechanical errors on the part of the party or the contractor such 
as--
    (i) Mathematical or computational mistakes;
    (ii) Inaccurate data entry; or
    (iii) Denials of claims as duplicates.
    (4) When a party has filed a valid request for an appeal of an 
initial determination, redetermination, reconsideration, ALJ or attorney 
adjudicator decision, or Council review, no adjudicator has jurisdiction 
to reopen an issue on a claim that is under appeal until all appeal 
rights for that issue are exhausted. Once the appeal rights for the 
issue have been exhausted, the contractor, QIC, ALJ or attorney 
adjudicator, or Council may reopen as set forth in this section.
    (5) The contractor's, QIC's, ALJ's or attorney adjudicator's, or 
Council's decision on whether to reopen is binding and not subject to 
appeal.
    (6) A determination under the Medicare secondary payer provisions of 
section 1862(b) of the Act that Medicare has an MSP recovery claim for 
services or items that were already reimbursed by the Medicare program 
is not a reopening, except where the recovery claim is based upon a 
provider's or supplier's failure to demonstrate that it filed a proper 
claim as defined in part 411 of this chapter.
    (b) Time frames and requirements for reopening initial 
determinations and redeterminations initiated by a contractor. A 
contractor may reopen an initial determination or redetermination on its 
own motion--
    (1) Within 1 year from the date of the initial determination or 
redetermination for any reason.
    (2) Within 4 years from the date of the initial determination or 
redetermination for good cause as defined in Sec. 405.986.
    (3) At any time if there exists reliable evidence as defined in 
Sec. 405.902 that the initial determination was procured by fraud or 
similar fault as defined in Sec. 405.902.
    (4) At anytime if the initial determination is unfavorable, in whole 
or in part, to the party thereto, but only for the purpose of correcting 
a clerical error on which that determination was based.
    (5) At any time to effectuate a decision issued under the coverage 
appeals process.
    (c) Time frame and requirements for reopening initial determinations 
and redeterminations requested by a party. (1) A party may request that 
a contractor reopen its initial determination or redetermination within 
1 year from the date of the initial determination or redetermination for 
any reason.
    (2) A party may request that a contractor reopen its initial 
determination or redetermination within 4 years from the date of the 
initial determination or

[[Page 188]]

redetermination for good cause in accordance with Sec. 405.986.
    (3) A party may request that a contractor reopen its initial 
determination at any time if the initial determination is unfavorable, 
in whole or in part, to the party thereto, but only for the purpose of 
correcting a clerical error on which that determination was based. Third 
party payer error does not constitute clerical error. See 
Sec. 405.986(c).
    (4) A party may request that a contractor reopen an initial 
determination for the purpose of reporting and returning an overpayment 
under Sec. 401.305 of this chapter.
    (d) Time frame and requirements for reopening reconsiderations, 
decisions and reviews initiated by a QIC, ALJ or attorney adjudicator, 
or the Council. (1) A QIC may reopen its reconsideration on its own 
motion within 180 calendar days from the date of the reconsideration for 
good cause in accordance with Sec. 405.986. If the QIC's reconsideration 
was procured by fraud or similar fault, then the QIC may reopen at any 
time.
    (2) An ALJ or attorney adjudicator may reopen his or her decision, 
or the Council may reopen an ALJ or attorney adjudicator decision on its 
own motion within 180 calendar days from the date of the decision for 
good cause in accordance with Sec. 405.986. If the decision was procured 
by fraud or similar fault, then the ALJ or attorney adjudicator may 
reopen his or her decision, or the Council may reopen an ALJ or attorney 
adjudicator decision, at any time.
    (3) The Council may reopen its review decision on its own motion 
within 180 calendar days from the date of the review decision for good 
cause in accordance with Sec. 405.986. If the Council's decision was 
procured by fraud or similar fault, then the Council may reopen at any 
time.
    (e) Time frames and requirements for reopening reconsiderations, 
decisions, and reviews requested by a party. (1) A party to a 
reconsideration may request that a QIC reopen its reconsideration within 
180 calendar days from the date of the reconsideration for good cause in 
accordance with Sec. 405.986.
    (2) A party to an ALJ or attorney adjudicator decision may request 
that an ALJ or attorney adjudicator reopen his or her decision, or the 
Council reopen an ALJ or attorney adjudicator decision, within 180 
calendar days from the date of the decision for good cause in accordance 
with Sec. 405.986.
    (3) A party to a Council review may request that the Council reopen 
its decision within 180 calendar days from the date of the review 
decision for good cause in accordance with Sec. 405.986.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005; 74 
FR 65334, Dec. 9, 2009; 81 FR 7684, Feb. 12, 2016; 82 FR 5108, Jan. 17, 
2017]



Sec. 405.982  Notice of a revised determination or decision.

    (a) When adjudicators initiate reopenings. When any determination or 
decision is reopened and revised as provided in Sec. 405.980, the 
contractor, QIC, ALJ or attorney adjudicator, or the Council must mail 
its revised determination or decision to the parties to that 
determination or decision at their last known address. In the case of a 
full or partial reversal resulting in issuance of a payment to a 
provider or supplier, a revised electronic or paper remittance advice 
notice must be issued by the Medicare contractor. An adverse revised 
determination or decision must state the rationale and basis for the 
reopening and revision and any right to appeal.
    (b) Reopenings initiated at the request of a party. The contractor, 
QIC, ALJ or attorney adjudicator, or the Council must mail its revised 
determination or decision to the parties to that determination or 
decision at their last known address. In the case of a full or partial 
reversal resulting in issuance of a payment to a provider or supplier, a 
revised electronic or paper remittance advice notice must be issued by 
the Medicare contractor. An adverse revised determination or decision 
must state the rationale and basis for the reopening and revision and 
any right to appeal.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5108, Jan. 17, 2017]



Sec. 405.984  Effect of a revised determination or decision.

    (a) Initial determinations. The revision of an initial determination 
is binding upon all parties unless a party files a

[[Page 189]]

written request for a redetermination that is accepted and processed in 
accordance with Sec. 405.940 through Sec. 405.958.
    (b) Redeterminations. The revision of a redetermination is binding 
upon all parties unless a party files a written request for a QIC 
reconsideration that is accepted and processed in accordance with 
Sec. 405.960 through Sec. 405.978.
    (c) Reconsiderations. The revision of a reconsideration is binding 
upon all parties unless a party files a written request for an ALJ 
hearing that is accepted and processed in accordance with Sec. 405.1000 
through Sec. 405.1063.
    (d) ALJ or attorney adjudicator decisions. The revision of an ALJ or 
attorney adjudicator decision is binding upon all parties unless a party 
files a written request for a Council review that is accepted and 
processed in accordance with Sec. 405.1100 through Sec. 405.1130.
    (e) Council review. The revision of a Council review is binding upon 
all parties unless a party files a civil action in which a Federal 
district court accepts jurisdiction and issues a decision.
    (f) Appeal of only the portion of the determination or decision 
revised by the reopening. Only the portion of the initial determination, 
redetermination, reconsideration, or hearing decision revised by the 
reopening may be subsequently appealed.
    (g) Effect of a revised determination or decision. A revised 
determination or decision is binding unless it is appealed or otherwise 
reopened.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5108, Jan. 17, 2017]



Sec. 405.986  Good cause for reopening.

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

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

                   Expedited Access to Judicial Review



Sec. 405.990  Expedited access to judicial review.

    (a) Process for expedited access to judicial review. (1) For 
purposes of this section, a ``review entity'' means an entity of up to 
three reviewers who are ALJs or members of the Departmental Appeals 
Board (DAB), as determined by the Secretary.
    (2) In order to obtain expedited access to judicial review (EAJR), a 
review entity must certify that the Council does not have the authority 
to decide the question of law or regulation relevant to the matters in 
dispute and that there is no material issue of fact in dispute.
    (3) A party may make a request for EAJR only once with respect to a 
question of law or regulation for a specific matter in dispute in an 
appeal.
    (b) Conditions for making the expedited appeals request. (1) A party 
may request EAJR in place of an ALJ hearing or Council review if the 
following conditions are met:
    (i) A QIC has made a reconsideration determination and the party has 
filed a request for--

[[Page 190]]

    (A) An ALJ hearing in accordance with Sec. 405.1002 and a decision, 
dismissal order, or remand order of the ALJ or attorney adjudicator has 
not been issued;
    (B) Council review in accordance with Sec. 405.1102 and a final 
decision, dismissal order, or remand order of the Council has not been 
issued; or
    (ii) The appeal has been escalated from the QIC to OMHA for an ALJ 
hearing after the period described in Sec. 405.970(a) and 
Sec. 405.970(b) has expired, and the QIC does not issue a decision or 
dismissal order within the timeframe described in Sec. 405.970(e).
    (2) The requestor is a party, as defined in paragraph (e) of this 
section.
    (3) The amount remaining in controversy meets the requirements of 
Sec. 405.1006(b) or (c).
    (4) If there is more than one party to the reconsideration, hearing, 
or Council review, each party concurs, in writing, with the request for 
the EAJR.
    (5) There are no material issues of fact in dispute.
    (c) Content of the request for EAJR. The request for EAJR must--
    (1) Allege that there are no material issues of fact in dispute and 
identify the facts that the requestor considers material and that are 
not disputed; and
    (2) Assert that the only factor precluding a decision favorable to 
the requestor is--
    (i) A statutory provision that is unconstitutional, or a provision 
of a regulation or national coverage determination and specify the 
statutory provision that the requestor considers unconstitutional or the 
provision of a regulation or a national coverage determination that the 
requestor considers invalid, or
    (ii) A CMS Ruling that the requester considers invalid;
    (3) Include a copy of any QIC reconsideration and of ALJ or attorney 
adjudicator decision that the requester has received;
    (4) If any QIC reconsideration or ALJ or attorney adjudicator 
decision was based on facts that the requestor is disputing, state why 
the requestor considers those facts to be immaterial; and
    (5) If any QIC reconsideration or ALJ or attorney adjudicator 
decision was based on a provision of a law, regulation, national 
coverage determination or CMS Ruling in addition to the one the 
requestor considers unconstitutional or invalid, a statement as to why 
further administrative review of how that provision applies to the facts 
is not necessary.
    (d) Place and time for an EAJR request--(1) Method and place for 
filing request. The requestor may--
    (i) If a request for ALJ hearing or Council review is not pending, 
file a written EAJR request with the HHS Departmental Appeals Board with 
his or her request for an ALJ hearing or Council review; or
    (ii) If an appeal is already pending for an ALJ hearing or otherwise 
before OMHA, or the Council, file a written EAJR request with the HHS 
Departmental Appeals Board.
    (2) Time of filing request. The party may file a request for the 
EAJR--
    (i) If the party has requested a hearing, at any time before receipt 
of the notice of the ALJ's or attorney adjudicator's decision; or
    (ii) If the party has requested Council review, at any time before 
receipt of notice of the Council's decision.
    (e) Parties to the EAJR. The parties to the EAJR are the persons or 
entities who were parties to the QIC's reconsideration determination 
and, if applicable, to the ALJ hearing.
    (f) Determination on EAJR request. (1) The review entity described 
in paragraph (a) of this section will determine whether the request for 
EAJR meets all of the requirements of paragraphs (b), (c), and (d) of 
this section.
    (2) Within 60 calendar days after the date the review entity 
receives a request and accompanying documents and materials meeting the 
conditions in paragraphs (b), (c), and (d) of this section, the review 
entity will issue either a certification in accordance to paragraph (g) 
of this section or a denial of the request.
    (3) A determination by the review entity either certifying that the 
requirements for EAJR are met pursuant to paragraph (g) of this section 
or denying the request is not subject to review by the Secretary.
    (4) If the review entity fails to make a determination within the 
time frame

[[Page 191]]

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

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005; 74 
FR 65334, Dec. 9, 2009; 82 FR 5108, Jan. 17, 2017]

                              ALJ Hearings



Sec. 405.1000  Hearing before an ALJ and decision by an ALJ or
attorney adjudicator: General rule.

    (a) If a party is dissatisfied with a QIC's reconsideration, or if 
the adjudication period specified in Sec. 405.970 for the QIC to 
complete its reconsideration has elapsed, the party may request a 
hearing before an ALJ.
    (b) A hearing before an ALJ may be conducted in-person, by video-
teleconference (VTC), or by telephone. At the hearing, the parties may 
submit evidence (subject to the restrictions in Sec. 405.1018 and 
Sec. 405.1028), examine the

[[Page 192]]

evidence used in making the determination under review, and present and/
or question witnesses.
    (c) In some circumstances, CMS or its contractor may participate in 
the proceedings under Sec. 405.1010, or join the hearing before an ALJ 
as a party under Sec. 405.1012.
    (d) The ALJ or attorney adjudicator conducts a de novo review and 
issues a decision based on the administrative record, including, for an 
ALJ, any hearing record.
    (e) If all parties who are due a notice of hearing in accordance 
with Sec. 405.1020(c) waive their right to appear at the hearing in 
person or by telephone or video-teleconference, the ALJ or an attorney 
adjudicator may make a decision based on the evidence that is in the 
file and any new evidence that is submitted for consideration.
    (f) The ALJ may require the parties to participate in a hearing if 
it is necessary to decide the case. If the ALJ determines that it is 
necessary to obtain testimony from a non-party, he or she may hold a 
hearing to obtain that testimony, even if all of the parties who are 
entitled to a notice of hearing in accordance with Sec. 405.1020(c) have 
waived the right to appear. In that event, however, the ALJ will give 
the parties the opportunity to appear when the testimony is given, but 
may hold the hearing even if none of the parties decide to appear.
    (g) An ALJ or attorney adjudicator may also issue a decision on the 
record on his or her own initiative if the evidence in the 
administrative record supports a fully favorable finding for the 
appellant, and no other party to the appeal is liable for the claims at 
issue, unless CMS or a contractor has elected to be a party to the 
hearing in accordance with Sec. 405.1012.
    (h) If more than one party timely files a request for hearing on the 
same claim before a decision is made on the first timely filed request, 
the requests are consolidated into one proceeding and record, and one 
decision, dismissal, or remand is issued.

[82 FR 5109, Jan. 17, 2017]



Sec. 405.1002  Right to an ALJ hearing.

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

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005; 74 
FR 65335, Dec. 9, 2009; 82 FR 5109, Jan. 17, 2017]



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

    (a) A party to a QIC's dismissal of a request for reconsideration 
has a right to have the dismissal reviewed by an ALJ or attorney 
adjudicator if--
    (1) The party files a written request for review within 60 calendar 
days after receipt of the notice of the QIC's dismissal.
    (2) The party meets the amount in controversy requirements of 
Sec. 405.1006.
    (3) For purposes of this section, the date of receipt of the QIC's 
dismissal is presumed to be 5 calendar days after

[[Page 193]]

the date of the dismissal notice, unless there is evidence to the 
contrary.
    (4) For purposes of meeting the 60 calendar day filing deadline, the 
request is considered as filed on the date it is received by the office 
specified in the QIC's dismissal.
    (b) If the ALJ or attorney adjudicator determines that the QIC's 
dismissal was in error, he or she vacates the dismissal and remands the 
case to the QIC for a reconsideration in accordance with Sec. 405.1056.
    (c) If the ALJ or attorney adjudicator affirms the QIC's dismissal 
of a reconsideration request, he or she issues a notice of decision 
affirming the QIC dismissal in accordance with Sec. 405.1046(b).
    (d) The ALJ or attorney adjudicator may dismiss the request for 
review of a QIC's dismissal in accordance with Sec. 405.1052(b).

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37703, June 30, 2005; 74 
FR 65335, Dec. 9, 2009; 82 FR 5109, Jan. 17, 2017]



Sec. 405.1006  Amount in controversy required for an ALJ hearing
and judicial review.

    (a) Definitions. For the purposes of aggregating claims to meet the 
amount in controversy requirement for an ALJ hearing or judicial review:
    (1) ``Common issues of law and fact'' means the claims sought to be 
aggregated are denied, or payment is reduced, for similar reasons and 
arise from a similar fact pattern material to the reason the claims are 
denied or payment is reduced.
    (2) ``Delivery of similar or related services'' means like or 
coordinated services or items provided to one or more beneficiaries.
    (b) ALJ review. To be entitled to a hearing before an ALJ, the party 
must meet the amount in controversy requirements of this section.
    (1) For ALJ hearing requests, the required amount remaining in 
controversy must be $100 increased by the percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (U.S. city average) as measured from July 2003 to the July 
preceding the current year involved.
    (2) If the figure in paragraph (b)(1) of this section is not a 
multiple of $10, then it is rounded to the nearest multiple of $10. The 
Secretary will publish changes to the amount in controversy requirement 
in the Federal Register when necessary.
    (c) Judicial review. To be entitled to judicial review, a party must 
meet the amount in controversy requirements of this subpart at the time 
it requests judicial review.
    (1) For review requests, the required amount remaining in 
controversy must be $1,000 or more, adjusted as specified in paragraphs 
(b)(1) and (b)(2) of this section.
    (2) [Reserved]
    (d) Calculating the amount remaining in controversy--(1) In general. 
The amount remaining in controversy is computed as the actual amount 
charged the individual for the items and services in the disputed claim, 
reduced by--
    (i) Any Medicare payments already made or awarded for the items or 
services; and
    (ii) Any deductible and/or coinsurance amounts that may be collected 
for the items or services.
    (2) Limitation on liability. Notwithstanding paragraph (d)(1) of 
this section, when payment is made for items or services under section 
1879 of the Act or Sec. 411.400 of this chapter, or the liability of the 
beneficiary for those services is limited under Sec. 411.402 of this 
chapter, the amount in controversy is computed as the amount the 
beneficiary would have been charged for the items or services in 
question if those expenses were not paid under Sec. 411.400 of this 
chapter or if that liability was not limited under Sec. 411.402 of this 
chapter, reduced by any deductible and/or coinsurance amounts that may 
be collected for the items or services.
    (3) Item or service terminations. When a matter involves a provider 
or supplier termination of Medicare-covered items or services that is 
disputed by a beneficiary, and the beneficiary did not elect to continue 
receiving the items or services, the amount in controversy is calculated 
in accordance with paragraph (d)(1) of this section, except that the 
amount charged to the individual and any deductible and coinsurance

[[Page 194]]

that may be collected for the items or services are calculated using the 
amount the beneficiary would have been charged if the beneficiary had 
received the items or services the beneficiary asserts should have been 
covered based on the beneficiary's current condition, and Medicare 
payment were not made for the items or services.
    (4) Overpayments. Notwithstanding paragraph (d)(1) of this section, 
when an appeal involves an identified overpayment, the amount in 
controversy is the amount of the overpayment specified in the demand 
letter for the items or services in the disputed claim. When an appeal 
involves an estimated overpayment amount determined through the use of 
statistical sampling and extrapolation, the amount in controversy is the 
total amount of the estimated overpayment determined through 
extrapolation, as specified in the demand letter.
    (5) Coinsurance and deductible challenges. Notwithstanding paragraph 
(d)(1) of this section, for appeals filed by beneficiaries challenging 
only the computation of a coinsurance amount or the amount of a 
remaining deductible, the amount in controversy is the difference 
between the amount of the coinsurance or remaining deductible, as 
determined by the contractor, and the amount of the coinsurance or 
remaining deductible the beneficiary believes is correct.
    (6) Fee schedule or contractor price challenges. Notwithstanding 
paragraph (d)(1) of this section, for appeals of claims where the 
allowable amount has been paid in full and the appellant is challenging 
only the validity of the allowable amount, as reflected on the published 
fee schedule or in the published contractor-priced amount applicable to 
the items or services in the disputed claim, the amount in controversy 
is the difference between the amount the appellant argues should have 
been the allowable amount for the items or services in the disputed 
claim in the applicable jurisdiction and place of service, and the 
published allowable amount for the items or services.
    (e) Aggregating claims to meet the amount in controversy--(1) 
Aggregating claims in appeals of QIC reconsiderations for an ALJ 
hearing. Either an individual appellant or multiple appellants may 
aggregate two or more claims to meet the amount in controversy for an 
ALJ hearing if--
    (i) The claims were previously reconsidered by a QIC;
    (ii) The appellant(s) requests aggregation of claims appealed in the 
same request for ALJ hearing, or in multiple requests for an ALJ hearing 
filed with the same request for aggregation, and the request is filed 
within 60 calendar days after receipt of all of the reconsiderations 
being appealed; and
    (iii) The claims that a single appellant seeks to aggregate involve 
the delivery of similar or related services, or the claims that multiple 
appellants seek to aggregate involve common issues of law and fact, as 
determined by an ALJ or attorney adjudicator. Only an ALJ may determine 
the claims that a single appellant seeks to aggregate do not involve the 
delivery of similar or related services, or the claims that multiple 
appellants seek to aggregate do not involve common issues of law and 
fact. Part A and Part B claims may be combined to meet the amount in 
controversy requirements.
    (2) Aggregating claims that are escalated from the QIC level for an 
ALJ hearing. Either an individual appellant or multiple appellants may 
aggregate two or more claims to meet the amount in controversy for an 
ALJ hearing if--
    (i) The claims were pending before the QIC in conjunction with the 
same request for reconsideration;
    (ii) The appellant(s) requests aggregation of the claims for an ALJ 
hearing in the same request for escalation; and
    (iii) The claims that a single appellant seeks to aggregate involve 
the delivery of similar or related services, or the claims that multiple 
appellants seek to aggregate involve common issues of law and fact, as 
determined by an ALJ or attorney adjudicator. Only an ALJ may determine 
the claims that a single appellant seeks to aggregate do not involve the 
delivery of similar or related services, or the claims that multiple 
appellants seek to aggregate do not involve common issues of law and 
fact. Part A and Part B claims may be combined to meet the amount in 
controversy requirements.

[[Page 195]]

    (f) Content of request for aggregation. When an appellant(s) seeks 
to aggregate claims in a request for an ALJ hearing, the appellant(s) 
must--
    (1) Specify all of the claims the appellant(s) seeks to aggregate; 
and
    (2) State why the appellant(s) believes that the claims involve 
common issues of law and fact or delivery of similar or related 
services.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65335, Dec. 9, 2009; 82 
FR 5109, Jan. 17, 2017]



Sec. 405.1008  Parties to the proceedings on a request for an ALJ hearing.

    The party who filed the request for hearing and all other parties to 
the reconsideration are parties to the proceedings on a request for an 
ALJ hearing. In addition, a representative of CMS or its contractor may 
be a party under the circumstances described in Sec. 405.1012.

[82 FR 5110, Jan. 17, 2017]



Sec. 405.1010  When CMS or its contractors may participate in the 
proceedings on a request for an ALJ hearing.

    (a) When CMS or a contractor can participate. (1) CMS or its 
contractors may elect to participate in the proceedings on a request for 
an ALJ hearing upon filing a notice of intent to participate in 
accordance with paragraph (b) of this section.
    (2) An ALJ may request, but may not require, CMS and/or one or more 
of its contractors to participate in any proceedings before the ALJ, 
including the oral hearing, if any. The ALJ cannot draw any adverse 
inferences if CMS or the contractor decides not to participate in any 
proceedings before the ALJ, including the hearing.
    (b) How an election is made--(1) No notice of hearing. If CMS or a 
contractor elects to participate before receipt of a notice of hearing, 
or when a notice of hearing is not required, it must send written notice 
of its intent to participate to the assigned ALJ or attorney 
adjudicator, or a designee of the Chief ALJ if the request for hearing 
is not yet assigned to an ALJ or attorney adjudicator, and the parties 
who were sent a copy of the notice of reconsideration.
    (2) Notice of hearing. If CMS or a contractor elects to participate 
after receipt of a notice of hearing, it must send written notice of its 
intent to participate to the ALJ and the parties who were sent a copy of 
the notice of hearing.
    (3) Timing of election. CMS or a contractor must send its notice of 
intent to participate--
    (i) If no hearing is scheduled, no later than 30 calendar days after 
notification that a request for hearing was filed; or
    (ii) If a hearing is scheduled, no later than 10 calendar days after 
receiving the notice of hearing.
    (c) Roles and responsibilities of CMS or a contractor as a 
participant. (1) Subject to paragraphs (d)(1) through (3) of this 
section, participation may include filing position papers and/or 
providing testimony to clarify factual or policy issues in a case, but 
it does not include calling witnesses or cross-examining the witnesses 
of a party to the hearing.
    (2) When CMS or its contractor participates in an ALJ hearing, CMS 
or its contractor may not be called as a witness during the hearing and 
is not subject to examination or cross-examination by the parties, 
except as provided in paragraph (d)(3) of this section. However, the 
parties may provide testimony to rebut factual or policy statements made 
by a participant and the ALJ may question the participant about its 
testimony.
    (3) CMS or contractor position papers and written testimony are 
subject to the following:
    (i) A position paper or written testimony must be submitted within 
14 calendar days of an election to participate if no hearing has been 
scheduled, or no later than 5 calendar days prior to the hearing if a 
hearing is scheduled unless the ALJ grants additional time to submit the 
position paper or written testimony.
    (ii) A copy of any position paper or written testimony it submits to 
OMHA must be sent within the same time frame specified in paragraph 
(c)(3)(i) of this section to--
    (A) The parties who were sent a copy of the notice of 
reconsideration, if the position paper or written testimony is being 
submitted before receipt of a notice of hearing for the appeal; or

[[Page 196]]

    (B) The parties who were sent a copy of the notice of hearing, if 
the position paper or written testimony is being submitted after receipt 
of a notice of hearing for the appeal.
    (iii) If CMS or a contractor fails to send a copy of its position 
paper or written testimony to the parties or fails to submit its 
position paper or written testimony within the time frames described in 
this paragraph, the position paper or written testimony will not be 
considered in deciding the appeal.
    (d) Limitation on participating in a hearing. (1) If CMS or a 
contractor has been made a party to a hearing in accordance with 
Sec. 405.1012, no entity that elected to be a participant in the 
proceedings in accordance with this section (or that elected to be a 
party to the hearing but was made a participant in accordance with 
Sec. 405.1012(d)(1)) may participate in the oral hearing, but such 
entity may file a position paper and/or written testimony to clarify 
factual or policy issues in the case.
    (2) If CMS or a contractor did not elect to be a party to a hearing 
in accordance with Sec. 405.1012 and more than one entity elected to be 
a participant in the proceedings in accordance with this section, only 
the first entity to file a response to the notice of hearing as provided 
under Sec. 405.1020(c) may participate in the oral hearing. Entities 
that filed a subsequent response to the notice of hearing may not 
participate in the oral hearing, but may file a position paper and/or 
written testimony to clarify factual or policy issues in the case.
    (3) If CMS or a contractor is precluded from participating in the 
oral hearing under paragraph (d)(1) or (2) of this section, the ALJ may 
grant leave to the precluded entity to participate in the oral hearing 
if the ALJ determines that the entity's participation is necessary for a 
full examination of the matters at issue. If the ALJ does not grant 
leave to the precluded entity to participate in the oral hearing, the 
precluded entity may still be called as a witness by CMS or a contractor 
that is a party to the hearing in accordance with Sec. 405.1012.
    (e) Invalid election. (1) An ALJ or attorney adjudicator may 
determine that a CMS or contractor election is invalid under this 
section if the election was not timely filed or the election was not 
sent to the correct parties.
    (2) If an election is determined to be invalid, a written notice 
must be sent to the entity that submitted the election and the parties 
who are entitled to receive notice of the election in accordance with 
this section.
    (i) If no hearing is scheduled or the election was submitted after 
the hearing occurred, the written notice of invalid election must be 
sent no later than the date the notice of decision, dismissal, or remand 
is mailed.
    (ii) If a hearing is scheduled, the written notice of invalid 
election must be sent prior to the hearing. If the notice would be sent 
fewer than 5 calendar days before the hearing is scheduled to occur, 
oral notice must be provided to the entity that submitted the election, 
and the written notice must be sent as soon as possible after the oral 
notice is provided.

[82 FR 5110, Jan. 17, 2017]



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

    (a) When CMS or a contractor can elect to be a party to a hearing. 
(1) Unless the request for hearing is filed by an unrepresented 
beneficiary, and unless otherwise provided in this section, CMS or one 
of its contractors may elect to be a party to the hearing upon filing a 
notice of intent to be a party to the hearing in accordance with 
paragraph (b) of this section no later than 10 calendar days after the 
QIC receives the notice of hearing.
    (2) Unless the request for hearing is filed by an unrepresented 
beneficiary, an ALJ may request, but may not require, CMS and/or one or 
more of its contractors to be a party to the hearing. The ALJ cannot 
draw any adverse inferences if CMS or the contractor decides not to be a 
party to the hearing.
    (b) How an election is made. If CMS or a contractor elects to be a 
party to the hearing, it must send written notice to the ALJ and the 
parties identified in the notice of hearing of its intent to be a party 
to the hearing.
    (c) Roles and responsibilities of CMS or a contractor as a party. 
(1) As a party, CMS or a contractor may file position

[[Page 197]]

papers, submit evidence, provide testimony to clarify factual or policy 
issues, call witnesses or cross-examine the witnesses of other parties.
    (2) CMS or contractor position papers, written testimony, and 
evidentiary submissions are subject to the following:
    (i) Any position paper, written testimony, and/or evidence must be 
submitted no later than 5 calendar days prior to the hearing unless the 
ALJ grants additional time to submit the position paper, written 
testimony, and/or evidence.
    (ii) A copy of any position paper, written testimony, and/or 
evidence it submits to OMHA must be sent within the same time frame 
specified in paragraph (c)(2)(i) of this section to the parties who were 
sent a copy of the notice of hearing.
    (iii) If CMS or a contractor fails to send a copy of its position 
paper, written testimony, and/or evidence to the parties or fails to 
submit its position paper, written testimony, and/or evidence within the 
time frames described in this section, the position paper, written 
testimony, and/or evidence will not be considered in deciding the 
appeal.
    (d) Limitation on participating in a hearing. (1) If CMS and one or 
more contractors, or multiple contractors, file an election to be a 
party to the hearing, the first entity to file its election after the 
notice of hearing is issued is made a party to the hearing and the other 
entities are made participants in the proceedings under Sec. 405.1010, 
subject to Sec. 405.1010(d)(1) and (3), unless the ALJ grants leave to 
an entity to also be a party to the hearing in accordance with paragraph 
(d)(2) of this section.
    (2) If CMS or a contractor filed an election to be a party in 
accordance with this section but is precluded from being made a party 
under paragraph (d)(1) of this section, the ALJ may grant leave to be a 
party to the hearing if the ALJ determines that the entity's 
participation as a party is necessary for a full examination of the 
matters at issue.
    (e) Invalid election. (1) An ALJ or attorney adjudicator may 
determine that a CMS or contractor election is invalid under this 
section if the request for hearing was filed by an unrepresented 
beneficiary, the election was not timely, the election was not sent to 
the correct parties, or CMS or a contractor had already filed an 
election to be a party to the hearing and the ALJ did not determine that 
the entity's participation as a party is necessary for a full 
examination of the matters at issue.
    (2) If an election is determined to be invalid, a written notice 
must be sent to the entity that submitted the election and the parties 
who were sent the notice of hearing.
    (i) If the election was submitted after the hearing occurred, the 
written notice of invalid election must be sent no later than the date 
the decision, dismissal, or remand notice is mailed.
    (ii) If the election was submitted before the hearing occurs, the 
written notice of invalid election must be sent prior to the hearing. If 
the notice would be sent fewer than 5 calendar days before the hearing 
is scheduled to occur, oral notice must be provided to the entity that 
submitted the election, and the written notice to the entity and the 
parties who were sent the notice of hearing must be sent as soon as 
possible after the oral notice is provided.

[82 FR 5111, Jan. 17, 2017]



Sec. 405.1014  Request for an ALJ hearing or a review of a QIC 
dismissal.

    (a) Content of the request. (1) The request for an ALJ hearing or a 
review of a QIC dismissal must be made in writing. The request must 
include all of the following--
    (i) The name, address, and Medicare health insurance claim number of 
the beneficiary whose claim is being appealed, and the beneficiary's 
telephone number if the beneficiary is the appealing party and not 
represented.
    (ii) The name, address, and telephone number, of the appellant, when 
the appellant is not the beneficiary.
    (iii) The name, address, and telephone number, of the designated 
representative, if any.
    (iv) The Medicare appeal number or document control number, if any, 
assigned to the QIC reconsideration or dismissal notice being appealed.

[[Page 198]]

    (v) The dates of service of the claim(s) being appealed, if 
applicable.
    (vi) The reasons the appellant disagrees with the QIC's 
reconsideration or other determination being appealed.
    (2) The appellant must submit a statement of any additional evidence 
to be submitted and the date it will be submitted.
    (3) Special rule for appealing statistical sample and/or 
extrapolation. If the appellant disagrees with how a statistical sample 
and/or extrapolation was conducted, the appellant must--
    (i) Include the information in paragraphs (a)(1) and (2) of this 
section for each sample claim that the appellant wishes to appeal;
    (ii) File the request for hearing for all sampled claims that the 
appellant wishes to appeal within 60 calendar days of the date the party 
receives the last reconsideration for the sample claims, if they were 
not all addressed in a single reconsideration; and
    (iii) Assert the reasons the appellant disagrees with how the 
statistical sample and/or extrapolation was conducted in the request for 
hearing.
    (b) Complete request required. (1) A request must contain the 
information in paragraph (a)(1) of this section to the extent the 
information is applicable, to be considered complete. If a request is 
not complete, the appellant will be provided with an opportunity to 
complete the request, and if an adjudication time frame applies, it does 
not begin until the request is complete. If the appellant fails to 
provide the information necessary to complete the request within the 
time frame provided, the appellant's request for hearing or review will 
be dismissed.
    (2) If supporting materials submitted with a request clearly provide 
information required for a complete request, the materials will be 
considered in determining whether the request is complete.
    (c) When and where to file. The request for an ALJ hearing or 
request for review of a QIC dismissal must be filed--
    (1) Within 60 calendar days from the date the party receives notice 
of the QIC's reconsideration or dismissal, except as provided in 
paragraph (a)(3)(ii) of this section for appeals of extrapolations;
    (2) With the office specified in the QIC's reconsideration or 
dismissal. If the request for hearing is timely filed with an office 
other than the office specified in the QIC's reconsideration, the 
request is not treated as untimely, and any applicable time frame 
specified in Sec. 405.1016 for deciding the appeal begins on the date 
the office specified in the QIC's reconsideration or dismissal receives 
the request for hearing. If the request for hearing is filed with an 
office, other than the office specified in the QIC's reconsideration or 
dismissal, OMHA must notify the appellant of the date the request was 
received in the correct office and the commencement of any applicable 
adjudication time frame.
    (d) Copy requirement. (1) The appellant must send a copy of the 
request for hearing or request for review of a QIC dismissal to the 
other parties who were sent a copy of the QIC's reconsideration or 
dismissal. If additional materials submitted with the request are 
necessary to provide the information required for a complete request in 
accordance with paragraph (b) of this section, copies of the materials 
must be sent to the parties as well (subject to authorities that apply 
to disclosing the personal information of other parties). If additional 
evidence is submitted with the request for hearing, the appellant may 
send a copy of the evidence, or briefly describe the evidence pertinent 
to the party and offer to provide copies of the evidence to the party at 
the party's request (subject to authorities that apply to disclosing the 
evidence).
    (2) Evidence that a copy of the request for hearing or request for 
review of a QIC dismissal, or a copy of submitted evidence or a summary 
thereof, was sent in accordance with paragraph (d)(1) of this section 
includes--
    (i) Certification on the standard form for requesting an ALJ hearing 
or requesting a review of a QIC dismissal that a copy of the request is 
being sent to the other parties;
    (ii) An indication, such as a copy or ``cc'' line, on a request for 
hearing or request for review of a QIC dismissal

[[Page 199]]

that a copy of the request and any applicable attachments or enclosures 
are being sent to the other parties, including the name and address of 
the recipient;
    (iii) An affidavit or certificate of service that identifies the 
name and address of the recipient, and what was sent to the recipient; 
or
    (iv) A mailing or shipping receipt that identifies the name and 
address of the recipient, and what was sent to the recipient.
    (3) If the appellant, other than an unrepresented beneficiary, fails 
to send a copy of the request for hearing or request for review of a QIC 
dismissal, any additional materials, or a copy of submitted evidence or 
a summary thereof, as described in paragraph (d)(1) of this section, the 
appellant will be provided with an additional opportunity to send the 
request, materials, and/or evidence or summary thereof, and if an 
adjudication time frame applies, it begins upon receipt of evidence that 
the request, materials, and/or evidence or summary thereof were sent. If 
the appellant, other than an unrepresented beneficiary, again fails to 
provide evidence that the request, materials, and/or evidence or summary 
thereof were sent within the additional time frame provided to send the 
request, materials, and/or evidence or summary thereof, the appellant's 
request for hearing or request for review of a QIC dismissal will be 
dismissed.
    (e) Extension of time to request a hearing or review. (1) If the 
request for hearing or review of a QIC dismissal is not filed within 60 
calendar days of receipt of the QIC's reconsideration or dismissal, an 
appellant may request an extension for good cause (See 
Sec. 405.942(b)(2) and (3)).
    (2) Any request for an extension of time must be in writing, give 
the reasons why the request for a hearing or review was not filed within 
the stated time period, and must be filed with the request for hearing 
or request for review of a QIC dismissal with the office specified in 
the notice of reconsideration or dismissal.
    (3) An ALJ or attorney adjudicator may find there is good cause for 
missing the deadline to file a request for an ALJ hearing or request for 
review of a QIC dismissal, or there is no good cause for missing the 
deadline to file a request for a review of a QIC dismissal, but only an 
ALJ may find there is no good cause for missing the deadline to file a 
request for an ALJ hearing. If good cause is found for missing the 
deadline, the time period for filing the request for hearing or request 
for review of a QIC dismissal will be extended. To determine whether 
good cause for late filing exists, the ALJ or attorney adjudicator uses 
the standards set forth in Sec. 405.942(b)(2) and (3).
    (4) If a request for hearing is not timely filed, any applicable 
adjudication period in Sec. 405.1016 begins the date the ALJ or attorney 
adjudicator grants the request to extend the filing deadline.
    (5) A determination granting a request to extend the filing deadline 
is not subject to further review.

[82 FR 5112, Jan. 17, 2017]



Sec. 405.1016  Time frames for deciding an appeal of a QIC
reconsideration or escalated request for a QIC reconsideration.

    (a) Adjudication period for appeals of QIC reconsiderations. When a 
request for an ALJ hearing is filed after a QIC has issued a 
reconsideration, an ALJ or attorney adjudicator issues a decision, 
dismissal order, or remand to the QIC, as appropriate, no later than the 
end of the 90 calendar day period beginning on the date the request for 
hearing is received by the office specified in the QIC's notice of 
reconsideration, unless the 90 calendar day period has been extended as 
provided in this subpart.
    (b) When the adjudication period begins. (1) Unless otherwise 
specified in this subpart, the adjudication period specified in 
paragraph (a) of this section begins on the date that a timely filed 
request for hearing is received by the office specified in the QIC's 
reconsideration, or, if it is not timely filed, the date that the ALJ or 
attorney adjudicator grants any extension to the filing deadline.
    (2) If the Council remands a case and the case was subject to an 
adjudication time frame under paragraph (a) or (c) of this section, the 
remanded appeal will be subject to the adjudication time frame of 
paragraph (a) of this section

[[Page 200]]

beginning on the date that OMHA receives the Council remand.
    (c) Adjudication period for escalated requests for QIC 
reconsiderations. When an appeal is escalated to OMHA because the QIC 
has not issued a reconsideration determination within the period 
specified in Sec. 405.970, an ALJ or attorney adjudicator issues a 
decision, dismissal order, or remand to the QIC, as appropriate, no 
later than the end of the 180 calendar day period beginning on the date 
that the request for escalation is received by OMHA in accordance with 
Sec. 405.970, unless the 180 calendar day period is extended as provided 
in this subpart.
    (d) Waivers and extensions of adjudication period. (1) At any time 
during the adjudication process, the appellant may waive the 
adjudication period specified in paragraphs (a) and (c) of this section. 
The waiver may be for a specific period of time agreed upon by the ALJ 
or attorney adjudicator and the appellant.
    (2) The adjudication periods specified in paragraphs (a) and (c) of 
this section are extended as otherwise specified in this subpart, and 
for the following events--
    (i) The duration of a stay of action on adjudicating the claims or 
matters at issue ordered by a court or tribunal of competent 
jurisdiction; or
    (ii) The duration of a stay of proceedings granted by an ALJ or 
attorney adjudicator on a motion by an appellant, provided no other 
party also filed a request for hearing on the same claim at issue.
    (e) Effect of exceeding adjudication period. If an ALJ or attorney 
adjudicator fails to issue a decision, dismissal order, or remand to the 
QIC within an adjudication period specified in this section, subject to 
paragraphs (b) and (d) of this section, the party that filed the request 
for hearing may escalate the appeal in accordance with paragraph (f) of 
this section. If the party that filed the request for hearing does not 
elect to escalate the appeal, the appeal remains pending with OMHA for a 
decision, dismissal order, or remand.
    (f) Requesting escalation--(1) When and how to request escalation. 
An appellant who files a timely request for hearing before an ALJ and 
whose appeal continues to be pending with OMHA at the end of the 
applicable adjudication period under paragraph (a) or (c) of this 
section, subject to paragraphs (b) and (d) of this section, may exercise 
the option of escalating the appeal to the Council by filing a written 
request with OMHA to escalate the appeal to the Council and sending a 
copy of the request to escalate to the other parties who were sent a 
copy of the QIC reconsideration.
    (2) Escalation. If the request for escalation meets the requirements 
of paragraph (f)(1) of this section and an ALJ or attorney adjudicator 
is not able to issue a decision, dismissal order, or remand order within 
the later of 5 calendar days of receiving the request for escalation, or 
5 calendar days from the end of the applicable adjudication period set 
forth in paragraph (a) or (c) of this section, subject to paragraphs (b) 
and (d) of this section, OMHA will take the following actions--
    (i) Send a notice to the appellant stating that an ALJ or attorney 
adjudicator is not able to issue a decision, dismissal order, or remand 
order within the adjudication period set forth in paragraph (a) or (c) 
of this section, the QIC reconsideration will be the decision that is 
subject to Council review consistent with Sec. 405.1102(a), and the 
appeal will be escalated to the Council for a review in accordance with 
Sec. 405.1108; and
    (ii) Forward the case file to the Council.
    (3) Invalid escalation request. If an ALJ or attorney adjudicator 
determines the request for escalation does not meet the requirements of 
paragraph (f)(1) of this section, OMHA will send a notice to the 
appellant explaining why the request is invalid within 5 calendar days 
of receiving the request for escalation.

[82 FR 5113, Jan. 17, 2017]



Sec. 405.1018  Submitting evidence.

    (a) When evidence may be submitted. Except as provided in this 
section, parties must submit all written or other evidence they wish to 
have considered with the request for hearing, by the date specified in 
the request for hearing in accordance with Sec. 405.1014(a)(2), or if a 
hearing is scheduled, within 10

[[Page 201]]

calendar days of receiving the notice of hearing.
    (b) Effect on adjudication period. If a party submits written or 
other evidence later than 10 calendar days after receiving the notice of 
hearing, any applicable adjudication period specified in Sec. 405.1016 
is extended by the number of calendar days in the period between 10 
calendar days after receipt of the notice of hearing and the day the 
evidence is received.
    (c) New evidence. (1) Any evidence submitted by a provider, 
supplier, or beneficiary represented by a provider or supplier that is 
not submitted prior to the issuance of the QIC's reconsideration 
determination must be accompanied by a statement explaining why the 
evidence was not previously submitted to the QIC, or a prior decision-
maker (see Sec. 405.1028).
    (2) If a statement explaining why the evidence was not previously 
submitted to the QIC or a prior decision-maker is not included with the 
evidence, the evidence will not be considered.
    (d) When this section does not apply. (1) The requirements in 
paragraphs (a) and (b) of this section do not apply to oral testimony 
given at a hearing, or to evidence submitted by an unrepresented 
beneficiary.
    (2) The requirements in paragraph (c) of this section do not apply 
to oral testimony given at a hearing, or to evidence submitted by an 
unrepresented beneficiary, CMS or any of its contractors, a Medicaid 
State agency, an applicable plan, or a beneficiary represented by[ 
someone other than a provider or supplier.

[82 FR 5113, Jan. 17, 2017]



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

    (a) General. The ALJ sets the time and place for the hearing, and 
may change the time and place, if necessary.
    (b) Determining how appearances are made--(1) Appearances by 
unrepresented beneficiaries. The ALJ will direct that the appearance of 
an unrepresented beneficiary who filed a request for hearing be 
conducted by video-teleconferencing (VTC) if the ALJ finds that VTC 
technology is available to conduct the appearance, unless the ALJ find 
good cause for an in-person appearance.
    (i) The ALJ may also offer to conduct a hearing by telephone if the 
request for hearing or administrative record suggests that a telephone 
hearing may be more convenient for the unrepresented beneficiary.
    (ii) The ALJ, with the concurrence of the Chief ALJ or designee, may 
find good cause that an in-person hearing should be conducted if--
    (A) VTC or telephone technology is not available; or
    (B) Special or extraordinary circumstances exist.
    (2) Appearances by individuals other than unrepresented 
beneficiaries. The ALJ will direct that the appearance of an individual, 
other than an unrepresented beneficiary who filed a request for hearing, 
be conducted by telephone, unless the ALJ finds good cause for an 
appearance by other means.
    (i) The ALJ may find good cause for an appearance by VTC if he or 
she determines that VTC is necessary to examine the facts or issues 
involved in the appeal.
    (ii) The ALJ, with the concurrence of the Chief ALJ or designee, 
also may find good cause that an in-person hearing should be conducted 
if--
    (A) VTC and telephone technology are not available; or
    (B) Special or extraordinary circumstances exist.
    (c) Notice of hearing. (1) A notice of hearing is sent to all 
parties that filed an appeal or participated in the reconsideration, any 
party who was found liable for the services at issue subsequent to the 
initial determination or may be found liable based on a review of the 
record, the QIC that issued the reconsideration, and CMS or a contractor 
that elected to participate in the proceedings in accordance with 
Sec. 405.1010(b) or that the ALJ believes would be beneficial to the 
hearing, advising them of the proposed time and place of the hearing.
    (2) The notice of hearing will require all parties to the ALJ 
hearing to reply to the notice by:
    (i) Acknowledging whether they plan to attend the hearing at the 
time and place proposed in the notice of hearing,

[[Page 202]]

or whether they object to the proposed time and/or place of the hearing;
    (ii) If the party or representative is an entity or organization, 
specifying who from the entity or organization plans to attend the 
hearing, if anyone, and in what capacity, in addition to the individual 
who filed the request for hearing; and
    (iii) Listing the witnesses who will be providing testimony at the 
hearing.
    (3) The notice of hearing will require CMS or a contractor that 
wishes to attend the hearing as a participant to reply to the notice by:
    (i) Acknowledging whether it plans to attend the hearing at the time 
and place proposed in the notice of hearing; and
    (ii) Specifying who from the entity plans to attend the hearing.
    (d) A party's right to waive a hearing. A party may also waive the 
right to a hearing and request a decision based on the written evidence 
in the record in accordance with Sec. 405.1038(b). As provided in 
Sec. 405.1000, an ALJ may require the parties to attend a hearing if it 
is necessary to decide the case. If an ALJ determines that it is 
necessary to obtain testimony from a non-party, he or she may still hold 
a hearing to obtain that testimony, even if all of the parties have 
waived the right to appear. In those cases, the ALJ will give the 
parties the opportunity to appear when the testimony is given but may 
hold the hearing even if none of the parties decide to appear.
    (e) A party's objection to time and place of hearing. (1) If a party 
objects to the time and place of the hearing, the party must notify the 
ALJ at the earliest possible opportunity before the time set for the 
hearing.
    (2) The party must state the reason for the objection and state the 
time and place he or she wants the hearing to be held.
    (3) The request must be in writing, except that a party may orally 
request that a hearing be rescheduled in an emergency circumstance the 
day prior to or day of the hearing. The ALJ must document all oral 
requests for a rescheduled hearing in writing and maintain the 
documentation in the administrative record.
    (4) The ALJ may change the time or place of the hearing if the party 
has good cause.
    (f) Good cause for changing the time or place. The ALJ can find good 
cause for changing the time or place of the scheduled hearing and 
reschedule the hearing if the information available to the ALJ supports 
the party's contention that--
    (1) The party or his or her representative is unable to attend or to 
travel to the scheduled hearing because of a serious physical or mental 
condition, incapacitating injury, or death in the family; or
    (2) Severe weather conditions make it impossible to travel to the 
hearing; or
    (3) Good cause exists as set forth in paragraph (g) of this section.
    (g) Good cause in other circumstances. (1) In determining whether 
good cause exists in circumstances other than those set forth in 
paragraph (f) of this section, the ALJ considers the party's reason for 
requesting the change, the facts supporting the request, and the impact 
of the proposed change on the efficient administration of the hearing 
process.
    (2) Factors evaluated to determine the impact of the change include, 
but are not limited to, the effect on processing other scheduled 
hearings, potential delays in rescheduling the hearing, and whether any 
prior changes were granted the party.
    (3) Examples of other circumstances a party might give for 
requesting a change in the time or place of the hearing include, but are 
not limited to, the following:
    (i) The party has attempted to obtain a representative but needs 
additional time.
    (ii) The party's representative was appointed within 10 calendar 
days of the scheduled hearing and needs additional time to prepare for 
the hearing.
    (iii) The party's representative has a prior commitment to be in 
court or at another administrative hearing on the date scheduled for the 
hearing.
    (iv) A witness who will testify to facts material to a party's case 
is unavailable to attend the scheduled hearing and the evidence cannot 
be otherwise obtained.

[[Page 203]]

    (v) Transportation is not readily available for a party to travel to 
the hearing.
    (vi) The party is unrepresented, and is unable to respond to the 
notice of hearing because of any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language) that he or she has.
    (vii) The party or representative has a prior commitment that cannot 
be changed without significant expense.
    (viii) The party or representative asserts that he or she did not 
receive the notice of hearing and is unable to appear at the scheduled 
time and place.
    (h) Effect of rescheduling hearing. If a hearing is postponed at the 
request of the appellant for any of the above reasons, the time between 
the originally scheduled hearing date and the new hearing date is not 
counted toward the adjudication period specified in Sec. 405.1016.
    (i) A party's request for an in-person or VTC hearing. (1) If an 
unrepresented beneficiary who filed the request for hearing objects to a 
VTC hearing or to the ALJ's offer to conduct a hearing by telephone, or 
if a party other than an unrepresented beneficiary who filed the request 
for hearing objects to a telephone or VTC hearing, the party must notify 
the ALJ at the earliest possible opportunity before the time set for the 
hearing and request a VTC or an in-person hearing.
    (2) The party must state the reason for the objection and state the 
time and/or place he or she wants an in-person or VTC hearing to be 
held.
    (3) The request must be in writing.
    (4) When a party's request for an in-person or VTC hearing as 
specified under paragraph (i)(1) of this section is granted and an 
adjudication time frame applies in accordance with Sec. 405.1016, the 
ALJ issues a decision, dismissal, or remand to the QIC within the 
adjudication time frame specified in Sec. 405.1016 (including any 
applicable extensions provided in this subpart) unless the party 
requesting the hearing agrees to waive such adjudication time frame in 
writing.
    (5) The ALJ may grant the request, with the concurrence of the Chief 
ALJ or designee, upon a finding of good cause and will reschedule the 
hearing for a time and place when the party may appear in person or by 
VTC before the ALJ.
    (j) Amended notice of hearing. If the ALJ changes or will change the 
time and/or place of the hearing, an amended notice of hearing must be 
sent to all of the parties who were sent a copy of the notice of hearing 
and CMS or its contractors that elected to be a participant or party to 
the hearing in accordance with Sec. 405.1022(a).

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005; 74 
FR 65335, Dec. 9, 2009; 82 FR 5114, Jan. 17, 2017]



Sec. 405.1022  Notice of a hearing before an ALJ.

    (a) Issuing the notice. After the ALJ sets the time and place of the 
hearing, notice of the hearing will be mailed or otherwise transmitted 
in accordance with OMHA procedures to the parties and other potential 
participants, as provided in Sec. 405.1020(c) at their last known 
address, or given by personal service, except to a party or potential 
participant who indicates in writing that it does not wish to receive 
this notice. The notice is mailed, transmitted, or served at least 20 
calendar days before the hearing unless the recipient agrees in writing 
to the notice being mailed, transmitted, or served fewer than 20 
calendar days before the hearing.
    (b) Notice information. (1) The notice of hearing contains--
    (i) A statement that the issues before the ALJ include all of the 
issues brought out in the initial determination, redetermination, or 
reconsideration that were not decided entirely in a party's favor, for 
the claims specified in the request for hearing; and
    (ii) A statement of any specific new issues the ALJ will consider in 
accordance with Sec. 405.1032.
    (2) The notice will inform the parties that they may designate a 
person to represent them during the proceedings.
    (3) The notice must include an explanation of the procedures for 
requesting a change in the time or place of the hearing, a reminder that 
the ALJ may dismiss the hearing request if the appellant fails to appear 
at the scheduled hearing without good cause, and other

[[Page 204]]

information about the scheduling and conduct of the hearing.
    (4) The appellant will also be told if his or her appearance or that 
of any other party or witness is scheduled by VTC, telephone, or in 
person. If the ALJ has scheduled the appellant or other party to appear 
at the hearing by VTC, the notice of hearing will advise that the 
scheduled place for the hearing is a VTC site and explain what it means 
to appear at the hearing by VTC.
    (5) The notice advises the appellant or other parties that if they 
object to appearing by VTC or telephone, and wish instead to have their 
hearing at a time and place where they may appear in person before the 
ALJ, they must follow the procedures set forth at Sec. 405.1020(i) for 
notifying the ALJ of their objections and for requesting an in-person 
hearing.
    (c) Acknowledging the notice of hearing. (1) If the appellant, any 
other party to the reconsideration to whom the notice of hearing was 
sent, or their representative does not acknowledge receipt of the notice 
of hearing, OMHA attempts to contact the party for an explanation.
    (2) If the party states that he or she did not receive the notice of 
hearing, a copy of the notice is sent to him or her by certified mail or 
other means requested by the party and in accordance with OMHA 
procedures.
    (3) The party may request that the ALJ reschedule the hearing in 
accordance with Sec. 405.1020(e).

[82 FR 5115, Jan. 17, 2017]



Sec. 405.1024  Objections to the issues.

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

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65335, Dec. 9, 2009; 82 
FR 5115, Jan. 17, 2017]



Sec. 405.1026  Disqualification of the ALJ or attorney adjudicator.

    (a) An ALJ or attorney adjudicator cannot adjudicate an appeal if he 
or she is prejudiced or partial to any party or has any interest in the 
matter pending for decision.
    (b) If a party objects to the ALJ or attorney adjudicator assigned 
to adjudicate the appeal, the party must notify the ALJ within 10 
calendar days of the date of the notice of hearing if a hearing is 
scheduled, or the ALJ or attorney adjudicator at any time before a 
decision, dismissal order, or remand order is issued if no hearing is 
scheduled. The ALJ or attorney adjudicator considers the party's 
objections and decides whether to proceed with the appeal or withdraw.
    (c) If the ALJ or attorney adjudicator withdraws, another ALJ or 
attorney adjudicator will be assigned to adjudicate the appeal. If the 
ALJ or attorney adjudicator does not withdraw, the party may, after the 
ALJ or attorney adjudicator has issued an action in the case, present 
his or her objections to the Council in accordance with Sec. 405.1100 
through Sec. 405.1130. The Council will then consider whether the 
decision or dismissal should be revised or if applicable, a new hearing 
held before another ALJ. If the case is escalated to the Council after a 
hearing is held but before the ALJ issues a decision, the Council 
considers the reasons the party objected to the ALJ during its review of 
the case and, if the Council deems it necessary, may remand the case to 
another ALJ for a hearing and decision.
    (d) If the party objects to the ALJ or attorney adjudicator and the 
ALJ or attorney adjudicator subsequently withdraws from the appeal, any 
adjudication time frame that applies to the appeal in accordance with 
Sec. 405.1016 is extended by 14 calendar days.

[82 FR 5115, Jan. 17, 2017]

[[Page 205]]



Sec. 405.1028  Review of evidence submitted by parties.

    (a) New evidence--(1) Examination of any new evidence. After a 
hearing is requested but before a hearing is held by an ALJ or a 
decision is issued if no hearing is held, the ALJ or attorney 
adjudicator will examine any new evidence submitted in accordance with 
Sec. 405.1018, by a provider, supplier, or beneficiary represented by a 
provider or supplier to determine whether the provider, supplier, or 
beneficiary represented by a provider or supplier had good cause for 
submitting the evidence for the first time at the OMHA level.
    (2) Determining if good cause exists. An ALJ or attorney adjudicator 
finds good cause when--
    (i) The new evidence is, in the opinion of the ALJ or attorney 
adjudicator, material to an issue addressed in the QIC's reconsideration 
and that issue was not identified as a material issue prior to the QIC's 
reconsideration;
    (ii) The new evidence is, in the opinion of the ALJ, material to a 
new issue identified in accordance with Sec. 405.1032(b)(1);
    (iii) The party was unable to obtain the evidence before the QIC 
issued its reconsideration and submits evidence that, in the opinion of 
the ALJ or attorney adjudicator, demonstrates the party made reasonable 
attempts to obtain the evidence before the QIC issued its 
reconsideration;
    (iv) The party asserts that the evidence was submitted to the QIC or 
another contractor and submits evidence that, in the opinion of the ALJ 
or attorney adjudicator, demonstrates the new evidence was submitted to 
the QIC or another contractor before the QIC issued the reconsideration; 
or
    (v) In circumstances not addressed in paragraphs (a)(2)(i) through 
(iv) of this section, the ALJ or attorney adjudicator determines that 
the party has demonstrated that it could not have obtained the evidence 
before the QIC issued its reconsideration.
    (3) If good cause does not exist. If the ALJ or attorney adjudicator 
determines that there was not good cause for submitting the evidence for 
the first time at the OMHA level, the ALJ or attorney adjudicator must 
exclude the evidence from the proceeding and may not consider it in 
reaching a decision.
    (4) Notification to parties. If a hearing is conducted, as soon as 
possible, but no later than the start of the hearing, the ALJ must 
notify all parties and participants who responded to the notice of 
hearing whether the evidence will be considered or is excluded from 
consideration.
    (b) Duplicative evidence. The ALJ or attorney adjudicator may 
exclude from consideration any evidence submitted by a party at the OMHA 
level that is duplicative of evidence already in the record forwarded to 
OMHA.

[82 FR 5115, Jan. 17, 2017]



Sec. 405.1030  ALJ hearing procedures.

    (a) General rule. A hearing is open to the parties and to other 
persons the ALJ considers necessary and proper.
    (b) At the hearing. (1) At the hearing, the ALJ fully examines the 
issues, questions the parties and other witnesses, and may accept 
evidence that is material to the issues consistent with Secs. 405.1018 
and 405.1028.
    (2) The ALJ may limit testimony and/or argument at the hearing that 
are not relevant to an issue before the ALJ, that are repetitive of 
evidence or testimony already in the record, or that relate to an issue 
that has been sufficiently developed or on which the ALJ has already 
ruled. The ALJ may, but is not required to, provide the party or 
representative with an opportunity to submit additional written 
statements and affidavits on the matter, in lieu of testimony and/or 
argument at the hearing. The written statements and affidavits must be 
submitted within the time frame designated by the ALJ.
    (3) If the ALJ determines that a party or party's representative is 
uncooperative, disruptive to the hearing, or abusive during the course 
of the hearing after the ALJ has warned the party or representative to 
stop such behavior, the ALJ may excuse the party or representative from 
the hearing and continue with the hearing to provide the other parties 
and participants with an opportunity to offer testimony and/or argument. 
If a party or representative was excused from the hearing, the

[[Page 206]]

ALJ will provide the party or representative with an opportunity to 
submit written statements and affidavits in lieu of testimony and/or 
argument at the hearing, and the party or representative may request a 
recording of the hearing in accordance with Sec. 405.1042 and respond in 
writing to any statements made by other parties or participants and/or 
testimony of the witnesses at the hearing. The written statements and 
affidavits must be submitted within the time frame designated by the 
ALJ.
    (c) Missing evidence. The ALJ may also stop the hearing temporarily 
and continue it at a later date if he or she believes that there is 
material evidence missing at the hearing. If the missing evidence is in 
the possession of the appellant, and the appellant is a provider, 
supplier, or a beneficiary represented by a provider or supplier, the 
ALJ must determine if the appellant had good cause in accordance with 
Sec. 405.1028 for not producing the evidence earlier.
    (d) Effect of new evidence on adjudication period. If an appellant, 
other than an unrepresented beneficiary, submits evidence pursuant to 
paragraph (b) or (c) of this section, and an adjudication period applies 
to the appeal, the adjudication period specified in Sec. 405.1016 is 
extended in accordance with Sec. 405.1018(b).
    (e) Continued hearing. (1) A hearing may be continued to a later 
date. Notice of the continued hearing must be sent in accordance with 
Sec. 405.1022, except that a waiver of notice of the hearing may be made 
in writing or on the record, and the notice is sent to the parties and 
participants who attended the hearing, and any additional parties or 
potential parties or participants the ALJ determines are appropriate.
    (2) If the appellant requests the continuance and an adjudication 
period applies to the appeal in accordance with Sec. 405.1016, the 
adjudication period is extended by the period between the initial 
hearing date and the continued hearing date.
    (f) Supplemental hearing. (1) The ALJ may conduct a supplemental 
hearing at any time before he or she mails a notice of the decision in 
order to receive new and material evidence, obtain additional testimony, 
or address a procedural matter. The ALJ determines whether a 
supplemental hearing is necessary and if one is held, the scope of the 
hearing, including when evidence is presented and what issues are 
discussed. Notice of the supplemental hearing must be sent in accordance 
with Sec. 405.1022, except that the notice is sent to the parties and 
participants who attended the hearing, and any additional parties or 
potential parties or participants the ALJ determines are appropriate.
    (2) If the appellant requests the supplemental hearing and an 
adjudication period applies to the appeal in accordance with 
Sec. 405.1016, the adjudication period is extended by the period between 
the initial hearing date and the supplemental hearing date.

[82 FR 5116, Jan. 17, 2017]



Sec. 405.1032  Issues before an ALJ or attorney adjudicator.

    (a) General rule. The issues before the ALJ or attorney adjudicator 
include all the issues for the claims or appealed matter specified in 
the request for hearing that were brought out in the initial 
determination, redetermination, or reconsideration that were not decided 
entirely in a party's favor. (For purposes of this provision, the term 
``party'' does not include a representative of CMS or one of its 
contractors that may be participating in the hearing.)
    (b) New issues--(1) When a new issue may be considered. A new issue 
may include issues resulting from the participation of CMS or its 
contractor at the OMHA level of adjudication and from any evidence and 
position papers submitted by CMS or its contractor for the first time to 
the ALJ. The ALJ or any party may raise a new issue relating to a claim 
or appealed matter specified in the request for hearing; however, the 
ALJ may only consider a new issue, including a favorable portion of a 
determination on a claim or appealed matter specified in the request for 
hearing, if its resolution could have a material impact on the claim or 
appealed matter and--
    (i) There is new and material evidence that was not available or 
known at the time of the determination and

[[Page 207]]

that may result in a different conclusion; or
    (ii) The evidence that was considered in making the determination 
clearly shows on its face that an obvious error was made at the time of 
the determination.
    (2) Notice of the new issue. The ALJ may consider a new issue at the 
hearing if he or she notifies the parties that were or will be sent the 
notice of hearing about the new issue before the start of the hearing.
    (3) Opportunity to submit evidence. If notice of the new issue is 
sent after the notice of hearing, the parties will have at least 10 
calendar days after receiving notice of the new issue to submit evidence 
regarding the issue, and without affecting any applicable adjudication 
period. If a hearing is conducted before the time to submit evidence 
regarding the issue expires, the record will remain open until the 
opportunity to submit evidence expires.
    (c) Adding claims to a pending appeal. (1) Claims that were not 
specified in a request for hearing may only be added to a pending appeal 
if the claims were adjudicated in the same reconsideration that is 
appealed, and the period to request an ALJ hearing for that 
reconsideration has not expired, or an ALJ or attorney adjudicator 
extends the time to request an ALJ hearing on those claims in accordance 
with Sec. 405.1014(e).
    (2) Before a claim may be added to a pending appeal, the appellant 
must submit evidence that demonstrates the information that constitutes 
a complete request for hearing in accordance with Sec. 405.1014(b) and 
other materials related to the claim that the appellant seeks to add to 
the pending appeal were sent to the other parties to the claim in 
accordance with Sec. 405.1014(d).
    (d) Appeals involving statistical sampling and extrapolations--(1) 
Generally. If the appellant does not assert the reasons the appellant 
disagrees with how a statistical sample and/or extrapolation was 
conducted in the request for hearing, in accordance with 
Sec. 405.1014(a)(3)(iii), issues related to how the statistical sample 
and extrapolation were conducted shall not be considered or decided.
    (2) Consideration of sample claims. If a party asserts a 
disagreement with how a statistical sample and/or extrapolation was 
conducted in the request for hearing, in accordance with 
Sec. 405.1014(a)(3)(iii), paragraphs (a) through (c) of this section 
apply to the adjudication of the sample claims but, in deciding issues 
related to how a statistical sample and/or extrapolation was conducted 
the ALJ or attorney adjudicator must base his or her decision on a 
review of the entire sample to the extent appropriate to decide the 
issue.

[82 FR 5116, Jan. 17, 2017]



Sec. 405.1034  Requesting information from the QIC.

    (a) If an ALJ or attorney adjudicator believes that the written 
record is missing information that is essential to resolving the issues 
on appeal and that information can be provided only by CMS or its 
contractors, the information may be requested from the QIC that 
conducted the reconsideration or its successor.
    (1) Official copies of redeterminations and reconsiderations that 
were conducted on the appealed claims can be provided only by CMS or its 
contractors. Prior to issuing a request for information to the QIC, OMHA 
will confirm whether an electronic copy of the redetermination or 
reconsideration is available in the official system of record, and if so 
will accept the electronic copy as an official copy.
    (2) ``Can be provided only by CMS or its contractors'' means the 
information is not publicly available, is not in the possession of, and 
cannot be requested and obtained by one of the parties. Information that 
is publicly available is information that is available to the general 
public via the Internet or in a printed publication. Information that is 
publicly available includes, but is not limited to, information 
available on a CMS or contractor Web site or information in an official 
CMS or DHHS publication (including, but not limited to, provisions of 
NCDs or LCDs, procedure code or modifier descriptions, fee schedule 
data, and contractor operating manual instructions).
    (b) The ALJ or attorney adjudicator retains jurisdiction of the 
case, and the case remains pending at OMHA.

[[Page 208]]

    (c) The QIC has 15 calendar days after receiving the request for 
information to furnish the information or otherwise respond to the 
information request directly or through CMS or another contractor.
    (d) If an adjudication period applies to the appeal in accordance 
with Sec. 405.1016, the adjudication period is extended by the period 
between the date of the request for information and the date the QIC 
responds to the request or 20 calendar days after the date of the 
request, whichever occurs first.

[82 FR 5117, Jan. 17, 2017]



Sec. 405.1036  Description of an ALJ hearing process.

    (a) The right to appear and present evidence. (1) Any party to a 
hearing has the right to appear before the ALJ to present evidence and 
to state his or her position. A party may appear by video-
teleconferencing (VTC), telephone, or in person as determined under 
Sec. 405.1020.
    (2) A party may also make his or her appearance by means of a 
representative, who may make the appearance by VTC, telephone, or in 
person, as determined under Sec. 405.1020.
    (3) Witness testimony may be given and CMS participation may also be 
accomplished by VTC, telephone, or in person, as determined under 
Sec. 405.1020.
    (b) Waiver of the right to appear. (1) A party may submit to OMHA a 
written statement indicating that he or she does not wish to appear at 
the hearing.
    (2) The appellant may subsequently withdraw his or her waiver at any 
time before the notice of the hearing decision is issued; however, by 
withdrawing the waiver the appellant agrees to an extension of the 
adjudication period as specified in Sec. 405.1016 that may be necessary 
to schedule and hold the hearing.
    (3) Other parties may withdraw their waiver up to the date of the 
scheduled hearing, if any. Even if all of the parties waive their right 
to appear at a hearing, the ALJ may require them to attend an oral 
hearing if he or she believes that a personal appearance and testimony 
by the appellant or any other party is necessary to decide the case.
    (c) Presenting written statements and oral arguments. A party or a 
person designated to act as a party's representative may appear before 
the ALJ to state the party's case, to present a written summary of the 
case, or to enter written statements about the facts and law material to 
the case in the record. A copy of any written statements must be 
provided to the other parties to a hearing, if any, at the same time 
they are submitted to the ALJ.
    (d) Witnesses at a hearing. Witnesses may appear at a hearing. They 
testify under oath or affirmation, unless the ALJ finds an important 
reason to excuse them from taking an oath or affirmation. The ALJ may 
ask the witnesses any questions relevant to the issues and allows the 
parties or their designated representatives to do so.
    (e) What evidence is admissible at a hearing. The ALJ may receive 
evidence at the hearing even though the evidence is not admissible in 
court under the rules of evidence used by the court.
    (f) Subpoenas. (1) Except as provided in this section, when it is 
reasonably necessary for the full presentation of a case, an ALJ may, on 
his or her own initiative or at the request of a party, issue subpoenas 
for the appearance and testimony of witnesses and for a party to make 
books, records, correspondence, papers, or other documents that are 
material to an issue at the hearing available for inspection and 
copying. An ALJ may not issue a subpoena to CMS or its contractors, on 
his or her own initiative or at the request of a party, to compel an 
appearance, testimony, or the production of evidence.
    (2) A party's written request for a subpoena must--
    (i) Give the names of the witnesses or documents to be produced;
    (ii) Describe the address or location of the witnesses or documents 
with sufficient detail to find them;
    (iii) State the important facts that the witness or document is 
expected to prove; and
    (iv) Indicate why these facts cannot be proven without issuing a 
subpoena.
    (3) Parties to a hearing who wish to subpoena documents or witnesses 
must file a written request for the issuance of a subpoena with the 
requirements

[[Page 209]]

set forth in paragraph (f)(2) of this section with the ALJ no later than 
the end of the discovery period established by the ALJ under 
Sec. 405.1037(c).
    (4) Where a party has requested a subpoena, a subpoena will be 
issued only where a party--
    (i) Has sought discovery;
    (ii) Has filed a motion to compel;
    (iii) Has had that motion granted by the ALJ; and
    (iv) Nevertheless, has not received the requested discovery.
    (5) Reviewability of subpoena rulings--
    (i) General rule. An ALJ ruling on a subpoena request is not subject 
to immediate review by the Council. The ruling may be reviewed solely 
during the course of the Council's review specified in Sec. 405.1016(e) 
and (f), Sec. 405.1102, or Sec. 405.1110, as applicable. Exception. To 
the extent a subpoena compels disclosure of a matter for which an 
objection based on privilege, or other protection from disclosure such 
as case preparation, confidentiality, or undue burden, was made before 
an ALJ, the Council may review immediately the subpoena or that portion 
of the subpoena as applicable.
    (ii) Where CMS objects to a subpoena ruling, the Council must take 
review and the subpoena ruling at issue is automatically stayed pending 
the Council's order.
    (iii) Upon notice to the ALJ that a party or non-party, as 
applicable, intends to seek Council review of the subpoena, the ALJ must 
stay all proceedings affected by the subpoena.
    (iv) The ALJ determines the length of the stay under the 
circumstances of a given case, but in no event is the stay less than 15 
calendar daysbeginning after the day on which the ALJ received notice of 
the party or non-party's intent to seek Council review.
    (v) If the Council grants a request for review of the subpoena, the 
subpoena or portion of the subpoena, as applicable, is stayed until the 
Council issues a written decision that affirms, reverses, or modifies 
the ALJ's action on the subpoena.
    (vi) If the Council does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifted and the ALJ's 
action stands.
    (6) Enforcement. (i) If the ALJ determines, whether on his or her 
own motion or at the request of a party, that a party or non-party 
subject to a subpoena issued under this section has refused to comply 
with the subpoena, the ALJ may request the Secretary to seek enforcement 
of the subpoena in accordance with section 205(e) of the Act, 42 U.S.C. 
405(e).
    (ii) Any enforcement request by an ALJ must consist of a written 
notice to the Secretary describing in detail the ALJ's findings of 
noncompliance and his or her specific request for enforcement, and 
providing a copy of the subpoena and evidence of its receipt by 
certified mail by the party or nonparty subject to the subpoena.
    (iii) The ALJ must promptly mail a copy of the notice and related 
documents to the party subject to the subpoena, and to any other party 
and affected non-party to the appeal.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65336, Dec. 9, 2009; 82 
FR 5117, Jan. 17, 2017]



Sec. 405.1037  Discovery.

    (a) General rules. (1) Discovery is permissible only when CMS or its 
contractor elects to be a party to an ALJ hearing, in accordance with 
Sec. 405.1012.
    (2) The ALJ may permit discovery of a matter that is relevant to the 
specific subject matter of the ALJ hearing, provided the matter is not 
privileged or otherwise protected from disclosure and the ALJ determines 
that the discovery request is not unreasonable, unduly burdensome or 
expensive, or otherwise inappropriate.
    (3) Any discovery initiated by a party must comply with all 
requirements and limitations of this section, along with any further 
requirements or limitations ordered by the ALJ.
    (b) Limitations on discovery. Any discovery before the ALJ is 
limited.
    (1) A party may request of another party the reasonable production 
of documents for inspection and copying.
    (2) A party may not take the deposition, upon oral or written 
examination, of another party unless the proposed deponent agrees to the 
deposition or the ALJ finds that the proposed deposition is necessary 
and appropriate in

[[Page 210]]

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

[[Page 211]]

    (f) Adjudication period. If an adjudication period applies to the 
appeal in accordance with Sec. 405.1016, and a party requests discovery 
from another party to the hearing, the adjudication period is extended 
for the duration of discovery, from the date a discovery request is 
granted until the date specified for ending discovery.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005; 74 
FR 65336, Dec. 9, 2009; 82 FR 5117, Jan. 17, 2017]



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

    (a) Decision fully favorable. If the evidence in the administrative 
record supports a finding fully in favor of the appellant(s) on every 
issue and no other party to the appeal is liable for claims at issue, an 
ALJ or attorney adjudicator may issue a decision without giving the 
parties prior notice and without an ALJ conducting a hearing, unless CMS 
or a contractor has elected to be a party to the hearing in accordance 
with Sec. 405.1012. The notice of the decision informs the parties that 
they have the right to a hearing and a right to examine the evidence on 
which the decision is based.
    (b) Parties do not wish to appear. (1) An ALJ or attorney 
adjudicator may decide a case on the record and without an ALJ 
conducting a hearing if--
    (i) All the parties who would be sent a notice of hearing in 
accordance with Sec. 405.1020(c) indicate in writing that they do not 
wish to appear before an ALJ at a hearing, including a hearing conducted 
by telephone or video-teleconferencing, if available; or
    (ii) The appellant lives outside the United States and does not 
inform OMHA that he or she wants to appear at a hearing before an ALJ, 
and there are no other parties who would be sent a notice of hearing in 
accordance with Sec. 405.1020(c) and who wish to appear.
    (2) When a hearing is not held, the decision of the ALJ or attorney 
adjudicator must refer to the evidence in the record on which the 
decision was based.
    (c) Stipulated decision. If CMS or one of its contractors submits a 
written statement or makes an oral statement at a hearing indicating the 
item or service should be covered or payment may be made, and the 
written or oral statement agrees to the amount of payment the parties 
believe should be made if the amount of payment is an issue before the 
ALJ or attorney adjudicator, an ALJ or attorney adjudicator may issue a 
stipulated decision finding in favor of the appellant or other liable 
parties on the basis of the statement, and without making findings of 
fact, conclusions of law, or further explaining the reasons for the 
decision.

[82 FR 5117, Jan. 17, 2017]



Sec. 405.1040  Prehearing and posthearing conferences.

    (a) The ALJ may decide on his or her own, or at the request of any 
party to the hearing, to hold a prehearing or posthearing conference to 
facilitate the hearing or the hearing decision.
    (b) The ALJ informs the parties who will be or were sent a notice of 
hearing in accordance with Sec. 405.1020(c), and CMS or a contractor 
that has elected to be a participant in the proceedings or party to the 
hearing at the time the notice of conference is sent, of the time, 
place, and purpose of the conference at least 7 calendar days before the 
conference date, unless a party indicates in writing that it does not 
wish to receive a written notice of the conference.
    (c) At the conference--
    (1) The ALJ or an OMHA attorney designated by the ALJ conducts the 
conference, but only the ALJ conducting a conference may consider 
matters in addition to those stated in the conference notice if the 
parties consent to consideration of the additional matters in writing.
    (2) An audio recording of the conference is made.
    (d) The ALJ issues an order to all parties and participants who 
attended the conference stating all agreements and actions resulting 
from the conference. If a party does not object within 10 calendar days 
of receiving the order, or any additional time granted by the ALJ, the 
agreements and actions become part of the administrative record and are 
binding on all parties.

[82 FR 5118, Jan. 17, 2017]

[[Page 212]]



Sec. 405.1042  The administrative record.

    (a) Creating the record. (1) OMHA makes a complete record of the 
evidence and administrative proceedings on the appealed matter, 
including any prehearing and posthearing conferences, and hearing 
proceedings that were conducted.
    (2) The record will include marked as exhibits, the appealed 
determinations, and documents and other evidence used in making the 
appealed determinations and the ALJ's or attorney adjudicator's 
decision, including, but not limited to, claims, medical records, 
written statements, certificates, reports, affidavits, and any other 
evidence the ALJ or attorney adjudicator admits. The record will also 
include any evidence excluded or not considered by the ALJ or attorney 
adjudicator, including, but not limited to, new evidence submitted by a 
provider or supplier, or beneficiary represented by a provider or 
supplier, for which no good cause was established, and duplicative 
evidence submitted by a party.
    (3) A party may request and review a copy of the record prior to or 
at the hearing, or, if a hearing is not held, at any time before the 
notice of decision is issued.
    (4) If a request for review is filed or the case is escalated to the 
Council, the complete record, including any prehearing and posthearing 
conference and hearing recordings, is forwarded to the Council.
    (5) A typed transcription of the hearing is prepared if a party 
seeks judicial review of the case in a Federal district court within the 
stated time period and all other jurisdictional criteria are met, 
unless, upon the Secretary's motion prior to the filing of an answer, 
the court remands the case.
    (b) Requesting and receiving copies of the record. (1) While an 
appeal is pending at OMHA, a party may request and receive a copy of all 
or part of the record from OMHA, including any index of the 
administrative record, documentary evidence, and a copy of the audio 
recording of the oral proceedings. The party may be asked to pay the 
costs of providing these items.
    (2) If a party requests a copy of all or part of the record from 
OMHA or the ALJ or attorney adjudicator and an opportunity to comment on 
the record, any adjudication period that applies in accordance with 
Sec. 405.1016 is extended by the time beginning with the receipt of the 
request through the expiration of the time granted for the party's 
response.
    (3) If a party requests a copy of all or part of the record and the 
record, including any audio recordings, contains information pertaining 
to an individual that the requesting party is not entitled to receive, 
such as personally identifiable information or protected health 
information, such portions of the record will not be furnished unless 
the requesting party obtains consent from the individual.

[82 FR 5118, Jan. 17, 2017]



Sec. 405.1044  Consolidated proceedings.

    (a) Consolidated hearing. (1) A consolidated hearing may be held if 
one or more of the issues to be considered at the hearing are the same 
issues that are involved in one or more other appeals pending before the 
same ALJ.
    (2) It is within the discretion of the ALJ to grant or deny an 
appellant's request for consolidation. In considering an appellant's 
request, the ALJ may consider factors such as whether the claims at 
issue may be more efficiently decided if the appeals are consolidated 
for hearing. In considering the appellant's request for consolidation, 
the ALJ must take into account any adjudication deadlines for each 
appeal and may require an appellant to waive the adjudication deadline 
associated with one or more appeals if consolidation otherwise prevents 
the ALJ from deciding all of the appeals at issue within their 
respective deadlines.
    (3) The ALJ may also propose on his or her own motion to consolidate 
two or more appeals in one hearing for administrative efficiency, but 
may not require an appellant to waive the adjudication deadline for any 
of the consolidated cases.
    (4) Notice of a consolidated hearing must be included in the notice 
of hearing issued in accordance with Secs. 405.1020 and 405.1022.
    (b) Consolidated or separate decision and record. (1) If the ALJ 
decides to hold a consolidated hearing, he or she may make either--

[[Page 213]]

    (i) A consolidated decision and record; or
    (ii) A separate decision and record on each appeal.
    (2) If a separate decision and record on each appeal is made, the 
ALJ is responsible for making sure that any evidence that is common to 
all appeals and material to the common issue to be decided, and audio 
recordings of any conferences that were conducted and the consolidated 
hearing are included in each individual administrative record, as 
applicable.
    (3) If a hearing will not be conducted for multiple appeals that are 
before the same ALJ or attorney adjudicator, and the appeals involve one 
or more of the same issues, the ALJ or attorney adjudicator may make a 
consolidated decision and record at the request of the appellant or on 
the ALJ's or attorney adjudicator's own motion.
    (c) Limitation on consolidated proceedings. Consolidated proceedings 
may only be conducted for appeals filed by the same appellant, unless 
multiple appellants aggregated claims to meet the amount in controversy 
requirement in accordance with Sec. 405.1006 and the beneficiaries whose 
claims are at issue have all authorized disclosure of their protected 
information to the other parties and any participants.

[82 FR 5118, Jan. 17, 2017]



Sec. 405.1046  Notice of an ALJ or attorney adjudicator decision.

    (a) Decisions on requests for hearing--(1) General rule. Unless the 
ALJ or attorney adjudicator dismisses or remands the request for 
hearing, the ALJ or attorney adjudicator will issue a written decision 
that gives the findings of fact, conclusions of law, and the reasons for 
the decision. The decision must be based on evidence offered at the 
hearing or otherwise admitted into the record, and shall include 
independent findings and conclusions. OMHA mails or otherwise transmits 
a copy of the decision to all the parties at their last known address 
and the QIC that issued the reconsideration or from which the appeal was 
escalated. For overpayment cases involving multiple beneficiaries, where 
there is no beneficiary liability, the ALJ or attorney adjudicator may 
choose to send written notice only to the appellant. In the event a 
payment will be made to a provider or supplier in conjunction with the 
ALJ's or attorney adjudicator's decision, the contractor must also issue 
a revised electronic or paper remittance advice to that provider or 
supplier.
    (2) Content of the notice. The decision must be written in a manner 
calculated to be understood by a beneficiary and must include--
    (i) The specific reasons for the determination, including, to the 
extent appropriate, a summary of any clinical or scientific evidence 
used in making the determination;
    (ii) For any new evidence that was submitted for the first time at 
the OMHA level and subject to a good cause determination pursuant to 
Sec. 405.1028, a discussion of the new evidence and the good cause 
determination that was made.
    (iii) The procedures for obtaining additional information concerning 
the decision; and
    (iv) Notification of the right to appeal the decision to the 
Council, including instructions on how to initiate an appeal under this 
section.
    (3) Limitation on decision. When the amount of payment for an item 
or service is an issue before the ALJ or attorney adjudicator, the ALJ 
or attorney adjudicator may make a finding as to the amount of payment 
due. If the ALJ or attorney adjudicator makes a finding concerning 
payment when the amount of payment was not an issue before the ALJ or 
attorney adjudicator, the contractor may independently determine the 
payment amount. In either of the aforementioned situations, an ALJ's or 
attorney adjudicator's decision is not binding on the contractor for 
purposes of determining the amount of payment due. The amount of payment 
determined by the contractor in effectuating the ALJ's or attorney 
adjudicator's decision is a new initial determination under 
Sec. 405.924.
    (b) Decisions on requests for review of a QIC dismissal--(1) General 
rule. Unless the ALJ or attorney adjudicator dismisses the request for 
review of a QIC

[[Page 214]]

dismissal, or the QIC's dismissal is vacated and remanded, the ALJ or 
attorney adjudicator will issue a written decision affirming the QIC's 
dismissal. OMHA mails or otherwise transmits a copy of the decision to 
all the parties that received a copy of the QIC's dismissal.
    (2) Content of the notice. The decision must be written in a manner 
calculated to be understood by a beneficiary and must include--
    (i) The specific reasons for the determination, including a summary 
of the evidence considered and applicable authorities;
    (ii) The procedures for obtaining additional information concerning 
the decision; and
    (iii) Notification that the decision is binding and is not subject 
to further review, unless reopened and revised by the ALJ or attorney 
adjudicator.
    (c) Recommended decision. An ALJ or attorney adjudicator issues a 
recommended decision if he or she is directed to do so in the Council's 
remand order. An ALJ or attorney adjudicator may not issue a recommended 
decision on his or her own motion. The ALJ or attorney adjudicator mails 
a copy of the recommended decision to all the parties at their last 
known address.

[82 FR 5119, Jan. 17, 2017]



Sec. 405.1048  The effect of an ALJ's or attorney adjudicator's 
decision.

    (a) The decision of the ALJ or attorney adjudicator on a request for 
hearing is binding on all parties unless--
    (1) A party requests a review of the decision by the Council within 
the stated time period or the Council reviews the decision issued by an 
ALJ or attorney adjudicator under the procedures set forth in 
Sec. 405.1110, and the Council issues a final decision or remand order 
or the appeal is escalated to Federal district court under the 
provisions at Sec. 405.1132 and the Federal district court issues a 
decision.
    (2) The decision is reopened and revised by an ALJ or attorney 
adjudicator or the Council under the procedures explained in 
Sec. 405.980;
    (3) The expedited access to judicial review process at Sec. 405.990 
is used;
    (4) The ALJ's or attorney adjudicator's decision is a recommended 
decision directed to the Council and the Council issues a decision; or
    (5) In a case remanded by a Federal district court, the Council 
assumes jurisdiction under the procedures in Sec. 405.1138 and the 
Council issues a decision.
    (b) The decision of the ALJ or attorney adjudicator on a request for 
review of a QIC dismissal is binding on all parties unless the decision 
is reopened and revised by the ALJ or attorney adjudicator under the 
procedures in Sec. 405.980.

[82 FR 5119, Jan. 17, 2017]



Sec. 405.1050  Removal of a hearing request from an OMHA to the 
Council.

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

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5118, Jan. 17, 2017]



Sec. 405.1052  Dismissal of a request for a hearing before an ALJ
or request for review of a QIC dismissal.

    (a) Dismissal of request for hearing. An ALJ dismisses a request for 
a hearing under any of the following conditions:
    (1) Neither the party that requested the hearing nor the party's 
representative appears at the time and place set for the hearing, if--
    (i) The party was notified before the time set for the hearing that 
the request for hearing might be dismissed for failure to appear, the 
record contains documentation that the party acknowledged the notice of 
hearing, and the party does not contact the ALJ within 10 calendar days 
after the hearing, or does contact the ALJ but the ALJ determines the 
party did not demonstrate good cause for not appearing; or
    (ii) The record does not contain documentation that the party 
acknowledged the notice of hearing, the ALJ sends a notice to the party 
at the last known address asking why the party

[[Page 215]]

did not appear, and the party does not respond to the ALJ's notice 
within 10 calendar days after receiving the notice or does contact the 
ALJ but the ALJ determines the party did not demonstrate good cause for 
not appearing.
    (iii) In determining whether good cause exists under paragraphs 
(a)(1)(i) and (ii) of this section, the ALJ considers any physical, 
mental, educational, or linguistic limitations (including any lack of 
facility with the English language), that the party may have.
    (2) The person or entity requesting a hearing has no right to it 
under Sec. 405.1002.
    (3) The party did not request a hearing within the stated time 
period and the ALJ or attorney adjudicator has not found good cause for 
extending the deadline, as provided in Sec. 405.1014(e).
    (4) The beneficiary whose claim is being appealed died while the 
request for hearing is pending and all of the following criteria apply:
    (i) The request for hearing was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding this 
issue, the ALJ or attorney adjudicator considers if the surviving spouse 
or estate remains liable for the services that were denied or a Medicare 
contractor held the beneficiary liable for subsequent similar services 
under the limitation of liability provisions based on the denial of the 
services at issue.
    (ii) No other individuals or entities that have a financial interest 
in the case wish to pursue an appeal under Sec. 405.1002.
    (iii) No other individual or entity filed a valid and timely request 
for an ALJ hearing in accordance to Sec. 405.1014.
    (5) The ALJ or attorney adjudicator dismisses a hearing request 
entirely or refuses to consider any one or more of the issues because a 
QIC, an ALJ or attorney adjudicator, or the Council has made a previous 
determination or decision under this subpart about the appellant's 
rights on the same facts and on the same issue(s) or claim(s), and this 
previous determination or decision has become binding by either 
administrative or judicial action.
    (6) The appellant abandons the request for hearing. An ALJ or 
attorney adjudicator may conclude that an appellant has abandoned a 
request for hearing when OMHA attempts to schedule a hearing and is 
unable to contact the appellant after making reasonable efforts to do 
so.
    (7) The appellant's request is not complete in accordance with 
Sec. 405.1014(a)(1) or the appellant, other than an unrepresented 
beneficiary, did not send a copy of its request to the other parties in 
accordance with Sec. 405.1014(d), after the appellant is provided with 
an opportunity to complete the request and/or send a copy of the request 
to the other parties.
    (b) Dismissal of request for review of a QIC dismissal. An ALJ or 
attorney adjudicator dismisses a request for review of a QIC dismissal 
under any of the following conditions:
    (1) The person or entity requesting a review of a dismissal has no 
right to it under Sec. 405.1004.
    (2) The party did not request a review within the stated time period 
and the ALJ or attorney adjudicator has not found good cause for 
extending the deadline, as provided in Sec. 405.1014(e).
    (3) The beneficiary whose claim is being appealed died while the 
request for review is pending and all of the following criteria apply:
    (i) The request for review was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding this 
issue, the ALJ or attorney adjudicator considers if the surviving spouse 
or estate remains liable for the services that were denied or a Medicare 
contractor held the beneficiary liable for subsequent similar services 
under the limitation of liability provisions based on the denial of the 
services at issue.
    (ii) No other individuals or entities that have a financial interest 
in the case wish to pursue an appeal under Sec. 405.1004.
    (iii) No other individual or entity filed a valid and timely request 
for a review of the QIC dismissal in accordance to Sec. 405.1014.
    (4) The appellant's request is not complete in accordance with

[[Page 216]]

Sec. 405.1014(a)(1) or the appellant, other than an unrepresented 
beneficiary, did not send a copy of its request to the other parties in 
accordance with Sec. 405.1014(d), after the appellant is provided with 
an opportunity to complete the request and/or send a copy of the request 
to the other parties.
    (c) Withdrawal of request. At any time before notice of the 
decision, dismissal, or remand is mailed, if only one party requested 
the hearing or review of the QIC dismissal and that party asks to 
withdraw the request, an ALJ or attorney adjudicator may dismiss the 
request for hearing or request for review of a QIC dismissal. This 
request for withdrawal may be submitted in writing, or a request to 
withdraw a request for hearing may be made orally at a hearing before 
the ALJ. The request for withdrawal must include a clear statement that 
the appellant is withdrawing the request for hearing or review of the 
QIC dismissal and does not intend to further proceed with the appeal. If 
an attorney or other legal professional on behalf of a beneficiary or 
other appellant files the request for withdrawal, the ALJ or attorney 
adjudicator may presume that the representative has advised the 
appellant of the consequences of the withdrawal and dismissal.
    (d) Notice of dismissal. OMHA mails or otherwise transmits a written 
notice of the dismissal of the hearing or review request to all parties 
who were sent a copy of the request for hearing or review at their last 
known address. The notice states that there is a right to request that 
the ALJ or attorney adjudicator vacate the dismissal action. The appeal 
will proceed with respect to any other parties who filed a valid request 
for hearing or review regarding the same claim or disputed matter.
    (e) Vacating a dismissal. If good and sufficient cause is 
established, the ALJ or attorney adjudicator may vacate his or her 
dismissal of a request for hearing or review within 6 months of the date 
of the notice of dismissal.

[82 FR 5119, Jan. 17, 2017]



Sec. 405.1054  Effect of dismissal of a request for a hearing or
request for review of QIC dismissal.

    (a) The dismissal of a request for a hearing is binding, unless it 
is vacated by the Council under Sec. 405.1108(b), or vacated by the ALJ 
or attorney adjudicator under Sec. 405.1052(e).
    (b) The dismissal of a request for review of a QIC dismissal of a 
request for reconsideration is binding and not subject to further review 
unless it is vacated by the ALJ or attorney adjudicator under 
Sec. 405.1052(e).

[82 FR 5120, Jan. 17, 2017]



Sec. 405.1056  Remands of requests for hearing and requests for review.

    (a) Missing appeal determination or case record. (1) If an ALJ or 
attorney adjudicator requests an official copy of a missing 
redetermination or reconsideration for an appealed claim in accordance 
with Sec. 405.1034, and the QIC or another contractor does not furnish 
the copy within the time frame specified in Sec. 405.1034, the ALJ or 
attorney adjudicator may issue a remand directing the QIC or other 
contractor to reconstruct the record or, if it is not able to do so, 
initiate a new appeal adjudication.
    (2) If the QIC does not furnish the case file for an appealed 
reconsideration, an ALJ or attorney adjudicator may issue a remand 
directing the QIC to reconstruct the record or, if it is not able to do 
so, initiate a new appeal adjudication.
    (3) If the QIC or another contractor is able to reconstruct the 
record for a remanded case and returns the case to OMHA, the case is no 
longer remanded and the reconsideration is no longer vacated, and any 
adjudication period that applies to the appeal in accordance with 
Sec. 405.1016 is extended by the period between the date of the remand 
and the date that case is returned to OMHA.
    (b) No redetermination. If an ALJ or attorney adjudicator finds that 
the QIC issued a reconsideration that addressed coverage or payment 
issues related to the appealed claim and no redetermination of the claim 
was made (if a redetermination was required under

[[Page 217]]

this subpart) or the request for redetermination was dismissed, the 
reconsideration will be remanded to the QIC, or its successor to re-
adjudicate the request for reconsideration.
    (c) Requested remand--(1) Request contents and timing. At any time 
prior to an ALJ or attorney adjudicator issuing a decision or dismissal, 
the appellant and CMS or one of its contractors may jointly request a 
remand of the appeal to the entity that conducted the reconsideration. 
The request must include the reasons why the appeal should be remanded 
and indicate whether remanding the case will likely resolve the matter 
in dispute.
    (2) Granting the request. An ALJ or attorney adjudicator may grant 
the request and issue a remand if he or she determines that remanding 
the case will likely resolve the matter in dispute.
    (d) Remanding a QIC's dismissal of a request for reconsideration. 
Consistent with Sec. 405.1004(b), an ALJ or attorney adjudicator will 
remand a case to the appropriate QIC if the ALJ or attorney adjudicator 
determines that a QIC's dismissal of a request for reconsideration was 
in error.
    (e) Relationship to local and national coverage determination 
appeals process. (1) An ALJ or attorney adjudicator remands an appeal to 
the QIC that made the reconsideration if the appellant is entitled to 
relief pursuant to Sec. 426.460(b)(1), Sec. 426.488(b), or 
Sec. 426.560(b)(1) of this chapter.
    (2) Unless the appellant is entitled to relief pursuant to 
Sec. 426.460(b)(1), Sec. 426.488(b), or Sec. 426.560(b)(1) of this 
chapter, the ALJ or attorney adjudicator applies the LCD or NCD in place 
on the date the item or service was provided.
    (f) Notice of a remand. OMHA mails or otherwise transmits a written 
notice of the remand of the request for hearing or request for review to 
all of the parties who were sent a copy of the request at their last 
known address, and CMS or a contractor that elected to be a participant 
in the proceedings or party to the hearing. The notice states that there 
is a right to request that the Chief ALJ or a designee review the 
remand.
    (g) Review of remand. Upon a request by a party or CMS or one of its 
contractors filed within 30 calendar days of receiving a notice of 
remand, the Chief ALJ or designee will review the remand, and if the 
remand is not authorized by this section, vacate the remand order. The 
determination on a request to review a remand order is binding and not 
subject to further review. The review of remand procedures provided for 
in this paragraph are not available for and do not apply to remands that 
are issued under paragraph (d) of this section.

[82 FR 5121, Jan. 17, 2017]



Sec. 405.1058  Effect of a remand.

    A remand of a request for hearing or request for review is binding 
unless vacated by the Chief ALJ or a designee in accordance with 
Sec. 405.1056(g).

[82 FR 5121, Jan. 17, 2017]

               Applicability of Medicare Coverage Policies



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

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

[[Page 218]]

or otherwise review an NCD for purposes of a section 1869 claim appeal, 
except that the DAB may review NCDs as provided under part 426 of this 
title.
    (2) The Council may review the facts of a particular case to 
determine whether an NCD applies to a specific claim for benefits and, 
if so, whether the NCD was applied correctly to the claim.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37704, June 30, 2005; 82 
FR 5121, Jan. 17, 2017]



Sec. 405.1062  Applicability of local coverage determinations and 
other policies not binding on the ALJ or attorney adjudicator 
and Council.

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

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5121, Jan. 17, 2017]



Sec. 405.1063  Applicability of laws, regulations, CMS Rulings, 
and precedential decisions.

    (a) All laws and regulations pertaining to the Medicare and Medicaid 
programs, including, but not limited to Titles XI, XVIII, and XIX of the 
Social Security Act and applicable implementing regulations, are binding 
on ALJs and attorney adjudicators, and the Council.
    (b) CMS Rulings are published under the authority of the 
Administrator, CMS. Consistent with Sec. 401.108 of this chapter, 
rulings are binding on all CMS components, on all HHS components that 
adjudicate matters under the jurisdiction of CMS, and on the Social 
Security Administration to the extent that components of the Social 
Security Administration adjudicate matters under the jurisdiction of 
CMS.
    (c) Precedential decisions designated by the Chair of the 
Departmental Appeals Board in accordance with Sec. 401.109 of this 
chapter, are binding on all CMS components, all HHS components that 
adjudicate matters under the jurisdiction of CMS, and on the Social 
Security Administration to the extent that components of the Social 
Security Administration adjudicate matters under the jurisdiction of 
CMS.

[82 FR 5121, Jan. 17, 2017]

                     Medicare Appeals Council Review



Sec. 405.1100  Medicare Appeals Council review: General.

    (a) The appellant or any other party to an ALJ's or attorney 
adjudicator's decision or dismissal may request that the Council review 
the ALJ's or attorney adjudicator's decision or dismissal.
    (b) Under circumstances set forth in Secs. 405.1016 and 405.1108, 
the appellant may request that a case be escalated to the Council for a 
decision even if the ALJ or attorney adjudicator has not issued a 
decision, dismissal, or remand in his or her case.
    (c) When the Council reviews an ALJ's or attorney adjudicator's 
decision, it undertakes a de novo review. The Council issues a final 
decision or dismissal order or remands a case to the ALJ or attorney 
adjudicator within 90 calendar days of receipt of the appellant's 
request for review, unless the 90 calendar day period is extended as 
provided in this subpart.
    (d) When deciding an appeal that was escalated from the OMHA level 
to the Council, the Council will issue a final decision or dismissal 
order or remand the case to the OMHA Chief ALJ within 180 calendar days 
of receipt of the

[[Page 219]]

appellant's request for escalation, unless the 180 calendar day period 
is extended as provided in this subpart.

[82 FR 5122, Jan. 17, 2017]



Sec. 405.1102  Request for Council review when ALJ or attorney 
adjudicator issues decision or dismissal.

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

[82 FR 5122, Jan. 17, 2017]



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

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

[[Page 220]]

period to issue a final decision, dismissal order, or remand order 
begins on the date the request for escalation is received by the 
Council.

[82 FR 5122, Jan. 17, 2017]



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

    (a) Except as specified in paragraphs (c) and (d) of this section, 
when a party requests that the Council review an ALJ's or attorney 
adjudicator's decision, the Council will review the ALJ's or attorney 
adjudicator's decision de novo. The party requesting review does not 
have a right to a hearing before the Council. The Council will consider 
all of the evidence in the administrative record. Upon completion of its 
review, the Council may adopt, modify, or reverse the ALJ's or attorney 
adjudicator's decision or remand the case to an ALJ or attorney 
adjudicator for further proceedings.
    (b) When a party requests that the Council review an ALJ's or 
attorney adjudicator's dismissal of a request for a hearing, the Council 
may deny review or vacate the dismissal and remand the case to the ALJ 
or attorney adjudicator for further proceedings.
    (c) The Council will dismiss a request for review when the party 
requesting review does not have a right to a review by the Council, or 
will dismiss the request for a hearing for any reason that the ALJ or 
attorney adjudicator could have dismissed the request for hearing.
    (d) When an appellant requests escalation of a case from the OMHA 
level to the Council, the Council may take any of the following actions:
    (1) Issue a decision based on the record constructed at the QIC and 
any additional evidence, including oral testimony, entered in the record 
by the ALJ or attorney adjudicator before the case was escalated.
    (2) Conduct any additional proceedings, including a hearing, that 
the Council determines are necessary to issue a decision.
    (3) Remand the case to OMHA for further proceedings, including a 
hearing.
    (4) Dismiss the request for Council review because the appellant 
does not have the right to escalate the appeal.
    (5) Dismiss the request for a hearing for any reason that the ALJ or 
attorney adjudicator could have dismissed the request.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5122, Jan. 17, 2017]



Sec. 405.1110  Council reviews on its own motion.

    (a) General rule. The Council may decide on its own motion to review 
a decision or dismissal issued by an ALJ or attorney adjudicator. CMS or 
any of its contractors may refer a case to the Council for it to 
consider reviewing under this authority anytime within 60 calendar days 
after the date of an ALJ's or attorney adjudicator's decision or 
dismissal.
    (b) Referral of cases. (1) CMS or any of its contractors may refer a 
case to the Council if, in their view, the decision or dismissal 
contains an error of law material to the outcome of the claim or 
presents a broad policy or procedural issue that may affect the public 
interest. CMS may also request that the Council take own motion review 
of a case if--
    (i) CMS or its contractor participated in the appeal at the OMHA 
level; and
    (ii) In CMS' view, the ALJ's or attorney adjudicator's decision or 
dismissal is not supported by the preponderance of evidence in the 
record or the ALJ or attorney adjudicator abused his or her discretion.
    (2) CMS' referral to the Council is made in writing and must be 
filed with the Council no later than 60 calendar days after the ALJ's or 
attorney adjudicator's decision or dismissal is issued. The written 
referral will state the reasons why CMS believes the Council must review 
the case on its own motion. CMS will send a copy of its referral to all 
parties to the ALJ's or attorney adjudicator's action who received a 
copy of the decision under Sec. 405.1046(a) or the notice of dismissal 
under Sec. 405.1052(d), and to the OMHA Chief ALJ. Parties to the ALJ's 
or attorney adjudicator's action may file exceptions to the referral by 
submitting written comments to the Council within 20 calendar days of 
the referral notice. A party submitting comments to the Council must 
send such comments to CMS and all other parties to

[[Page 221]]

the ALJ's or attorney adjudicator's action who received a copy of the 
decision under Sec. 405.1046(a) or the notice of dismissal under 
Sec. 405.1052(d).
    (c) Standard of review--(1) Referral by CMS after participation at 
the OMHA level. If CMS or its contractor participated in an appeal at 
the OMHA level, the Council exercises its own motion authority if there 
is an error of law material to the outcome of the case, an abuse of 
discretion by the ALJ or attorney adjudicator, the decision is not 
consistent with the preponderance of the evidence of record, or there is 
a broad policy or procedural issue that may affect the general public 
interest. In deciding whether to accept review under this standard, the 
Council will limit its consideration of the ALJ's or attorney 
adjudicator's action to those exceptions raised by CMS.
    (2) Referral by CMS when CMS did not participate in the OMHA 
proceedings or appear as a party. The Council will accept review if the 
decision or dismissal contains an error of law material to the outcome 
of the case or presents a broad policy or procedural issue that may 
affect the general public interest. In deciding whether to accept 
review, the Council will limit its consideration of the ALJ's or 
attorney adjudicator's action to those exceptions raised by CMS.
    (d) Council's action. If the Council decides to review a decision or 
dismissal on its own motion, it will mail the results of its action to 
all the parties to the hearing and to CMS if it is not already a party 
to the hearing. The Council may adopt, modify, or reverse the decision 
or dismissal, may remand the case to an ALJ or attorney adjudicator for 
further proceedings or may dismiss a hearing request. The Council must 
issue its action no later than 90 calendar days after receipt of the CMS 
referral, unless the 90 calendar day period has been extended as 
provided in this subpart. The Council may not, however, issue its action 
before the 20 calendar day comment period has expired, unless it 
determines that the agency's referral does not provide a basis for 
reviewing the case. If the Council does not act within the applicable 
adjudication deadline, the ALJ's or attorney adjudicator's decision or 
dismissal is binding on the parties to the ALJ's or attorney 
adjudicator's action.

[82 FR 5122, Jan. 17, 2017]



Sec. 405.1112  Content of request for review.

    (a) The request for Council review must be filed with the entity 
specified in the notice of the ALJ's or attorney adjudicator's action. 
The request for review must be in writing and may be made on a standard 
form. A written request that is not made on a standard form is accepted 
if it contains the beneficiary's name; Medicare health insurance claim 
number; the specific service(s) or item(s) for which the review is 
requested; the specific date(s) of service; the date of the ALJ's or 
attorney adjudicator's decision or dismissal order, if any; and the name 
and signature of the party or the representative of the party; and any 
other information CMS may decide.
    (b) The request for review must identify the parts of the ALJ's or 
attorney adjudicator's action with which the party requesting review 
disagrees and explain why he or she disagrees with the ALJ's or attorney 
adjudicator's decision, dismissal, or other determination being 
appealed. For example, if the party requesting review believes that the 
ALJ's or attorney adjudicator's action is inconsistent with a statute, 
regulation, CMS Ruling, or other authority, the request for review 
should explain why the appellant believes the action is inconsistent 
with that authority.
    (c) The Council will limit its review of an ALJ's or attorney 
adjudicator's actions to those exceptions raised by the party in the 
request for review, unless the appellant is an unrepresented 
beneficiary. For purposes of this section only, we define a 
representative as anyone who has accepted an appointment as the 
beneficiary's representative, except a member of the beneficiary's 
family, a legal guardian, or an individual who routinely acts on behalf 
of the beneficiary, such as a family member or friend who has a power of 
attorney.

[82 FR 5123, Jan. 17, 2017]

[[Page 222]]



Sec. 405.1114  Dismissal of request for review.

    The Council dismisses a request for review if the party requesting 
review did not file the request within the stated period of time and the 
time for filing has not been extended. The Council also dismisses the 
request for review if--
    (a) The party asks to withdraw the request for review;
    (b) The party does not have a right to request Council review; or
    (c) The beneficiary whose claim is being appealed died while the 
request for review is pending and all of the following criteria apply:
    (1) The request for review was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding this 
issue, the Council considers whether the surviving spouse or estate 
remains liable for the services that were denied or a Medicare 
contractor held the beneficiary liable for subsequent similar services 
under the limitation of liability provisions based on the denial of the 
services at issue;
    (2) No other individual or entity with a financial interest in the 
case wishes to pursue an appeal under Sec. 405.1102;
    (3) No other party to the ALJ's or attorney adjudicator's action 
filed a valid and timely review request under Secs. 405.1102 and 
405.1112.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5123, Jan. 17, 2017]



Sec. 405.1116  Effect of dismissal of request for Council review
or request for hearing.

    The dismissal of a request for Council review or denial of a request 
for review of a dismissal issued by an ALJ or attorney adjudicator is 
binding and not subject to further review unless reopened and vacated by 
the Council. The Council's dismissal of a request for hearing is also 
binding and not subject to judicial review.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5123, Jan. 17, 2017]



Sec. 405.1118  Obtaining evidence from the Council.

    A party may request and receive a copy of all or part of the record 
of the ALJ's or attorney adjudicator's action, including any index of 
the administrative record, documentary evidence, and a copy of the audio 
recording of the oral proceedings. However, the party may be asked to 
pay the costs of providing these items. If a party requests evidence 
from the Council and an opportunity to comment on that evidence, the 
time beginning with the Council's receipt of the request for evidence 
through the expiration of the time granted for the party's response will 
not be counted toward the 90 calendar day adjudication deadline.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65337, Dec. 9, 2009; 82 
FR 5123, Jan. 17, 2017]



Sec. 405.1120  Filing briefs with the Council.

    Upon request, the Council will give the party requesting review, as 
well as all other parties, a reasonable opportunity to file briefs or 
other written statements about the facts and law relevant to the case. 
Any party who submits a brief or statement must send a copy to all of 
the other parties. Unless the party requesting review files the brief or 
other statement with the request for review, the time beginning with the 
date of receipt of the request to submit the brief and ending with the 
date the brief is received by the Council will not be counted toward the 
adjudication timeframe set forth in Sec. 405.1100. The Council may also 
request, but not require, CMS or its contractor to file a brief or 
position paper if the Council determines that it is necessary to resolve 
the issues in the case. The Council will not draw any adverse inference 
if CMS or a contractor either participates, or decides not to 
participate in Council review.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5123, Jan. 17, 2017]

[[Page 223]]



Sec. 405.1122  What evidence may be submitted to the Council.

    (a) Appeal before the Council on request for review of ALJ's or 
attorney adjudicator's decision. (1) If the Council is reviewing an 
ALJ's or attorney adjudicator's decision, the Council limits its review 
of the evidence to the evidence contained in the record of the 
proceedings before the ALJ or attorney adjudicator. However, if the 
ALJ's or attorney adjudicator's decision decides a new issue that the 
parties were not afforded an opportunity to address at the OMHA level, 
the Council considers any evidence related to that issue that is 
submitted with the request for review.
    (2) If the Council determines that additional evidence is needed to 
resolve the issues in the case and the administrative record indicates 
that the previous decision-makers have not attempted to obtain the 
evidence, the Council may remand the case to an ALJ or attorney 
adjudicator to obtain the evidence and issue a new decision.
    (b) Appeal before Council as a result of appellant's request for 
escalation. (1) If the Council is reviewing a case that is escalated 
from the OMHA level to the Council, the Council will decide the case 
based on the record constructed at the QIC and any additional evidence, 
including oral testimony, entered in the record by the ALJ or attorney 
adjudicator before the case was escalated.
    (2) If the Council receives additional evidence with the request for 
escalation that is material to the question to be decided, or determines 
that additional evidence is needed to resolve the issues in the case, 
and the record provided to the Council indicates that the previous 
decision-makers did not attempt to obtain the evidence before 
escalation, the Council may remand the case to an ALJ or attorney 
adjudicator to consider or obtain the evidence and issue a new decision.
    (c) Evidence related to issues previously considered by the QIC. (1) 
If new evidence related to issues previously considered by the QIC is 
submitted to the Council by a provider, supplier, or a beneficiary 
represented by a provider or supplier, the Council must determine if the 
provider, supplier, or the beneficiary represented by a provider or 
supplier had good cause for submitting it for the first time at the 
Council level.
    (2) If the Council determines that good cause does not exist, the 
Council must exclude the evidence from the proceeding, may not consider 
it in reaching a decision, and may not remand the issue to an ALJ or 
attorney adjudicator.
    (3) The Council must notify all parties if it excludes the evidence. 
The Council may remand to an ALJ or attorney adjudicator if--
    (i) The ALJ or attorney adjudicator did not consider the new 
evidence submitted by the provider, supplier, or beneficiary represented 
by a provider or supplier because good cause did not exist; and
    (ii) The Council finds that good cause existed under Sec. 405.1028 
and the ALJ or attorney adjudicator should have reviewed the evidence.
    (iii) The new evidence is submitted by a party that is not a 
provider, supplier, or a beneficiary represented by a provider or 
supplier.
    (d) Subpoenas. (1) Except as provided in this section, when it is 
reasonably necessary for the full presentation of a case, the Council 
may, on its own initiative or at the request of a party, issue subpoenas 
requiring a party to make books, records, correspondence, papers, or 
other documents that are material to an issue at the hearing available 
for inspection and copying. The Council may not issue a subpoena to CMS 
or its contractors, on its own initiative or at the request of a party, 
to compel the production of evidence.
    (2) A party's request for a subpoena must--
    (i) Give a sufficient description of the documents to be produced;
    (ii) State the important facts that the documents are expected to 
prove; and
    (iii) Indicate why these facts could not be proven without issuing a 
subpoena.
    (3) A party to the Council review on escalation that wishes to 
subpoena documents must file a written request that complies with the 
requirements set out in paragraph (d)(2) of this section within 10 
calendar days of the request for escalation.

[[Page 224]]

    (4) A subpoena will issue only where a party--
    (i) Has sought discovery;
    (ii) Has filed a motion to compel;
    (iii) Has had that motion granted; and
    (iv) Nevertheless, has still not received the requested discovery.
    (e) Reviewability of subpoena rulings--
    (1) General rule. A Council ruling on a subpoena request is not 
subject to immediate review by the Secretary.
    (2) Exception. To the extent a subpoena compels disclosure of a 
matter for which an objection based on privilege, or other protection 
from disclosure such as case preparation, confidentiality, or undue 
burden, was made before the Council, the Secretary may review 
immediately that subpoena or portion of the subpoena.
    (3) Upon notice to the Council that a party or non-party, as 
applicable, intends to seek Secretary review of the subpoena, the 
Council must stay all proceedings affected by the subpoena.
    (4) The Council determines the length of the stay under the 
circumstances of a given case, but in no event is less than 15 calendar 
days after the day on which the Council received notice of the party or 
non-party's intent to seek Secretary review.
    (5) If the Secretary grants a request for review, the subpoena or 
portion of the subpoena, as applicable, is stayed until the Secretary 
issues a written decision that affirms, reverses, modifies, or remands 
the Council's action for the subpoena.
    (6) If the Secretary does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifted and the 
Council's action stands.
    (f) Enforcement. (1) If the Council determines, whether on its own 
motion or at the request of a party, that a party or non-party subject 
to a subpoena issued under this section has refused to comply with the 
subpoena, the Council may request the Secretary to seek enforcement of 
the subpoena in accordance with section 205(e) of the Act, 42 U.S.C. 
405(e).
    (2) Any enforcement request by the Council must consist of a written 
notice to the Secretary describing in detail the Council's findings of 
noncompliance and its specific request for enforcement, and providing a 
copy of the subpoena and evidence of its receipt by certified mail by 
the party or nonparty subject to the subpoena.
    (3) The Council must promptly mail a copy of the notice and related 
documents to the party or non-party subject to the subpoena, and to any 
other party and affected non-party to the appeal.
    (4) If the Secretary does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifted and the 
subpoena stands.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65337, Dec. 9, 2009; 82 
FR 5123, Jan. 17, 2017]



Sec. 405.1124  Oral argument.

    A party may request to appear before the Council to present oral 
argument.
    (a) The Council grants a request for oral argument if it decides 
that the case raises an important question of law, policy, or fact that 
cannot be readily decided based on written submissions alone.
    (b) The Council may decide on its own that oral argument is 
necessary to decide the issues in the case. If the Council decides to 
hear oral argument, it tells the parties of the time and place of the 
oral argument at least 10 calendar days before the scheduled date.
    (c) In case of a previously unrepresented beneficiary, a newly hired 
representative may request an extension of time for preparation of the 
oral argument and the Council must consider whether the extension is 
reasonable.
    (d) The Council may also request, but not require, CMS or its 
contractor to appear before it if the Council determines that it may be 
helpful in resolving the issues in the case.
    (e) The Council will not draw any inference if CMS or a contractor 
decides not to participate in the oral argument.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65338, Dec. 9, 2009; 82 
FR 5124, Jan. 17, 2017]

[[Page 225]]



Sec. 405.1126  Case remanded by the Council.

    (a) When the Council may remand a case. Except as specified in 
Sec. 405.1122(c), the Council may remand a case in which additional 
evidence is needed or additional action by the ALJ or attorney 
adjudicator is required. The Council will designate in its remand order 
whether the ALJ or attorney adjudicator will issue a decision or a 
recommended decision on remand.
    (b) Action by ALJ on remand. The ALJ or attorney adjudicator will 
take any action that is ordered by the Council and may take any 
additional action that is not inconsistent with the Council's remand 
order.
    (c) Notice when case is returned with a recommended decision. When 
the ALJ or attorney adjudicator sends a case to the Council with a 
recommended decision, a notice is mailed to the parties at their last 
known address. The notice tells them that the case was sent to the 
Council, explains the rules for filing briefs or other written 
statements with the Council, and includes a copy of the recommended 
decision.
    (d) Filing briefs with the Council when ALJ or attorney adjudicator 
issues recommended decision. (1) Any party to the recommended decision 
may file with the Council briefs or other written statements about the 
facts and law relevant to the case within 20 calendar days of the date 
on the recommended decision. Any party may ask the Council for 
additional time to file briefs or statements. The Council will extend 
this period, as appropriate, if the party shows that it has good cause 
for requesting the extension.
    (2) All other rules for filing briefs with and obtaining evidence 
from the Council follow the procedures explained in this subpart.
    (e) Procedures before the Council. (1) The Council, after receiving 
a recommended decision, will conduct proceedings and issue its decision 
or dismissal according to the procedures explained in this subpart.
    (2) If the Council determines that more evidence is required, it may 
again remand the case to an ALJ or attorney adjudicator for further 
inquiry into the issues, rehearing if applicable, receipt of evidence, 
and another decision or recommended decision. However, if the Council 
decides that it can get the additional evidence more quickly, it will 
take appropriate action.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65338, Dec. 9, 2009; 82 
FR 5124, Jan. 17, 2017]



Sec. 405.1128  Action of the Council.

    (a) After it has reviewed all the evidence in the administrative 
record and any additional evidence received, subject to the limitations 
on Council consideration of additional evidence in Sec. 405.1122, the 
Council will make a decision or remand the case to an ALJ or attorney 
adjudicator.
    (b) The Council may adopt, modify, or reverse the ALJ's or attorney 
adjudicator's decisionor recommended decision.
    (c) The Council mails a copy of its decision to all the parties at 
their last known addresses. For overpayment cases involving multiple 
beneficiaries where there is no beneficiary liability the Council may 
choose to send written notice only to the appellant. In the event the 
decision will result in a payment to a provider or supplier, the 
Medicare contractor must issue any electronic or paper remittance advice 
notice to that provider or supplier.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5124, Jan. 17, 2017]



Sec. 405.1130  Effect of the Council's decision.

    The Council's decision is final and binding on all parties unless a 
Federal district court issues a decision modifying the Council's 
decision or the decision is revised as the result of a reopening in 
accordance with Sec. 405.980. A party may file an action in a Federal 
district court within 60 calendar days after the date it receives notice 
of the Council's decision.

[74 FR 65338, Dec. 9, 2009, as amended at 82 FR 5124, Jan. 17, 2017]



Sec. 405.1132  Request for escalation to Federal court.

    (a) If the Council does not issue a decision or dismissal or remand 
the case to an ALJ or attorney adjudicator

[[Page 226]]

within the adjudication period specified in Sec. 405.1100, or as 
extended as provided in this subpart, the appellant may request that the 
appeal, other than an appeal of an ALJ or attorney adjudicator 
dismissal, be escalated to Federal district court. Upon receipt of a 
request for escalation, the Council may--
    (1) Issue a decision or dismissal or remand the case to an ALJ or 
attorney adjudicator, if that action is issued within the latter of 5 
calendar days of receipt of the request for escalation or 5 calendar 
days from the end of the applicable adjudication time period set forth 
in Sec. 405.1100; or
    (2) If the Council is not able to issue a decision or dismissal or 
remand as set forth in paragraph (a)(1) of this section, it will send a 
notice to the appellant acknowledging receipt of the request for 
escalation and confirming that it is not able to issue a decision, 
dismissal or remand order within the statutory time frame.
    (b) A party may file an action in a Federal district court within 60 
calendar days after the date it receives the Council's notice that the 
Council is not able to issue a final decision, dismissal order, or 
remand order unless the party is appealing an ALJ or attorney 
adjudicator dismissal.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65338, Dec. 9, 2009; 82 
FR 5124, Jan. 17, 2017]



Sec. 405.1134  Extension of time to file action in Federal district
court.

    (a) Any party to the Council's decision or to a request for EAJR 
that has been certified by the review entity other than CMS may request 
that the time for filing an action in a Federal district court be 
extended.
    (b) The request must--
    (1) Be in writing.
    (2) Give the reasons why the action was not filed within the stated 
time period.
    (3) Be filed with the Council.
    (c) If the party shows that he or she had good cause for missing the 
deadline, the time period will be extended. To determine whether good 
cause exists, the Council uses the standards specified in 
Sec. 405.942(b)(2) or (b)(3).

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5124, Jan. 17, 2017]



Sec. 405.1136  Judicial review.

    (a) General rules. (1) To the extent authorized by sections 1869, 
1876(c)(5)(B), and 1879(d) of the Act, a party to a Council decision, or 
an appellant who requests escalation to Federal district court if the 
Council does not complete its review of the ALJ's or attorney 
adjudicator's decision within the applicable adjudication period, may 
obtain a court review if the amount remaining in controversy satisfies 
the requirements of Sec. 405.1006(c).
    (2) If the Council's adjudication period set forth in Sec. 405.1100 
expires and the appellant does not request escalation to Federal 
district court, the case remains with the Council until a final 
decision, dismissal order, or remand order is issued.
    (b) Court in which to file civil action. (1) Any civil action 
described in paragraph (a) of this section must be filed in the district 
court of the United States for the judicial district in which the party 
resides or where such individual, institution, or agency has its 
principal place of business.
    (2) If the party does not reside within any judicial district, or if 
the individual, institution, or agency does not have its principal place 
of business within any such judicial district, the civil action must be 
filed in the District Court of the United States for the District of 
Columbia.
    (c) Time for filing civil action. (1) Any civil action described in 
paragraph (a) of this section must be filed within the time periods 
specified in Sec. 405.1130, Sec. 405.1132, or Sec. 405.1134, as 
applicable.
    (2) For purposes of this section, the date of receipt of the notice 
of the Council's decision or the Council's notice that it is not able to 
issue a decision within the statutory timeframe shall be presumed to be 
5 calendar days after the date of the notice, unless there is a 
reasonable showing to the contrary.
    (3) Where a case is certified for judicial review in accordance with 
the expedited access to judicial review process in Sec. 405.990, the 
civil action must be

[[Page 227]]

filed within 60 calendar days after receipt of the review entity's 
certification, except where the time is extended by the ALJ or attorney 
adjudicator or Council, as applicable, upon a showing of good cause.
    (d) Proper defendant. (1) In any civil action described in paragraph 
(a) of this section, the Secretary of HHS, in his or her official 
capacity, is the proper defendant. Any civil action properly filed shall 
survive notwithstanding any change of the person holding the Office of 
the Secretary of HHS or any vacancy in such office.
    (2) If the complaint is erroneously filed against the United States 
or against any agency, officer, or employee of the United States other 
than the Secretary, the plaintiff will be notified that he or she has 
named an incorrect defendant and is granted 60 calendar days from the 
date of receipt of the notice in which to commence the action against 
the correct defendant, the Secretary.
    (e) Prohibition against judicial review of certain Part B 
regulations or instructions. Under section 1869(e)(1) of the Act, a 
court may not review a regulation or instruction that relates to a 
method of payment under Medicare Part B if the regulation was published, 
or the instructions issued, before January 1, 1991.
    (f) Standard of review. (1) Under section 205(g) of the Act, the 
findings of the Secretary of HHS as to any fact, if supported by 
substantial evidence, are conclusive.
    (2) When the Secretary's decision is adverse to a party due to a 
party's failure to submit proof in conformity with a regulation 
prescribed under section 205(a) of the Act pertaining to the type of 
proof a party must offer to establish entitlement to payment, the court 
will review only whether the proof conforms with the regulation and the 
validity of the regulation.

[70 FR 11472, Mar. 8, 2005, as amended at 70 FR 37705, June 30, 2005; 74 
FR 65338, Dec. 9, 2009; 82 FR 5124, Jan. 17, 2017]



Sec. 405.1138  Case remanded by a Federal district court.

    When a Federal district court remands a case to the Secretary for 
further consideration, unless the court order specifies otherwise, the 
Council, acting on behalf of the Secretary, may make a decision, or it 
may remand the case to an ALJ or attorney adjudicator with instructions 
to take action and either issue a decision, take other action, or return 
the case to the Council with a recommended decision. If the Council 
remands a case, the procedures specified in Sec. 405.1140 will be 
followed.

[70 FR 11472, Mar. 8, 2005, as amended at 82 FR 5124, Jan. 17, 2017]



Sec. 405.1140  Council review of ALJ decision in a case remanded by
a Federal district court.

    (a) General rules. (1) In accordance with Sec. 405.1138, when a case 
is remanded by a Federal district court for further consideration and 
the Council remands the case to an ALJ or attorney adjudicator, a 
decision subsequently issued by the ALJ becomes the final decision of 
the Secretary unless the Council assumes jurisdiction.
    (2) The Council may assume jurisdiction based on written exceptions 
to the decision of the ALJ or attorney adjudicator that a party files 
with the Council or based on its authority under paragraph (c) of this 
section.
    (3) The Council either makes a new, independent decision based on 
the entire record that will be the final decision of the Secretary after 
remand, or remands the case to an ALJ or attorney adjudicator for 
further proceedings.
    (b) A party files exceptions disagreeing with the decision of the 
ALJ or attorney adjudicator. (1) If a party disagrees with an ALJ or 
attorney adjudicator decision described in paragraph (a) of this 
section, in whole or in part, he or she may file exceptions to the 
decision with the Council. Exceptions may be filed by submitting a 
written statement to the Council setting forth the reasons for 
disagreeing with the decision of the ALJ or attorney adjudicator. The 
party must file exceptions within 30 calendar days of the date the party 
receives the decision of the ALJ or attorney adjudicator or submit a 
written request for an extension within the 30 calendar day period. The 
Council will grant a timely request for a 30 calendar day extension. A 
request for an extension of more than 30 calendar

[[Page 228]]

days must include a statement of reasons as to why the party needs the 
additional time and may be granted if the Council finds good cause under 
the standard established in Sec. 405.942(b)(2) or (b)(3).
    (2) If written exceptions are timely filed, the Council considers 
the party's reasons for disagreeing with the decision of the ALJ or 
attorney adjudicator. If the Council concludes that there is no reason 
to change the decision of the ALJ or attorney adjudicator, it will issue 
a notice addressing the exceptions and explaining why no change in the 
decision of the ALJ or attorney adjudicator is warranted. In this 
instance, the decision of the ALJ or attorney adjudicator is the final 
decision of the Secretary after remand.
    (3) When a party files written exceptions to the decision of the 
ALJ, the Council may assume jurisdiction at any time. If the Council 
assumes jurisdiction, it makes a new, independent decision based on its 
consideration of the entire record adopting, modifying, or reversing the 
decision of the ALJ or attorney adjudicator or remanding the case to an 
ALJ or attorney adjudicator for further proceedings, including a new 
decision. The new decision of the Council is the final decision of the 
Secretary after remand.
    (c)  Council assumes jurisdiction without exceptions being filed. 
(1) Any time within 60 calendar days after the date of the decision of 
the ALJ or attorney adjudicator, the Council may decide to assume 
jurisdiction of the case even though no written exceptions have been 
filed.
    (2) Notice of this action is mailed to all parties at their last 
known address.
    (3) The parties will be provided with the opportunity to file briefs 
or other written statements with the Council about the facts and law 
relevant to the case.
    (4) After the briefs or other written statements are received or the 
time allowed (usually 30 calendar days) for submitting them has expired, 
the Council will either issue a final decision of the Secretary 
affirming, modifying, or reversing the decision of the ALJ, or remand 
the case to an ALJ or attorney adjudicator for further proceedings, 
including a new decision.
    (d) Exceptions are not filed and the Council does not otherwise 
assume jurisdiction. If no exceptions are filed and the Council does not 
assume jurisdiction of the cases within 60 calendar days after the date 
of the ALJ's or attorney adjudicator's decision, the decision of the ALJ 
or attorney adjudicator becomes the final decision of the Secretary 
after remand.

[70 FR 11472, Mar. 8, 2005, as amended at 74 FR 65338, Dec. 9, 2009; 82 
FR 5124, Jan. 17, 2017]



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

    Source: 69 FR 69624, Nov. 26, 2004, unless otherwise noted.



Sec. 405.1200  Notifying beneficiaries of provider service 
terminations.

    (a) Applicability and scope. (1) For purposes of Secs. 405.1200 
through 405.1204, the term, provider, is defined as a home health agency 
(HHA), skilled nursing facility (SNF), comprehensive outpatient 
rehabilitation facility (CORF), or hospice.
    (2) For purposes of Secs. 405.1200 through 405.1204, a termination 
of Medicare-covered service is a discharge of a beneficiary from a 
residential provider of services, or a complete cessation of coverage at 
the end of a course of treatment prescribed in a discrete increment, 
regardless of whether the beneficiary agrees that the services should 
end. A termination does not include a reduction in services. A 
termination also does not include the termination of one type of service 
by the provider if the beneficiary continues to receive other Medicare-
covered services from the provider.
    (b) Advance written notice of service terminations. Before any 
termination of services, the provider of the service must deliver valid 
written notice to the beneficiary of the provider's decision to 
terminate services. The provider must use a standardized notice, as 
specified by CMS, in accordance with the following procedures:

[[Page 229]]

    (1) Timing of notice. A provider must notify the beneficiary of the 
decision to terminate covered services no later than 2 days before the 
proposed end of the services. If the beneficiary's services are expected 
to be fewer than 2 days in duration, the provider must notify the 
beneficiary at the time of admission to the provider. If, in a non-
residential setting, the span of time between services exceeds 2 days, 
the notice must be given no later than the next to last time services 
are furnished.
    (2) Content of the notice. The standardized termination notice must 
include the following information:
    (i) The date that coverage of services ends;
    (ii) The date that the beneficiary's financial liability for 
continued services begins;
    (iii) A description of the beneficiary's right to an expedited 
determination under Sec. 405.1202, including information about how to 
request an expedited determination and about a beneficiary's right to 
submit evidence showing that services must continue;
    (iv) A beneficiary's right to receive the detailed information 
specified under Sec. 405.1202(f); and
    (v) Any other information required by CMS.
    (3) When delivery of the notice is valid. Delivery of the 
termination notice is valid if--
    (i) The beneficiary (or the beneficiary's authorized representative) 
has signed and dated the notice to indicate that he or she has received 
the notice and can comprehend its contents; and
    (ii) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph (b)(2) 
of this section.
    (4) If a beneficiary refuses to sign the notice. The provider may 
annotate its notice to indicate the refusal, and the date of refusal is 
considered the date of receipt of the notice.
    (5) Financial liability for failure to deliver valid notice. A 
provider is financially liable for continued services until 2 days after 
the beneficiary receives valid notice as specified under paragraph 
(b)(3) of this section, or until the service termination date specified 
on the notice, whichever is later. A beneficiary may waive continuation 
of services if he or she agrees with being discharged sooner than the 
planned service termination date.



Sec. 405.1202  Expedited determination procedures.

    (a) Beneficiary's right to an expedited determination by the QIO. A 
beneficiary has a right to an expedited determination by a QIO under the 
following circumstances:
    (1) For services furnished by a non-residential provider, the 
beneficiary disagrees with the provider of those services that services 
should be terminated, and a physician certifies that failure to continue 
the provision of the service(s) may place the beneficiary's health at 
significant risk.
    (2) For services furnished by a residential provider or a hospice, 
the beneficiary disagrees with the provider's decision to discharge the 
beneficiary.
    (b) Requesting an expedited determination. (1) A beneficiary who 
wishes to exercise the right to an expedited determination must submit a 
request for a determination to the QIO in the State in which the 
beneficiary is receiving those provider services, in writing or by 
telephone, by no later than noon of the calendar day following receipt 
of the provider's notice of termination. If the QIO is unable to accept 
the beneficiary's request, the beneficiary must submit the request by 
noon of the next day the QIO is available to accept a request.
    (2) The beneficiary, or his or her representative, must be available 
to answer questions or to supply information that the QIO may request to 
conduct its review.
    (3) The beneficiary may, but is not required to, submit evidence to 
be considered by a QIO in making its decision.
    (4) If a beneficiary makes an untimely request for an expedited 
determination by a QIO, the QIO will accept the request and make a 
determination as soon as possible, but the 72-hour time frame under 
paragraph (e)(6) and the financial liability protection under paragraph 
(g) of this section do not apply.

[[Page 230]]

    (c) Coverage of provider services. Coverage of provider services 
continues until the date and time designated on the termination notice, 
unless the QIO reverses the provider's service termination decision. If 
the QIO's decision is delayed because the provider did not timely supply 
necessary information or records, the provider may be liable for the 
costs of any additional coverage, as determined by the QIO in accordance 
with paragraph (e)(7) of this section. If the QIO finds that the 
beneficiary did not receive valid notice, coverage of provider services 
continues until at least 2 days after valid notice has been received. 
Continuation of coverage is not required if the QIO determines that 
coverage could pose a threat to the beneficiary's health or safety.
    (d) Burden of proof. When a beneficiary requests an expedited 
determination by a QIO, the burden of proof rests with the provider to 
demonstrate that termination of coverage is the correct decision, either 
on the basis of medical necessity, or based on other Medicare coverage 
policies.
    (1) In order for the QIO to determine whether the provider has met 
the burden of proof, the provider should supply any and all information 
that a QIO requires to sustain the provider's termination decision, 
consistent with paragraph (f) of this section.
    (2) The beneficiary may submit evidence to be considered by a QIO in 
making its decision.
    (e) Procedures the QIO must follow. (1) On the day the QIO receives 
the request for an expedited determination under paragraph (b) of this 
section, it must immediately notify the provider of those services that 
a request for an expedited determination has been made.
    (2) The QIO determines whether the provider delivered valid notice 
of the termination decision consistent with Sec. 405.1200(b) and 
paragraph (f) of this section.
    (3) The QIO examines the medical and other records that pertain to 
the services in dispute. If applicable, the QIO determines whether a 
physician has certified that failure to continue the provision of 
services may place the beneficiary's health at significant risk.
    (4) The QIO must solicit the views of the beneficiary who requested 
the expedited determination.
    (5) The QIO must provide an opportunity for the provider/
practitioner to explain why the termination or discharge is appropriate.
    (6) No later than 72 hours after receipt of the request for an 
expedited determination, the QIO must notify the beneficiary, 
beneficiary's physician, and the provider of services of its 
determination whether termination of Medicare coverage is the correct 
decision, either on the basis of medical necessity or based on other 
Medicare coverage policies.
    (7) If the QIO does not receive the information needed to sustain a 
provider's decision to terminate services, it may make its determination 
based on the evidence at hand, or it may defer a decision until it 
receives the necessary information. If this delay results in extended 
Medicare coverage of an individual's provider services, the provider may 
be held financially liable for these services, as determined by the QIO.
    (8) The QIO's initial notification may be by telephone, followed by 
a written notice including the following information:
    (i) The rationale for the determination;
    (ii) An explanation of the Medicare payment consequences of the 
determination and the date a beneficiary becomes fully liable for the 
services; and
    (iii) Information about the beneficiary's right to a reconsideration 
of the QIO's determination, including how to request a reconsideration 
and the time period for doing so.
    (f) Responsibilities of providers. (1) When a QIO notifies a 
provider that a beneficiary has requested an expedited determination, 
the provider must send a detailed notice to the beneficiary by close of 
business of the day of the QIO's notification. The detailed termination 
notice must include the following information:
    (i) A specific and detailed explanation why services are either no 
longer reasonable and necessary or are no longer covered;
    (ii) A description of any applicable Medicare coverage rule, 
instruction, or

[[Page 231]]

other Medicare policy, including citations to the applicable Medicare 
policy rules or information about how the beneficiary may obtain a copy 
of the Medicare policy;
    (iii) Facts specific to the beneficiary and relevant to the coverage 
determination that are sufficient to advise the beneficiary of the 
applicability of the coverage rule or policy to the beneficiary's case; 
and
    (iv) Any other information required by CMS.
    (2) Upon notification by the QIO of the request for an expedited 
determination, the provider must supply all information that the QIO 
needs to make its expedited determination, including a copy of the 
notices required under Sec. 405.1200(b) and under paragraph (f)(1) of 
this section. The provider must furnish this information as soon as 
possible, but no later than by close of business of the day the QIO 
notifies the provider of the request for an expedited determination. At 
the discretion of the QIO, the provider may make the information 
available by phone or in writing (with a written record of any 
information not transmitted initially in writing).
    (3) At a beneficiary's request, the provider must furnish the 
beneficiary with a copy of, or access to, any documentation that it 
sends to the QIO including records of any information provided by 
telephone. The provider may charge the beneficiary a reasonable amount 
to cover the costs of duplicating the documentation and/or delivering it 
to the beneficiary. The provider must accommodate such a request by no 
later than close of business of the first day after the material is 
requested.
    (g) Coverage during QIO review. When a beneficiary requests an 
expedited determination in accordance with the procedures required by 
this section, the provider may not bill the beneficiary for any disputed 
services until the expedited determination process (and reconsideration 
process, if applicable) has been completed.



Sec. 405.1204  Expedited reconsiderations.

    (a) Beneficiary's right to an expedited reconsideration. A 
beneficiary who is dissatisfied with a QIO's expedited determination may 
request an expedited reconsideration by the appropriate QIC.
    (b) Requesting an expedited reconsideration. (1) A beneficiary who 
wishes to obtain an expedited reconsideration must submit a request for 
the reconsideration to the appropriate QIC, in writing or by telephone, 
by no later than noon of the calendar day following initial notification 
(whether by telephone or in writing) receipt of the QIO's determination. 
If the QIC is unable to accept the beneficiary's request, the 
beneficiary must submit the request by noon of the next day the QIC is 
available to accept a request.
    (2) The beneficiary, or his or her representative, must be available 
to answer questions or supply information that the QIC may request to 
conduct its reconsideration.
    (3) The beneficiary may, but is not required to, submit evidence to 
be considered by a QIC in making its decision.
    (4) A beneficiary who does not file a timely request for an 
expedited QIC reconsideration subsequently may request a reconsideration 
under the standard claims appeal process, but the coverage protections 
described in paragraph (f) of this section would not extend through this 
reconsideration, nor would the timeframes or the escalation process 
described in paragraphs (c)(3) and (c)(5) of this section, respectively.
    (c) Procedures the QIC must follow. (1) On the day the QIC receives 
the request for an expedited determination under paragraph (b) of this 
section, the QIC must immediately notify the QIO that made the expedited 
determination and the provider of services of the request for an 
expedited reconsideration.
    (2) The QIC must offer the beneficiary and the provider an 
opportunity to provide further information.
    (3) Unless the beneficiary requests an extension in accordance with 
paragraph (c)(6) of this section, no later than 72 hours after receipt 
of the request for an expedited reconsideration, and any medical or 
other records needed for such reconsideration, the QIC must notify the 
QIO, the beneficiary, the beneficiary's physician, and the provider of 
services, of its decision on the reconsideration request.

[[Page 232]]

    (4) The QIC's initial notification may be done by telephone, 
followed by a written notice including:
    (i) The rationale for the reconsideration decision;
    (ii) An explanation of the Medicare payment consequences of the 
determination and the beneficiary's date of liability; and
    (iii) Information about the beneficiary's right to appeal the QIC's 
reconsideration decision to OMHA for an ALJ hearing in accordance with 
subpart I of this part, including how to request an appeal and the time 
period for doing so.
    (5) Unless the beneficiary requests an extension in accordance with 
paragraph (c)(6) of this section, if the QIC does not issue a decision 
within 72 hours of receipt of the request, the QIC must notify the 
beneficiary of his or her right to have the case escalated to OMHA for 
an ALJ hearing in accordance with subpart I of this part, if the amount 
remaining in controversy after the QIO determination meets the 
requirements for an ALJ hearing under Sec. 405.1006.
    (6) A beneficiary requesting an expedited reconsideration under this 
section may request (either in writing or orally) that the QIC grant 
such additional time as the beneficiary specifies (not to exceed 14 
days) for the reconsideration. If an extension is granted, the deadlines 
in paragraph (c)(3) of this section do not apply.
    (d) Responsibilities of the QIO. (1) When a QIC notifies a QIO that 
a beneficiary has requested an expedited reconsideration, the QIO must 
supply all information that the QIC needs to make its expedited 
reconsideration as soon as possible, but no later than by close of 
business of the day that the QIC notifies the QIO of the request for an 
expedited reconsideration.
    (2) At a beneficiary's request, the QIO must furnish the beneficiary 
with a copy of, or access to, any documentation that it sends to the 
QIC. The QIO may charge the beneficiary a reasonable amount to cover the 
costs of duplicating the documentation and/or delivering it to the 
beneficiary. The QIO must accommodate the request by no later than close 
of business of the first day after the material is requested.
    (e) Responsibilities of the provider. A provider may, but is not 
required to, submit evidence to be considered by a QIC in making its 
decision. If a provider fails to comply with a QIC's request for 
additional information beyond that furnished to the QIO for purposes of 
the expedited determination, the QIC makes its reconsideration decision 
based on the information available.
    (f) Coverage during QIC reconsideration process. When a beneficiary 
requests an expedited reconsideration in accordance with the deadline 
specified in (b)(1) of this section, the provider may not bill the 
beneficiary for any disputed services until the QIC makes its 
determination.

[69 FR 69624, Nov. 26, 2004, as amended at 82 FR 5124, Jan. 17, 2017]



Sec. 405.1205  Notifying beneficiaries of hospital discharge appeal
rights.

    (a) Applicability and scope. (1) For purposes of Secs. 405.1204, 
405.1205, 405.1206, and 405.1208, the term ``hospital'' is defined as 
any facility providing care at the inpatient hospital level, whether 
that care is short term or long term, acute or non acute, paid through a 
prospective payment system or other reimbursement basis, limited to 
specialty care or providing a broader spectrum of services. This 
definition includes critical access hospitals.
    (2) For purposes of Secs. 405.1204, 405.1205, 405.1206, and 
405.1208, a discharge is a formal release of a beneficiary from an 
inpatient hospital.
    (b) Advance written notice of hospital discharge rights. For all 
Medicare beneficiaries, hospitals must deliver valid, written notice of 
a beneficiary's rights as a hospital inpatient, including discharge 
appeal rights. The hospital must use a standardized notice, as specified 
by CMS, in accordance with the following procedures:
    (1) Timing of notice. The hospital must provide the notice at or 
near admission, but no later than 2 calendar days following the 
beneficiary's admission to the hospital.
    (2) Content of the notice. The notice must include the following 
information:
    (i) The beneficiary's rights as a hospital inpatient including the 
right to

[[Page 233]]

benefits for inpatient services and for post-hospital services in 
accordance with 1866(a)(1)(M) of the Act.
    (ii) The beneficiary's right to request an expedited determination 
of the discharge decision including a description of the process under 
Sec. 405.1206, and the availability of other appeals processes if the 
beneficiary fails to meet the deadline for an expedited determination.
    (iii) The circumstances under which a beneficiary will or will not 
be liable for charges for continued stay in the hospital in accordance 
with 1866(a)(1)(M) of the Act.
    (iv) A beneficiary's right to receive additional detailed 
information in accordance with Sec. 405.1206(e).
    (v) Any other information required by CMS.
    (3) When delivery of the notice is valid. Delivery of the written 
notice of rights described in this section is valid if--
    (i) The beneficiary (or the beneficiary's representative) has signed 
and dated the notice to indicate that he or she has received the notice 
and can comprehend its contents, except as provided in paragraph (b)(4) 
of this section; and
    (ii) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph (b)(2) 
of this section.
    (4) If a beneficiary refuses to sign the notice. The hospital may 
annotate its notice to indicate the refusal, and the date of refusal is 
considered the date of receipt of the notice.
    (c) Follow up notification. (1) The hospital must present a copy of 
the signed notice described in paragraph (b)(2) of this section to the 
beneficiary (or beneficiary's representative) prior to discharge. The 
notice should be given as far in advance of discharge as possible, but 
not more than 2 calendar days before discharge.
    (2) Follow up notification is not required if the notice required 
under Sec. 405.1205(b) is delivered within 2 calendar days of discharge.

[71 FR 68720, Nov. 27, 2006]



Sec. 405.1206  Expedited determination procedures for inpatient
hospital care.

    (a) Beneficiary's right to an expedited determination by the QIO. A 
beneficiary has a right to request an expedited determination by the QIO 
when a hospital (acting directly or through its utilization review 
committee), with physician concurrence, determines that inpatient care 
is no longer necessary.
    (b) Requesting an expedited determination. (1) A beneficiary who 
wishes to exercise the right to an expedited determination must submit a 
request to the QIO that has an agreement with the hospital as specified 
in Sec. 476.78 of this chapter. The request must be made no later than 
the day of discharge and may be in writing or by telephone.
    (2) The beneficiary, or his or her representative, upon request by 
the QIO, must be available to discuss the case.
    (3) The beneficiary may, but is not required to, submit written 
evidence to be considered by a QIO in making its decision.
    (4) A beneficiary who makes a timely request for an expedited QIO 
review in accordance with paragraph (b)(1) of this section is subject to 
the financial liability protections under paragraphs (f)(1) and (f)(2) 
of this section, as applicable.
    (5) A beneficiary who fails to make a timely request for an 
expedited determination by a QIO, as described in paragraph (b)(1) of 
this section, and remains in the hospital without coverage, still may 
request an expedited QIO determination at any time during the 
hospitalization. The QIO will issue a decision in accordance with 
paragraph (d)(6)(ii) of this section, however, the financial liability 
protection under paragraphs (f)(1) and (f)(2) of this section does not 
apply.
    (6) A beneficiary who fails to make a timely request for an 
expedited determination in accordance with paragraph (b)(1) of this 
section, and who is no longer an inpatient in the hospital, may request 
QIO review within 30 calendar days after the date of discharge, or at 
any time for good cause. The QIO will issue a decision in accordance 
with paragraph (d)(6)(iii) of this section;

[[Page 234]]

however, the financial liability protection under paragraphs (f)(1) and 
(f)(2) of this section does not apply.
    (c) Burden of proof. When a beneficiary (or his or her 
representative, if applicable) requests an expedited determination by a 
QIO, the burden of proof rests with the hospital to demonstrate that 
discharge is the correct decision, either on the basis of medical 
necessity, or based on other Medicare coverage policies. Consistent with 
paragraph (e)(2) of this section, the hospital should supply any and all 
information that a QIO requires to sustain the hospital's discharge 
determination.
    (d) Procedures the QIO must follow. (1) When the QIO receives the 
request for an expedited determination under paragraph (b)(1) of this 
section, it must immediately notify the hospital that a request for an 
expedited determination has been made.
    (2) The QIO determines whether the hospital delivered valid notice 
consistent with Sec. 405.1205(b)(3).
    (3) The QIO examines the medical and other records that pertain to 
the services in dispute.
    (4) The QIO must solicit the views of the beneficiary (or the 
beneficiary's representative) who requested the expedited determination.
    (5) The QIO must provide an opportunity for the hospital to explain 
why the discharge is appropriate.
    (6)(i) When the beneficiary requests an expedited determination in 
accordance with paragraph (b)(1) of this section, the QIO must make a 
determination and notify the beneficiary, the hospital, and physician of 
its determination within one calendar day after it receives all 
requested pertinent information.
    (ii) When the beneficiary makes an untimely request for an expedited 
determination, and remains in the hospital, consistent with paragraph 
(b)(5) of this section, the QIO will make a determination and notify the 
beneficiary, the hospital, and the physician of its determination within 
2 calendar days following receipt of the request and pertinent 
information.
    (iii) When the beneficiary makes an untimely request for an 
expedited determination, and is no longer an inpatient in the hospital, 
consistent with paragraph (b)(6) of this section, the QIO will make a 
determination and notify the beneficiary, the hospital, and physician of 
its determination within 30 calendar days after receipt of the request 
and pertinent information.
    (7) If the QIO does not receive the information needed to sustain a 
hospital's decision to discharge, it may make its determination based on 
the evidence at hand, or it may defer a decision until it receives the 
necessary information. If this delay results in extended Medicare 
coverage of an individual's hospital services, the hospital may be held 
financially liable for these services, as determined by the QIO.
    (8) When the QIO issues an expedited determination, the QIO must 
notify the beneficiary, the physician, and hospital of its decision by 
telephone, followed by a written notice that must include the following 
information:
    (i) The basis for the determination.
    (ii) A detailed rationale for the determination.
    (iii) An explanation of the Medicare payment consequences of the 
determination and the date a beneficiary becomes fully liable for the 
services.
    (iv) Information about the beneficiary's right to a reconsideration 
of the QIO's determination as set forth in Sec. 405.1204, including how 
to request a reconsideration and the time period for doing so.
    (e) Responsibilities of hospitals. (1) When a QIO notifies a 
hospital that a beneficiary has requested an expedited determination, 
the hospital must deliver a detailed notice to the beneficiary as soon 
as possible but no later than noon of the day after the QIO's 
notification. The detailed notice must include the following 
information:
    (i) A detailed explanation why services are either no longer 
reasonable and necessary or are otherwise no longer covered.
    (ii) A description of any applicable Medicare coverage rule, 
instruction, or other Medicare policy, including information about how 
the beneficiary may obtain a copy of the Medicare policy.
    (iii) Facts specific to the beneficiary and relevant to the coverage 
determination that are sufficient to advise the beneficiary of the 
applicability of

[[Page 235]]

the coverage rule or policy to the beneficiary's case.
    (iv) Any other information required by CMS.
    (2) Upon notification by the QIO of the request for an expedited 
determination, the hospital must supply all information that the QIO 
needs to make its expedited determination, including a copy of the 
notices required as specified in Sec. 405.1205 (b) and (c) and paragraph 
(e)(1) of this section. The hospital must furnish this information as 
soon as possible, but no later than by noon of the day after the QIO 
notifies the hospital of the request for an expedited determination. At 
the discretion of the QIO, the hospital must make the information 
available by phone or in writing (with a written record of any 
information not transmitted initially in writing).
    (3) At a beneficiary's (or representative's) request, the hospital 
must furnish the beneficiary with a copy of, or access to, any 
documentation that it sends to the QIO, including written records of any 
information provided by telephone. The hospital may charge the 
beneficiary a reasonable amount to cover the costs of duplicating the 
documentation and/or delivering it to the beneficiary. The hospital must 
accommodate such a request by no later than close of business of the 
first day after the material is requested.
    (f) Coverage during QIO expedited review--(1) General rule and 
liability while QIO review is pending. If the beneficiary remains in the 
hospital past midnight of the discharge date ordered by the physician, 
and the hospital, the physician who concurred with the discharge 
determination, or the QIO subsequently finds that the beneficiary 
requires inpatient hospital care, the beneficiary is not financially 
responsible for continued care (other than applicable coinsurance and 
deductible) until the hospital once again determines that the 
beneficiary no longer requires inpatient care, secures concurrence from 
the physician responsible for the beneficiary's care or the QIO, and 
notifies the beneficiary with a notice consistent with 405.1205 (c).
    (2) Timely filing and limitation on liability. If a beneficiary 
files a request for an expedited determination by the QIO in accordance 
with paragraph (b)(1) of this section, the beneficiary is not 
financially responsible for inpatient hospital services (other than 
applicable coinsurance and deductible) furnished before noon of the 
calendar day after the date the beneficiary (or his or her 
representative) receives notification (either orally or in writing) of 
the expedited determination by the QIO.
    (3) Untimely request and liability. When a beneficiary does not file 
a request for an expedited determination by the QIO in accordance with 
paragraph (b) of this section, but remains in the hospital past the 
discharge date, that beneficiary may be held responsible for charges 
incurred after the date of discharge or as otherwise stated by the QIO.
    (4) Hospital requests an expedited review. When the hospital 
requests a review in accordance with Sec. 405.1208, and the QIO concurs 
with the hospital's discharge determination, a hospital may not charge 
the beneficiary until the date specified by the QIO.
    (g) Effect of an expedited QIO determination. The QIO determination 
is binding upon the beneficiary, physician, and hospital, except in the 
following circumstances:
    (1) Right to request a reconsideration. If the beneficiary is still 
an inpatient in the hospital and is dissatisfied with the determination, 
he or she may request a reconsideration according to the procedures 
described in Sec. 405.1204.
    (2) Right to pursue the general claims appeal process. If the 
beneficiary is no longer an inpatient in the hospital and is 
dissatisfied with this determination, the determination is subject to 
the general claims appeal process.

[71 FR 68721, Nov. 27, 2006]



Sec. 405.1208  Hospital requests expedited QIO review.

    (a) General rule. (1) If the hospital (acting directly or through 
its utilization review committee) believes that the beneficiary does not 
require further inpatient hospital care but is unable to obtain the 
agreement of the physician, it may request an expedited determination by 
the QIO.
    (2) When the hospital requests review, and the QIO concurs with the

[[Page 236]]

hospital's discharge determination, a hospital may not charge a 
beneficiary until the date specified by the QIO in accordance with 
405.1206(f)(4).
    (b) Procedures hospital must follow. (1) The hospital must (acting 
directly or through its utilization review committee) notify the 
beneficiary (or his or her representative) that it has requested that 
review.
    (2) The hospital must supply any pertinent information the QIO 
requires to conduct its review and must make it available by phone or in 
writing, by close of business of the first full working day immediately 
following the day the hospital submits the request for review.
    (c) Procedures the QIO must follow. (1) The QIO must notify the 
hospital that it has received the request for review and must notify the 
hospital if it has not received all pertinent records.
    (2) The QIO must examine the pertinent records pertaining to the 
services.
    (3) The QIO must solicit the views of the beneficiary in question.
    (4) The QIO must make a determination and notify the beneficiary, 
the hospital, and physician within 2 working days of the hospital's 
request and receipt of any pertinent information submitted by the 
hospital.
    (d) Notice of an expedited determination. (1) When a QIO issues an 
expedited determination as stated in paragraph (c)(4) of this section, 
it must notify the beneficiary, physician, and hospital of its decision, 
by telephone and subsequently in writing.
    (2) A written notice of the expedited initial determination must 
contain the following:
    (i) The basis for the determination;.
    (ii) A detailed rationale for the determination;
    (iii) A statement explaining the Medicare payment consequences of 
the expedited determination and date of liability, if any; and
    (iv) A statement informing the beneficiary of his or her appeal 
rights and the timeframe for requesting an appeal.
    (e) Effect of an expedited determination. The expedited 
determination under this section is binding upon the beneficiary, 
physician, and hospital, except in the following circumstances:
    (1) When a beneficiary remains in the hospital. If the beneficiary 
is still an inpatient in the hospital and is dissatisfied with this 
determination, he or she may request a reconsideration according to the 
procedures described in Sec. 405.1204. The procedures described in 
Sec. 405.1204 will apply to reconsiderations requested under this 
section. If the beneficiary does not make a request in accordance with 
Sec. 405.1204(b)(1), the timeframes described in Sec. 405.1204(c)(3), 
the escalation procedures described in Sec. 405.1204(c)(5), and the 
coverage rule described in Sec. 405.1204(f) will not apply.
    (2) When a beneficiary is no longer an inpatient in the hospital. If 
the beneficiary is no longer an inpatient in the hospital and is 
dissatisfied with this determination, this determination is subject to 
the general claims appeal process.

[69 FR 69624, Nov. 26, 2004, as amended at 71 FR 68722, Nov. 27, 2006]

Subparts K-Q [Reserved]



       Subpart R_Provider Reimbursement Determinations and Appeals

    Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 1871, 
1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 405, 1302, 
1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 1395oo, and 
1395ww).

    Source: 39 FR 34515, Sept. 26, 1974, unless otherwise noted. 
Redesignated at 42 FR 52826, Sept. 30, 1977.

    Editorial Note: Nomenclature changes to subpart R of part 405 appear 
at 79 FR 55031, Aug. 22, 2014.



Sec. 405.1801  Introduction.

    (a) Definitions. As used in this subpart:
    Administrator means the Administrator or Deputy Administrator of 
CMS.
    Administrator review means that review provided for in section 
1878(f) of the Act (42 U.S.C. 1395oo(f)) and Sec. 405.1875.
    Board means the Provider Reimbursement Review Board established in 
accordance with section 1878 of the Act (42 U.S.C. 1395oo) and 
Sec. 405.1845.

[[Page 237]]

    Board hearing means that hearing provided for in section 1878(a) of 
the Act (42 U.S.C. 1395oo(a)), and Sec. 405.1835.
    CMS reviewing official means the reviewing official provided for in 
Sec. 405.1834.
    CMS reviewing official procedure means the review provided for in 
Sec. 405.1834.
    Contractor determination means the following:
    (1) With respect to a provider of services that has filed a cost 
report under Secs. 413.20 and 413.24 of this chapter, the term means a 
final determination of the amount of total reimbursement due the 
provider, pursuant to Sec. 405.1803 following the close of the 
provider's cost reporting period, for items and services furnished to 
beneficiaries for which reimbursement may be made on a reasonable cost 
basis under Medicare for the period covered by the cost report.
    (2) With respect to a hospital that receives payments for inpatient 
hospital services under the prospective payment system (part 412 of this 
chapter), the term means a final determination of the total amount of 
payment due the hospital, pursuant to Sec. 405.1803 following the close 
of the hospital's cost reporting period, under that system for the 
period covered by the final determination.
    (3) For purposes of appeal to the Provider Reimbursement Review 
Board, the term is synonymous with the phrases ``intermediary's final 
determination,'' ``final determination of the organization serving as 
its fiscal intermediary,'' ``Secretary's final determination'' and 
``final determination of the Secretary,'' as those phrases are used in 
section 1878(a) of the Act, and with the phrases ``final contractor 
determination'' and ``final Secretary determination'' as those phrases 
are used in this subpart.
    (4) For purposes of Sec. 405.376 concerning claims collection 
activities, the term does not include an action by CMS with respect to a 
compromise of a Medicare overpayment claim, or termination or suspension 
of collection action on an overpayment claim, against a provider or 
physician or other supplier.
    Contractor hearing means that hearing provided for in Sec. 405.1809.
    Contractor hearing officer(s) means the hearing officer or panel of 
hearing officers provided for in Sec. 405.1817.
    Date of receipt means the date a document or other material is 
received by either of the following:
    (1) A party or an affected nonparty. A party or an affected 
nonparty, such as CMS, involved in proceedings before a reviewing 
entity.
    (i) As applied to a party or an affected nonparty, the phrase ``date 
of receipt'' in this definition is synonymous with the term ``notice,'' 
as that term is used in section 1878 of the Act and in this subpart.
    (ii) For purposes of a contractor hearing, if no contractor hearing 
officer is appointed (or none is currently presiding), the date of 
receipt of materials sent to the contractor hearing officer is presumed 
to be the date that the contractor stamps ``Received'' on the materials.
    (iii) The date of receipt by a party or affected nonparty of 
documents involved in proceedings before a reviewing entity is presumed 
to be 5 days after the date of issuance of a contractor notice or a 
reviewing entity document. This presumption, which is otherwise 
conclusive, may be overcome if it is established by a preponderance of 
the evidence that such materials were actually received on a later date.
    (2) A reviewing entity. For purposes of this definition, a reviewing 
entity is deemed to include the Office of the Attorney Advisor. The 
determination as to the date of receipt by the reviewing entity to which 
the document or other material was submitted is final and binding as to 
all parties to the appeal. The date of receipt of documents by a 
reviewing entity is presumed to be the date--
    (i) Of delivery where the document or material is transmitted by a 
nationally-recognized next-day courier (such as the United States Postal 
Service's Express Mail, Federal Express, UPS, DHL, etc.); or
    (ii) Stamped ``Received'' by the reviewing entity on the document or 
other submitted material (where a nationally-recognized next-day courier 
is not employed). This presumption, which is otherwise conclusive, may 
be overcome if it is established by clear

[[Page 238]]

and convincing evidence that the document or other material was actually 
received on a different date.
    Reviewing entity means the contractor hearing officer(s), a CMS 
reviewing official, the Board, or the Administrator.
    (b) General rules--(1) Providers. In order to be paid for covered 
services furnished to Medicare beneficiaries, a provider must file a 
cost report with its contractor as specified in Sec. 413.24 of this 
chapter. For purposes of this subpart, the term ``provider'' includes a 
hospital (as described in part 482 of this chapter), hospice program (as 
described in Sec. 418.3 of this chapter), critical access hospital 
(CAH), comprehensive outpatient rehabilitation facility (CORF), renal 
dialysis facility, Federally qualified health center (FQHC), home health 
agency (HHA), rural health clinic (RHC), skilled nursing facility (SNF), 
and any other entity included under the Act. (FQHCs and RHCs are 
providers, for purposes of this subpart, effective with cost reporting 
periods beginning on or after October 1, 1991).
    (2) Other nonprovider entities participating in Medicare Part A. (i) 
Providers of services, as well as, other entities (including, but not 
limited to health maintenance organizations (HMOs) and competitive 
medical plans (CMPs) (as described in Sec. 400.200 of this chapter)) may 
participate in the Medicare program, but do not qualify as providers 
under the Act or this subpart.
    (ii) Some of these nonprovider entities are required to file 
periodic cost reports and are paid on the basis of information furnished 
in these reports. Except as provided at Sec. 413.200(g), these 
nonprovider entities may not obtain a contractor hearing or a Board 
hearing under section 1878 of the Act or this subpart.
    (iii) Some other hearing will be available to these nonprovider 
entities, if the amount in controversy is at least $1,000.
    (iv) For any nonprovider hearing, the procedural rules for a Board 
hearing set forth in this subpart are applicable to the maximum extent 
possible.
    (c) Effective dates. (1) Except as provided in paragraphs (c)(2) and 
(c)(3) of this section or in Sec. 405.1885(e), this subpart applies to 
all cost reporting periods ending on or after December 31, 1971, for 
which reimbursement may be made on a reasonable cost basis.
    (2) Sections 405.1835 to 405.1877 apply only to cost reporting 
periods ending on or after June 30, 1973, for which reimbursement may be 
made on a reasonable cost basis.
    (3) With respect to hospitals under the prospective payment system 
(see part 412 of this chapter), the appeals procedures in Secs. 405.1811 
to 405.1877 that apply become applicable with the hospital's first cost 
reporting period beginning on or after October 1, 1983.
    (d) Calculating time periods and deadlines. In computing any period 
of time or deadline prescribed or allowed under this subpart or 
authorized by a reviewing entity the following principles are 
applicable:
    (1) The day of the act, event, or default from which the designated 
time period begins to run is not included.
    (2) Each succeeding calendar day, including the last day, is 
included in the designated time period, except that, in calculating a 
designated period of time for an act by a reviewing entity, a day is not 
included where the reviewing entity is unable to conduct business in the 
usual manner due to extraordinary circumstances beyond its control such 
as natural or other catastrophe, weather conditions, fire, or furlough. 
In that case, the designated time period resumes when the reviewing 
entity is again able to conduct business in the usual manner.
    (3) If the last day of the designated time period is a Saturday, a 
Sunday, a Federal legal holiday (as enumerated in Rule 6(a) of the 
Federal Rules of Civil Procedure), or a day on which the reviewing 
entity is unable to conduct business in the usual manner, the deadline 
becomes the next day that is not one of the aforementioned days.
    (4) For purposes of paragraph (d) of this section, the reviewing 
entity is deemed to also include--
    (i) The contractor, if the contractor hearing officer(s) is not yet 
appointed (or none is currently presiding); and

[[Page 239]]

    (ii) The Office of the Attorney Advisor.

[39 FR 34515, Sept. 26, 1974. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 48 FR 39834, Sept. 1, 1983; 48 FR 45773, Oct. 7, 
1983; 49 FR 322, Jan. 3, 1984; 49 FR 23013, June 1, 1984; 51 FR 34793, 
Sept. 30, 1986; 61 FR 63749, Dec. 2, 1996; 73 FR 30243, May 23, 2008; 73 
FR 49356, Aug. 21, 2008; 80 FR 70597, Nov. 13, 2015]



Sec. 405.1803  Contractor determination and notice of amount 
of program reimbursement.

    (a) General requirement. Upon receipt of a provider's cost report, 
or amended cost report where permitted or required, the contractor must 
within a reasonable period of time (as specified in 
Sec. 405.1835(c)(1)), furnish the provider and other parties as 
appropriate (see Sec. 405.1805) a written notice reflecting the 
contractor's final determination of the total amount of reimbursement 
due the provider. The contractor must include the following information 
in the notice, as appropriate:
    (1) Reasonable cost. The notice must--
    (i) Explain the contractor's determination of total program 
reimbursement due the provider on the basis of reasonable cost for the 
reporting period covered by the cost report or amended cost report; and
    (ii) Relate this determination to the provider's claimed total 
program reimbursement due the provider for this period.
    (2) Prospective payment. With respect to a hospital that receives 
payments for inpatient hospital services under the prospective payment 
system (see part 412 of this chapter), the contractor must include in 
the notice its determination of the total amount of the payments due the 
hospital under that system for the cost reporting period covered by the 
notice. The notice must explain (with appropriate use of the applicable 
money amounts) any difference in the amount determined to be due, and 
the amounts received by the hospital during the cost reporting period 
covered by the notice.
    (3) Hospice caps. With respect to a hospice, the reporting period 
for the cap calculation is the cap year; and the contractors' 
determination of program reimbursement letter, which provides the 
results of the inpatient and aggregate cap calculations, shall serve as 
a notice of program reimbursement. The time period for filing cap 
appeals begins with receipt of the determination of program 
reimbursement letter.
    (b) Requirements for contractor notices. The contractor must include 
in each notice appropriate references to law, regulations, CMS Rulings, 
or program instructions to explain why the contractor's determination of 
the amount of program reimbursement for the period differs from the 
amount the provider claimed. The notice must also inform the provider of 
its right to contractor or Board hearing (see Secs. 405.1809, 405.1811, 
405.1815, 405.1835, and 405.1843) and that the provider must request the 
hearing within 180 days after the date of receipt of the notice.
    (c) Use of notice as basis for recoupment of overpayments. The 
contractor's determination contained in its notice is the basis for 
making the retroactive adjustment (required by Sec. 413.64(f) of this 
chapter) to any program payments made to the provider during the period 
to which the determination applies, including recoupment under 
Sec. 405.373 from ongoing payments to the provider of any overpayments 
to the provider identified in the determination. Recoupment is made 
notwithstanding any request for hearing on the determination the 
provider may make under Sec. 405.1811 or Sec. 405.1835.
    (d) Effect of certain final agency decisions and final court 
judgments; audits of self-disallowed and other items. (1) This paragraph 
applies to the following administrative decisions and court judgments:
    (i) A final hearing decision by the contractor (as described in 
Sec. 405.1833 of this subpart) or the Board (as described in 
Sec. 405.1871(b) of this subpart).
    (ii) A final decision by a CMS reviewing official (as described in 
Sec. 405.1834(f)(1) of this subpart) or the Administrator (as described 
in Sec. 405.1875(e)(4) of this subpart) following review of a hearing 
decision by the contractor or the Board, respectively.
    (iii) A final, non-appealable judgment by a court on a Medicare 
reimbursement issue that the court rendered in accordance with 
jurisdiction under section 1878 of the Act (as described in 
Secs. 405.1842 and 405.1877 of this subpart).

[[Page 240]]

    (2) For any final agency decision or final court judgment specified 
in paragraph (d)(1) of this section, the contractor must promptly, upon 
notification from CMS--
    (i) Determine the effect of the final decision or judgment on the 
contractor determination for the cost reporting period at issue in the 
decision or judgment; and
    (ii) Issue any revised contractor determination, and make any 
additional program payment, or recoup or offset any program payment (as 
described in Sec. 405.371 of this subpart), for the period that may be 
necessary to implement the final decision or judgment on the specific 
matters at issue in the decision or judgment.
    (3) CMS may require the contractor to audit any item, including any 
self-disallowed item, at issue in an appeal or a civil action, before 
any revised contractor determination or additional Medicare payment, 
recoupment, or offset may be determined for an item under paragraph 
(d)(2) of this section.
    (4) For any final settlement agreement, whether for an appeal to the 
contractor hearing officer(s) or the Board or for a civil action before 
a court, the contractor must implement the settlement agreement in 
accordance with paragraphs (d)(2) and (d)(3) of this section, unless a 
particular administrative or judicial settlement agreement provides 
otherwise.

[48 FR 39834, Sept. 1, 1983, as amended at 49 FR 322, Jan. 3, 1984; 51 
FR 34793, Sept. 30, 1986; 61 FR 63748, Dec. 2, 1996; 73 FR 30244, May 
23, 2008; 74 FR 39412, Aug. 6, 2009; 80 FR 70597, Nov. 13, 2015]



Sec. 405.1804  Matters not subject to administrative and judicial
review under prospective payment.

    Neither administrative nor judicial review is available for 
controversies about the following matters:
    (a) The determination of the requirement, or the proportional 
amount, of the budget neutrality adjustment in the prospective payment 
rates required under section 1886(e)(1) of the Social Security Act.
    (b) The establishment of--
    (1) Diagnosis related groups (DRGs);
    (2) The methodology for the classification of inpatient discharges 
within the DRGs; or
    (3) Appropriate weighting factors that reflect the relative hospital 
resources used with respect to discharge within each DRG.

[49 FR 322, Jan. 1, 1984, as amended at 78 FR 75195, Dec. 10, 2013]



Sec. 405.1805  Parties to contractor determination.

    The parties to the contractor's determination are the provider and 
any other entity found by the contractor to be a related organization of 
the provider under Sec. 413.17 of this chapter.

[48 FR 39835, Sept. 1, 1983, as amended at 51 FR 34793, Sept. 30, 1986]



Sec. 405.1807  Effect of contractor determination.

    The determination shall be final and binding on the party or parties 
to such determination unless:
    (a) A contractor hearing is requested in accordance with 
Sec. 405.1811 and a contractor hearing decision rendered in accordance 
with Sec. 405.1831; or
    (b) The contractor determination is revised in accordance with 
Sec. 405.1885; or
    (c) A Board hearing is requested in accordance with Sec. 405.1835 
and a hearing decision rendered pursuant thereto.



Sec. 405.1809  Contractor hearing procedures.

    (a) Hearings. Each contractor must establish and maintain written 
procedures for contractor hearings, in accordance with the regulations 
in this subpart, for resolving issues that may arise between the 
contractor and a provider concerning the amount of reasonable cost 
reimbursement, or prospective payment due the provider (except as 
provided in Sec. 405.1804) under the Medicare program. The procedures 
must provide for a hearing on the contractor determination contained in 
the notice of program reimbursement (Sec. 405.1803), if the provider 
files a timely request for a hearing.
    (b) Amount in controversy. In order for a contractor to grant a 
hearing, the following dates and amounts in controversy apply:
    (1) For cost reporting periods ending prior to June 30, 1973, the 
amount of

[[Page 241]]

program reimbursement in controversy must be at least $1000.
    (2) For cost reporting periods ending on or after June 30, 1973, the 
amount of program reimbursement in controversy must be at least $1000 
but less than $10,000.

[48 FR 39835, Sept. 1, 1983, as amended at 49 FR 323, Jan. 1, 1984]



Sec. 405.1811  Right to contractor hearing; contents of, and adding
issues to, hearing request.

    (a) Right to hearing on final contractor determination. A provider 
(but no other individual, entity, or party) has a right to a contractor 
hearing, as a single provider appeal, with respect to a final contractor 
or Secretary determination for the provider's cost reporting period, 
if--
    (1) The provider is dissatisfied with the contractor's final 
determination of the total amount of reimbursement due the provider, as 
set forth in the contractor's written notice pursuant to Sec. 405.1803. 
Exception: If a final contractor determination is reopened under 
Sec. 405.1885, any review by the contractor hearing officer must be 
limited solely to those matters that are specifically revised in the 
contractor's revised final determination (Secs. 405.1887(d), 
405.1889(b), and the ``Exception'' in Sec. 405.1832(c)(2)(i)).
    (2) The amount in controversy (as determined in accordance with 
Sec. 405.1839) must be at least $1,000 but less than $10,000.
    (3) Unless the provider qualifies for a good cause extension under 
Sec. 405.1813, the date of receipt by the contractor of the provider's 
hearing request must be no later than 180 days after the date of receipt 
by the provider of the final contractor or Secretary determination.
    (b) Contents of request for a contractor hearing on final contractor 
determination. The provider's request for a contractor hearing under 
paragraph (a) of this section must be submitted in writing to the 
contractor, and the request must include the elements described in 
paragraphs (b)(1) through (b)(3) of this section. If the provider 
submits a hearing request that does not meet the requirements of 
paragraph (b)(1), (b)(2), or (b)(3) of this section, the contractor 
hearing officer may dismiss with prejudice the appeal or take any other 
remedial action he or she considers appropriate.
    (1) A demonstration that the provider satisfies the requirements for 
a contractor hearing as specified in paragraph (a) of this section, 
including a specific identification of the final contractor or Secretary 
determination under appeal.
    (2) For each specific item under appeal, a separate explanation of 
why, and a description of how, the provider is dissatisfied with the 
specific aspects of the final contractor or Secretary determination 
under appeal, including an account of all of the following:
    (i) Why the provider believes Medicare payment is incorrect for each 
disputed item (or, where applicable, why the provider is unable to 
determine whether Medicare payment is correct because it allegedly does 
not have access to underlying information concerning the calculation of 
its payment); and
    (ii) How and why the provider believes Medicare payment should be 
determined differently for each disputed item.
    (iii) If the provider self-disallows a specific item (as specified 
in Sec. 413.24(j) of this chapter), an explanation of the nature and 
amount of each self-disallowed item, the reimbursement sought for the 
item, and why the provider self-disallowed the item instead of claiming 
reimbursement for the item.
    (3) A copy of the final contractor or Secretary determination under 
appeal and any other documentary evidence the provider considers 
necessary to satisfy the hearing request requirements of paragraphs 
(b)(1) and (b)(2) of this section.
    (c) Right to hearing based on untimely contractor determination. 
Notwithstanding the provisions of paragraph (a) of this section, a 
provider (but no other individual, entity, or party) has a right to a 
contractor hearing, as a single provider appeal, for specific items for 
a cost reporting period if--
    (1) A final contractor determination for the provider's cost 
reporting period is not issued (through no fault of the provider) within 
12 months after the date of receipt by the contractor of the

[[Page 242]]

provider's perfected cost report or amended cost report (as specified in 
Sec. 413.24(f) of this chapter). The date of receipt by the contractor 
of the provider's perfected cost report or amended cost report is 
presumed to be the date the contractor stamped ``Received'' on such cost 
report unless it is shown by a preponderance of the evidence that the 
contractor received the cost report on an earlier date.
    (2) Unless the provider qualifies for a good cause extension under 
Sec. 405.1813, the date of receipt by the contractor of the provider's 
hearing request is no later than 180 days after the expiration of the 12 
month period for issuance of the final contractor determination (as 
determined in accordance with paragraph (c)(1) of this section); and
    (3) The amount in controversy (as determined in accordance with 
Sec. 405.1839) is at least $1,000 but less than $10,000.
    (d) Contents of request for a contractor hearing based on untimely 
contractor determination. The provider's request for a contractor 
hearing under paragraph (c) of this section must be submitted in writing 
to the contractor, and the request must include the elements described 
in paragraphs (d)(1) through (d)(3) of this section. If the provider 
submits a hearing request that does not meet the requirements of 
paragraph (d)(1), (d)(2), or (d)(3) of this section, the contractor 
hearing officer may dismiss with prejudice the appeal or take any other 
remedial action he or she considers appropriate.
    (1) A demonstration that the provider satisfies the requirements for 
a contractor hearing as specified in paragraph (c) of this section.
    (2) An explanation (for each specific item at issue) of the 
following:
    (i) Why the provider believes Medicare payment is incorrect for each 
disputed item (or, where applicable, why the provider is unable to 
determine whether Medicare payment is correct because it does not have 
access to underlying information concerning the calculation of Medicare 
payment).
    (ii) How and why the provider believes Medicare payment must be 
determined differently for each disputed item.
    (iii) If the provider self-disallows a specific item, a description 
of the nature and amount of each self-disallowed item and the 
reimbursement or payment sought for the item.
    (3) A copy of any documentary evidence the provider considers 
necessary to satisfy the hearing request requirements of paragraphs 
(d)(1) and (d)(2) of this section.
    (e) Adding issues to the hearing request. After filing a hearing 
request in accordance with paragraphs (a) and (b), or paragraphs (c) and 
(d), of this section, a provider may add specific Medicare payment 
issues to the original hearing request by submitting a written request 
to the contractor hearing officer, only if--
    (1) The request to add issues complies with the requirements of 
paragraphs (a) and (b), or paragraphs (c) and (d), of this section as to 
each new specific item at issue.
    (2) The specific items raised in the initial hearing request and the 
specific items identified in subsequent requests to add issues, when 
combined, satisfy the amount in controversy requirements of paragraph 
(a)(2) or paragraph (c)(3) of this section.
    (3) The contractor hearing officer receives the provider's request 
to add issues no later than 60 days after the expiration of the 
applicable 180-day period prescribed in paragraph (a)(3) or paragraph 
(c)(2) of this section.

[73 FR 30244, May 23, 2008, as amended at 79 FR 50349, Aug. 22, 2014; 79 
FR 59680, Oct. 3, 2014; 80 FR 70597, Nov. 13, 2015]



Sec. 405.1813  Good cause extension of time limit for requesting
a contractor hearing.

    (a) A request for a contractor hearing that is received by the 
contractor after the applicable 180-day time limit prescribed in 
Sec. 405.1811(a)(3) or Sec. 405.1811(c)(2) must be dismissed by the 
contractor hearing officer(s), except that the hearing officer(s) may 
extend the time limit upon a good cause showing by the provider.
    (b) The contractor hearing officer(s) may find good cause to extend 
the time limit only if the provider demonstrates in writing it could not 
reasonably have been expected to file timely due to extraordinary 
circumstances beyond its

[[Page 243]]

control (such as a natural or other catastrophe, fire, or strike), and 
the provider's written request for an extension is received by the 
contractor hearing officer(s) within a reasonable time (as determined by 
the contractor hearing officer(s) under the circumstances) after the 
expiration of the applicable 180-day limit prescribed in 
Sec. 405.1811(a)(3) or Sec. 405.1811(c)(2).
    (c) The contractor hearing officer(s) may not grant a request for an 
extension under this section if--
    (1) The provider relies on a change in the law, regulations, CMS 
Rulings, or general CMS instructions (whether based on a court decision 
or otherwise) or a CMS administrative ruling or policy as the basis for 
the extension request; or
    (2) The date of receipt by the contractor of the provider's 
extension request is later than 3 years after the date of the contractor 
or other determination that the provider seeks to appeal.
    (d) If an extension request is granted or denied under this section, 
the contractor hearing officer(s) must give prompt written notice to the 
provider, and mail a copy to each party to the appeal. The notice must 
include an explanation of the reasons for the decision by the hearing 
officer(s) and the facts underlying the decision.
    (e)(1) A decision denying an extension request under this section 
and dismissing the appeal is final and binding on the provider, unless 
the dismissal decision is reviewed by a CMS reviewing official in 
accordance with Sec. 405.1834(b)(2)(i) of this subpart or reopened and 
revised by the contractor hearing officer(s) in accordance with 
Sec. 405.1885 through Sec. 405.1889 of this subpart. The contractor 
hearing officer(s) promptly mails the decision to the appropriate 
component of CMS (currently the Center for Medicare Management) (as 
specified in Sec. 405.1834(b)(4) of this subpart).
    (2) A decision granting an extension request under this section is 
not subject to immediate review by a CMS reviewing official (as 
described in Sec. 405.1834(b)(3) of this subpart). Any decision may be 
examined during the course of CMS review of a final jurisdictional 
dismissal decision or a final hearing decision by the contractor hearing 
officer(s) (as described in Secs. 405.1834(b)(2)(i) and 
405.1834(b)(2)(ii) of this subpart).

[73 FR 30245, May 23, 2008, as amended at 80 FR 70598, Nov. 13, 2015]



Sec. 405.1814  Contractor hearing officer jurisdiction.

    (a) General rules. (1) After a request for a contractor hearing is 
filed under Sec. 405.1811 of this subpart, the contractor hearing 
officer(s) must do the following:
    (i) Determine in accordance with paragraph (b) of this section 
whether or not it has jurisdiction to grant a hearing on each of the 
specific matters at issue in the hearing request.
    (ii) Make a preliminary determination of the scope of its 
jurisdiction (that is, whether the request for hearing was timely, and 
whether the amount in controversy requirement has been met), if any, 
over the matters at issue in the appeal before conducting any of the 
following proceedings:
    (A) Determining its authority to decide a legal question relevant to 
a matter at issue (as described in Sec. 405.1829 of this subpart);
    (B) Permitting discovery (as specified in Sec. 405.1821 of this 
subpart); or
    (C) Conducting a hearing (as specified in Sec. 405.1819 of this 
subpart);
    (2) The hearing officer(s) may revise a preliminary jurisdictional 
determination at any subsequent stage of the proceedings in an appeal, 
and it must promptly notify the parties of any revised determination.
    (3) Under paragraph (c)(1) of this section, each contractor hearing 
decision (as described in Sec. 405.1831 of this subpart) must include a 
final jurisdictional finding for each specific matter at issue in the 
appeal.
    (4) If the hearing officer(s) finally determines it lacks 
jurisdiction over every specific matter at issue in the appeal, it 
issues a jurisdictional dismissal decision under paragraph (c)(2) of 
this section.
    (5) Final jurisdictional findings and jurisdictional dismissal 
decisions by the hearing officer(s) are subject to the

[[Page 244]]

CMS reviewing official procedure in accordance with paragraph (d) of 
this section and Sec. 405.1834(b)(2)(i) and (b)(2)(ii) of this subpart.
    (b) Criteria. Except for the amount in controversy requirement, the 
jurisdiction of the contractor hearing officer(s) to grant a hearing is 
determined separately for each specific matter at issue in the 
contractor or Secretary determination for the cost reporting period 
under appeal. The hearing officer(s) has jurisdiction to grant a hearing 
over a specific matter at issue in an appeal only if the provider has a 
right to a contractor hearing under Sec. 405.1811. Certain matters at 
issue are removed from the jurisdiction of the contractor hearing 
officer(s); these matters include, but are not limited to, the 
following:
    (1) A finding in a contractor determination that expenses incurred 
for certain items or services furnished by a provider to an individual 
are not payable under title XVIII of the Act because those items and 
services are excluded from coverage under section 1862 of the Act and 
part 411 of the regulations. Review of these findings is limited to the 
applicable provisions of sections 1155, 1869, and 1879(d) of the Act, 
and of subpart I of part 405 and subpart B of part 478, as applicable.
    (2) Certain matters affecting payments to hospitals under the 
prospective payment system, as provided in section 1886(d)(7) of the Act 
and Sec. 405.1804 of this subpart.
    (c) Final jurisdictional findings, and jurisdictional dismissal 
decisions by contractor hearing officer(s). (1) In issuing a hearing 
decision under Sec. 405.1831 of this subpart, the contractor hearing 
officer(s) must make a final determination of its jurisdiction, or lack 
thereof, for each specific matter at issue in the hearing decision. Each 
contractor hearing decision must include specific findings of fact and 
conclusions of law as to the jurisdiction of the hearing officer(s), or 
lack thereof, to grant a hearing on each matter at issue in the appeal.
    (2) If the hearing officer(s) finally determines it lacks 
jurisdiction to grant a hearing for every specific matter at issue in an 
appeal, it must issue a jurisdictional dismissal decision. Each 
jurisdictional dismissal decision by the hearing officer(s) must include 
specific findings of fact and conclusions of law explaining the 
determination that there is no jurisdiction to grant a hearing on each 
matter at issue in the appeal. A copy of the jurisdictional dismissal 
decision must be mailed promptly to each party to the appeal.
    (3) A jurisdictional dismissal decision by the contractor hearing 
officer(s) under paragraph (c)(2) of this section is final and binding 
on the parties, unless the decision is reviewed by a CMS reviewing 
official in accordance with Sec. 405.1834 of this subpart or reopened 
and revised by the contractor hearing officer(s) in accordance with 
Sec. 405.1885 through Sec. 405.1889 of this subpart.
    (d) CMS reviewing official review. Any finding by the contractor 
hearing officer as to whether it has jurisdiction to grant a hearing on 
a specific matter at issue in an appeal is not subject to further 
administrative review, except as provided in this paragraph. The 
contractor hearing officer's jurisdictional findings as to specific 
matters at issue in an appeal may be reviewed solely during the course 
of CMS reviewing official review of one of the contractor hearing 
officer decisions specified in Sec. 405.1834(b)(2) of this subpart.

[73 FR 30245, May 23, 2008, as amended at 80 FR 70598, Nov. 13, 2015]



Sec. 405.1815  Parties to proceedings before the contractor hearing
officer(s).

    When a provider files a request for a contractor hearing in 
accordance with Sec. 405.1811 of this subpart, the parties to all 
proceedings before the contractor hearing officer(s) are the provider 
and, if applicable, any other entity found by the contractor hearing 
officer(s) to be a related organization of the provider under the 
principles enunciated in Sec. 413.17 of this chapter. The parties must 
be given reasonable notice of the time, date, and place of any 
contractor hearing. Neither the contractor nor CMS may be made a party 
to proceedings before the contractor hearing officer(s).

[73 FR 30246, May 23, 2008]

[[Page 245]]



Sec. 405.1817  Hearing officer or panel of hearing officers authorized
to conduct contractor hearing; disqualification of officers.

    The contractor hearing provided for in Sec. 405.1809 shall be 
conducted by a hearing officer or panel of hearing officers designated 
by the contractor. Such hearing officer or officers shall be persons 
knowledgeable in the field of health care reimbursement. The hearing 
officer or officers shall not have had any direct responsibility for the 
program reimbursement determination with respect to which a request for 
hearing is filed; no hearing officer (or officers) shall conduct a 
hearing in a case in which he is prejudiced or partial with respect to 
any party, or where he has any interest in the matter pending for 
determination before him. Notice of any objection which a party may have 
with respect to a hearing officer shall be presented in writing to such 
officer by the objecting party at the party's earliest opportunity. The 
hearing officer shall consider the objection and shall, at his 
discretion, either proceed in the conduct of the hearing or withdraw. If 
the hearing officer does not withdraw, the objecting party may, after 
the hearing, present his objections to an executive official of the 
contractor, who shall rule promptly on the objection.



Sec. 405.1819  Conduct of contractor hearing.

    The hearing shall be open to all parties thereto (see Sec. 405.1815) 
and to representatives of the contractor and of the Centers for Medicare 
& Medicaid Services (see Sec. 405.1815). The hearing officer(s) shall 
inquire fully into all of the matters at issue and shall receive into 
evidence the testimony and any documents which are relevant and material 
to such matters. If the hearing officer(s) believes that there is 
relevant and material evidence available which has not been presented at 
the hearing, he (they) may, at any time prior to the mailing of notice 
of the decision, reopen the hearing record for the receipt of such 
evidence. The order in which the evidence and the allegations shall be 
presented and the conduct of the hearing shall be at the discretion of 
the hearing officer(s).



Sec. 405.1821  Prehearing discovery and other proceedings prior to
the contractor hearing.

    (a) Discovery rule: Time limits. (1) Limited prehearing discovery 
may be permitted by the contractor hearing officer(s) upon request of a 
party, provided the request is timely and the hearing officer(s) makes a 
preliminary finding of its jurisdiction over the matters at issue in 
accordance with Sec. 405.1814(a) of this subpart.
    (2) A prehearing discovery request is timely if the request by a 
party is served no later than 120 days before the initially scheduled 
starting date of the contractor hearing, unless the contractor hearing 
officer(s) extends the time for requesting discovery.
    (3) In the absence of a specific schedule for responses set by the 
contractor hearing officer(s), responses to interrogatories and requests 
for production of documents are due according to the schedule agreed 
upon by the party serving discovery and the party to which the discovery 
is directed. Responses by a party to interrogatories or requests for 
production of documents must be served no later than 45 days before the 
initially scheduled start of the contractor hearing, unless the 
contractor hearing officer(s) orders otherwise. Responses by a nonparty 
to requests for production of documents must be served no later than 75 
days after the date the requests were served on the nonparty, unless the 
party requesting the documents and the nonparty to which the requests 
are directed agree on a different time for responding, or unless the 
contractor hearing officer(s) extends the time for responding.
    (4) Before ruling on a request to extend the time for requesting 
discovery or for responding to discovery, the hearing officer(s) must 
give the other parties to the appeal and any nonparty subject to a 
discovery request a reasonable period to respond to the extension 
request.
    (5) If the extension request is granted, the hearing officer(s) sets 
a new deadline and has the discretion to reschedule the hearing date.
    (b) Discovery criteria--(1) General rule. The contractor hearing 
officer(s) may permit discovery of a matter that is

[[Page 246]]

relevant to the specific subject matter of the contractor hearing, 
provided the matter is not privileged or otherwise protected from 
disclosure and the discovery request is not unreasonable, unduly 
burdensome or expensive, or otherwise inappropriate. In determining 
whether to permit discovery, and in fixing the scope and limits of any 
discovery, the hearing officer(s) uses the Federal Rules of Civil 
Procedure and Rules 401 and 501 of the Federal Rules of Evidence for 
guidance.
    (2) Limitations on discovery. Any discovery before the contractor 
hearing officer(s) is limited as follows:
    (i) A party may request of another party, or of a nonparty other 
than CMS, HHS or any Federal agency, the reasonable production of 
documents for inspection and copying.
    (ii) A party may request another party to respond to a reasonable 
number of written interrogatories.
    (iii) A party may not request admissions, take oral or written 
depositions, or take any other form of discovery not permitted under 
this section.
    (c) Discovery procedures. Rights of nonparties: Motions to compel or 
for protective order. (1) A party may request discovery of another party 
to the proceedings before the contractor hearing officer(s) or of a 
nonparty other than CMS, HHS or other Federal agency. Any discovery 
request filed with the contractor hearing officer(s) must be mailed 
promptly to the party or nonparty from which the discovery is requested, 
and to any other party to the contractor hearing (as described in 
Sec. 405.1815 of this subpart).
    (2) If a discovery request is made of a nonparty to the contractor 
hearing, the nonparty has the rights any party has in responding to a 
discovery request. The rights of the nonparty include, but are not 
limited to, the right to select and use any attorney or other 
representative, and to submit discovery responses, objections, or 
motions to the hearing officer(s).
    (3) Each party and nonparty is required to make a good faith effort 
to resolve or narrow any discovery dispute, regardless of whether the 
dispute is with another party or a nonparty.
    (i) A party may submit to the contractor hearing officer(s) a motion 
to compel discovery that is permitted under this section, and a motion 
for a protective order regarding any discovery request may be submitted 
to the hearing officer(s) by a party or nonparty.
    (ii) Any motion to compel or for protective order must include a 
self-sworn declaration describing the movant's efforts to resolve or 
narrow the discovery dispute. A self-sworn declaration describing 
efforts to resolve or narrow a discovery dispute also must be included 
with any response to a motion to compel or for a protective order.
    (iii) The hearing officer(s) must--
    (A) Decide the motion in accordance with this section and any prior 
discovery ruling; and
    (B) Issue and mail to each party and any affected nonparty a 
discovery ruling that grants or denies the motion to compel or for 
protective order in whole or in part; if applicable the discovery ruling 
must specifically identify any part of the disputed discovery request 
upheld and any part rejected, and impose any limits on discovery the 
hearing officer(s) finds necessary and appropriate. Nothing in this 
section authorizes the contractor hearing officer to compel any action 
from the Secretary or CMS.
    (d) Reviewability of discovery or disclosure rulings--(1) General 
rule. A discovery ruling issued in accordance with paragraph (c)(3) of 
this section, or a disclosure ruling (such as one issued at a hearing), 
is not subject to immediate review by a CMS official (as described in 
Sec. 405.1834(b)(3) of this subpart). A discovery ruling may be examined 
solely during the course of CMS review under Sec. 405.1834 of this 
subpart of a jurisdictional dismissal decision (as described in 
Sec. 405.1814(c)(2) of this subpart) or a hearing decision (as described 
in Sec. 405.1831 of this subpart) by the contractor hearing officer(s).
    (2) Exception. To the extent a ruling authorizes discovery or 
disclosure of a matter for which an objection based on privilege or 
other protection from disclosure such as case preparation, 
confidentiality, or undue burden, was made before the contractor hearing 
officer(s), that portion of the discovery or disclosure ruling may 
immediately

[[Page 247]]

be reviewed by a CMS reviewing official in accordance with 
Sec. 405.1834(b)(3).
    (i) Upon notice to the contractor hearing officer that the provider 
intends to seek immediate review of a ruling, or that the contractor or 
other affected nonparty intends to suggest that the Administrator 
through the CMS reviewing official, take own motion review of the 
ruling, the contractor hearing officer stays all proceedings affected by 
the ruling.
    (ii) The contractor hearing officer must determine, under the 
circumstances of a given case, the length of any stay, but in no event 
may the stay be less than 15 days.
    (iii) If the Administrator through the CMS reviewing official--
    (A) Grants a request for review, or takes own motion review, of a 
ruling, the ruling is stayed until such time as the CMS reviewing 
official issues a written decision that affirms, reverses, modifies, or 
remands the contractor hearing officer's ruling.
    (B) Does not grant review or take own motion review within the time 
allotted for the stay, the stay is lifted and the ruling is not subject 
to immediate review.
    (e) Prehearing conference. The contractor hearing officer(s) has 
discretion to schedule a prehearing conference. A prehearing conference 
may be conducted in person or telephonically, at the discretion of the 
contractor hearing officer(s). When a panel of contractor hearing 
officers is designated, the panel may appoint one or more hearing 
officers to act for the panel for any prehearing conference or any 
matter addressed at the conference.

[73 FR 30246, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1823  Evidence at contractor hearing.

    Evidence may be received at the contractor hearing even though 
inadmissible under the rules of evidence applicable to court procedure. 
The hearing officer(s) shall give the parties opportunity for submission 
and consideration of facts and arguments, and during the course of the 
hearing, should in ruling upon admissibility of evidence, exclude 
irrelevant, immaterial, or unduly repetitious evidence. The hearing 
officer(s) shall render a final ruling on the admissibility of evidence.



Sec. 405.1825  Witnesses at contractor hearing.

    The hearing officer(s) may examine the witnesses and shall allow the 
parties and their representatives to do so. Parties to the proceedings 
may also cross-examine witnesses.



Sec. 405.1827  Record of proceedings before the contractor hearing
officer(s).

    (a) The contractor hearing officer(s) must maintain a complete 
record of all proceedings in an appeal.
    (b) The record consists of all documents and any other tangible 
materials timely submitted to the hearing officer(s) by the parties to 
the appeal and by any nonparty (as described in Sec. 405.1821(c) of this 
subpart), along with all correspondence, rulings, orders, and decisions 
(including the final decision) issued by the hearing officer(s).
    (c) The record must include a complete transcription of the 
proceedings at any contractor hearing.
    (d) A copy of the transcription must be made available to any party 
upon request.

[73 FR 30247, May 23, 2008]



Sec. 405.1829  Scope of authority of contractor hearing officer(s).

    (a) The hearing officer(s) in exercising his authority must comply 
with all the provisions of title XVIII of the Act and regulations issued 
thereunder, as well as with CMS Rulings issued under the authority of 
the Administrator of the Centers for Medicare & Medicaid Services (as 
described in Sec. 401.108 of this chapter), and with the general 
instructions issued by the Centers for Medicare & Medicaid Services in 
accordance with the Secretary's agreement with the contractor.
    (b)(1) If the contractor hearing officer(s) has jurisdiction to 
conduct a hearing on the specific matters at issue under Sec. 405.1811, 
and the legal authority to fully resolve the matters in a hearing 
decision (as described in Sec. 405.1831 of this subpart), the hearing 
officer(s) must affirm, modify, or reverse the contractor's findings on 
each specific matter at issue in the contractor or

[[Page 248]]

Secretary determination for the cost year under appeal.
    (2) The contractor hearing officer(s) also may make additional 
revisions on specific matters regardless of whether the contractor 
considered the matters in issuing the contractor determination for the 
cost year, provided the hearing officer(s) does not consider or decide 
any specific matter for which it lacks jurisdiction (as described in 
Sec. 405.1814(b) of this subpart) or which was not timely raised in the 
provider's hearing request.
    (3) The authority of the contractor hearing officer(s) under this 
paragraph to make the additional revisions is limited to those revisions 
necessary to fully resolve a specific matter at issue if--
    (i) The hearing officer(s) has jurisdiction to grant a hearing on 
the specific matter under Secs. 405.1811 and 405.1814 of this subpart; 
and
    (ii) The specific matter was timely raised in an initial request for 
a contractor hearing filed in accordance with Sec. 405.1811(b) of this 
subpart or in a timely request to add issues to an appeal submitted in 
accordance with Sec. 405.1811(c) of this subpart.

[39 FR 34515, Sept. 26, 1974. Redesignated at 42 FR 52826, Sept. 30, 
1977, as amended at 73 FR 30247, May 23, 2008]



Sec. 405.1831  Contractor hearing decision.

    (a) If the contractor hearing officer(s) finds jurisdiction (as 
described in Sec. 405.1814(a) of this subpart) and conducts a hearing, 
the contractor hearing officer(s) must promptly issue a written hearing 
decision.
    (b) The contractor hearing decision must be based on the evidence 
from the contractor hearing (as described in Sec. 405.1823 of this 
subpart) and other evidence as may be included in the record (as 
described in Sec. 405.1827 of this subpart).
    (c) The decision must include findings of fact and conclusions of 
law on jurisdictional issues (as described in Sec. 405.1814(c)(1) of 
this subpart) and on the merits of the provider's reimbursement claims, 
and include appropriate citations to the record evidence and to the 
applicable law, regulations, CMS Rulings, and other interpretive rules, 
general statements of policy, and rules of agency organization, 
procedure, or practice established by CMS.
    (d) A copy of the decision must be mailed promptly to the 
contractor, to each party and to the appropriate component of CMS (which 
currently is the Center for Medicare Management).
    (e) When the contractor's denial of the relief that the provider 
seeks before the contractor hearing officer(s) was based on procedural 
grounds (for example, the alleged failure of the provider to satisfy a 
time limit), or was based on the alleged failure to supply adequate 
documentation to support the provider's claim, and the contractor 
hearing officer(s) rule(s) that the basis of the contractor's denial is 
invalid, the contractor hearing officer(s) remands to the contractor for 
the contractor to make a determination on the merits of the provider's 
claim.

[73 FR 30248, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1832  Contractor hearing officer review of compliance with
the substantive reimbursement requirement of an appropriate cost
report claim.

    (a) General. In order to receive or potentially qualify for 
reimbursement for a specific item, the provider must include in its cost 
report an appropriate claim for the specific item (as prescribed in 
Sec. 413.24(j) of this chapter). If the provider files an appeal to the 
contractor seeking reimbursement for a specific item and any party to 
such appeal questions whether the provider's cost report included an 
appropriate claim for the specific item, the contractor hearing 
officer(s) must address such questions in accordance with the procedures 
set forth in this section.
    (b) Summary of procedures--(1) Preliminary steps. The contractor 
hearing officer(s) must give each party to the appeal an adequate 
opportunity to submit factual evidence and legal argument regarding the 
question of whether the provider's cost report included an appropriate 
claim for the specific item under appeal. Upon receipt of timely 
submitted factual evidence and legal argument (if any), the contractor

[[Page 249]]

hearing officer(s) must review such evidence and argument, and prepare 
written specific findings of fact and conclusions of law on the question 
of whether the provider's cost report complied with, for the specific 
item under appeal, the cost report claim requirements prescribed in 
Sec. 413.24(j) of this chapter. In reaching such specific factual 
findings and legal conclusions, the contractor hearing officer(s) must 
follow the procedures set forth in Sec. 413.24(j)(3) of this chapter for 
determining whether the provider's cost report included an appropriate 
claim for the specific item under appeal. The contractor hearing 
officer(s) must promptly give a copy of such written specific factual 
findings and legal conclusions to each party to the appeal, and such 
factual findings and legal conclusions must be included in the record of 
administrative proceedings for the appeal (as prescribed in 
Sec. 405.1827).
    (2) Limits on contractor hearing officer(s) actions. The contractor 
hearing officer(s)'s specific findings of fact and conclusions of law 
(in accordance with paragraph (b)(1) of this section) must not be 
invoked or relied on by the contractor hearing officer(s) as a basis to 
deny, or decline to exercise, jurisdiction over a specific item or take 
any other of the actions specified in paragraph (c) of this section. 
Upon giving the parties to the appeal the contractor hearing 
officer(s)'s written specific factual findings and legal conclusions 
(pursuant to paragraph (b)(1) of this section) on the question of 
whether the provider's cost report included an appropriate cost report 
claim for the specific item under appeal, the contractor hearing 
officer(s) must proceed to issue one of the two types of overall 
decisions specified in paragraphs (d) and (e) of this section with 
respect to the specific item. If the contractor hearing officer(s) 
issues an overall contractor hearing decision (as specified in paragraph 
(d) of this section) regarding the specific item under appeal, the 
contractor hearing officer(s)'s written specific factual findings and 
legal conclusions (in accordance with paragraph (b)(1) of this section) 
must be included in such overall contractor hearing decision regarding 
the specific item, along with the other matters that are required by the 
regulations for an overall contractor hearing decision. However, if the 
contractor hearing officer(s) issues an overall jurisdictional dismissal 
decision (as specified in paragraph (e) of this section) regarding the 
specific item under appeal, the contractor hearing officer(s)'s written 
specific factual findings and legal conclusions (in accordance with 
paragraph (b)(1) of this section) must not be included in the overall 
jurisdictional dismissal decision regarding the specific item. The 
contractor hearing officer(s) may permit reimbursement for the specific 
item under appeal, as part of an overall contractor hearing decision, 
but such reimbursement may be permitted only to the extent authorized by 
paragraph (f) of this section.
    (c) Prohibition of certain types of decisions, orders, and other 
actions. (1) If the contractor hearing officer(s) determines, in its 
findings of fact and conclusions of law (as prescribed by paragraph 
(b)(1) of this section), that the provider's cost report did not include 
an appropriate claim for the specific item under appeal, the contractor 
hearing officer(s) may not--
    (i) Deny jurisdiction over the specific item under appeal, based on 
(in whole or in part) the contractor hearing officer(s)'s factual 
findings and legal conclusions (reached under paragraph (b)(1) of this 
section);
    (ii) Decline to exercise jurisdiction over the specific item under 
appeal, based on (in whole or in part) the contractor hearing 
officer(s)'s factual findings and legal conclusions (reached under 
paragraph (b)(1) of this section); or
    (iii) Impose any sanction or take any other action against the 
interests of any party to the appeal except as provided in paragraph (f) 
of this section, based on (in whole or in part) the contractor hearing 
officer(s)'s factual findings and legal conclusions (in accordance with 
paragraph (b)(1) of this section).
    (2) Regardless of whether the contractor hearing officer(s) 
determines, in its findings of fact and conclusions of law (as 
prescribed by paragraph

[[Page 250]]

(b)(1) of this section), that the provider's cost report did or did not 
include an appropriate claim for the specific item under appeal, the 
contractor hearing officer(s) may not--
    (i) Deny jurisdiction over the specific item under appeal, based on 
(in whole or in part) the absence, in the final contractor or Secretary 
determination under appeal, of an adjustment, revision, correction, or 
other change to the specific item under appeal, or the lack of a 
particular determination by the contractor or the Secretary regarding 
the specific item. Exception: If the provider's appeal of the specific 
item is based on a reopening of such item (pursuant to Sec. 405.1885) 
where the specific item is not revised, adjusted, corrected, or 
otherwise changed in a revised final contractor or Secretary 
determination, the contractor must deny jurisdiction over the specific 
item under appeal (as prescribed in Secs. 405.1887(d) and 405.1889(b));
    (ii) Decline to exercise jurisdiction over the specific item under 
appeal, based on (in whole or in part) the absence, in the final 
contractor or Secretary determination under appeal, of an adjustment, 
revision, correction, or other change to the specific item under appeal, 
or the lack of a particular determination by the contractor or the 
Secretary regarding the specific item; or
    (iii) Impose any sanction or take any other action against the 
interests of any party to the appeal except as provided in paragraph (f) 
of this section, based on (in whole or in part) the absence, in the 
final contractor or Secretary determination under appeal, of an 
adjustment, revision, correction, or other change to the specific item 
under appeal, or the lack of a particular determination by the 
contractor or the Secretary regarding the specific item.
    (d) Contractor hearing decision must include any factual findings 
and legal conclusions under paragraph (b)(1) of this section. If the 
contractor hearing officer(s) issues a hearing decision regarding the 
specific item under appeal (pursuant to Sec. 405.1831), any specific 
findings of fact and conclusions of law by the contractor hearing 
officer(s) (reached under paragraph (b)(1) of this section), on the 
question of whether the provider's cost report included an appropriate 
claim for the specific item, must be included in such hearing decision 
along with the other matters prescribed by Sec. 405.1831. The contractor 
hearing officer(s)'s factual findings and legal conclusions (in 
accordance with paragraph (b)(1) of this section) about whether there 
was an appropriate cost report claim for the specific item under appeal 
are subject to the provisions of Sec. 405.1833 just as those provisions 
apply to the other parts of the contractor hearing decision. If the 
contractor hearing officer(s) determines that the provider's cost 
report--
    (1) Included an appropriate claim for the specific item under appeal 
(as prescribed in Sec. 413.24(j) of this chapter), the contractor 
hearing decision also must address whether the other substantive 
reimbursement requirements for the specific item are also satisfied; or
    (2) Did not include an appropriate claim for the specific item under 
appeal, the contractor hearing officer(s) has discretion whether or not 
to address in the contractor hearing decision whether the other 
substantive reimbursement requirements for the specific item are also 
satisfied.
    (e) Contractor jurisdictional dismissal decision must not include 
factual findings and legal conclusions under paragraph (b)(1) of this 
section. If the contractor hearing officer(s) issues a jurisdictional 
dismissal decision regarding the specific item under appeal (in 
accordance with Sec. 405.1814(c)), the contractor hearing officer(s)'s 
specific findings of fact and conclusions of law (in accordance with 
paragraph (b)(1) of this section) on the question of whether the 
provider's cost report included an appropriate claim for the specific 
item must not be included in such jurisdictional dismissal decision.
    (f) Effects of the contractor hearing officer(s)'s factual findings 
and legal conclusions under paragraph (b)(1) of this section when part 
of a final contractor hearing decision. If the contractor hearing 
officer(s) determines, as part of a final and binding contractor hearing 
decision (pursuant to Sec. 405.1833 and paragraphs (b)(1) and (d) of 
this section), that the provider's cost report--

[[Page 251]]

    (1) Included an appropriate claim for the specific item under appeal 
(as prescribed in Sec. 413.24(j) of this chapter), the specific item is 
reimbursable in accordance with Medicare policy, but only if the 
contractor hearing officer(s) further determines in such final 
contractor hearing decision that all the other substantive reimbursement 
requirements for the specific item are also satisfied; or
    (2) Did not include an appropriate cost report claim for the 
specific item under appeal, the specific item is not reimbursable, 
regardless of whether the contractor hearing officer(s) further 
determines in such final contractor hearing decision that the other 
substantive reimbursement requirements for the specific item are or are 
not satisfied.

[80 FR 70598, Nov. 13, 2015]



Sec. 405.1833  Effect of contractor hearing decision.

    A contractor hearing decision issued in accordance with 
Sec. 405.1831 of this subpart is final and binding on all parties to the 
contractor hearing and on the contractor, unless the hearing decision is 
reviewed by a CMS reviewing official in accordance with Sec. 405.1834 of 
this subpart or reopened and revised by the contractor hearing 
officer(s) in accordance with Sec. 405.1885 through Sec. 405.1889 of 
this subpart. Final contractor hearing decisions are subject to the 
provisions of Sec. 405.1803(d) of this subpart.

[73 FR 30248, May 23, 2008; 73 FR 49356, Aug. 21, 2008]



Sec. 405.1834  CMS reviewing official procedure.

    (a) Scope. A provider that is a party to, and dissatisfied with, a 
final decision by the contractor hearing officer(s), upon submitting a 
request that meets the requirements of paragraph (c) of this section, is 
entitled to further administrative review of the decision, or the 
decision may be reviewed at the discretion of the Administrator. No 
other individual, entity, or party has the right to the review. The 
review is conducted on behalf of the Administrator by a designated CMS 
reviewing official who considers whether the decision of the contractor 
hearing officer(s) is consistent with the controlling legal authority 
(as described in Sec. 405.1834(e)(1) of this subpart) and the evidence 
in the record. Based on the review, the CMS reviewing official issues a 
decision on behalf of the Administrator.
    (b) General rules. (1) A CMS reviewing official may immediately 
review any final decision of the contractor hearing officer(s) as 
specified in paragraph (b)(2) of this section.
    (i) Nonfinal decisions and other nonfinal actions by the contractor 
hearing officer(s) are not immediately reviewable, except as provided in 
paragraph (b)(3) of this section.
    (ii) The CMS reviewing official exercises this review authority in 
response to a request from a provider party to the appeal that meets the 
requirements of paragraph (c) of this section or may exercise his or her 
discretion to take own motion review.
    (2) A CMS reviewing official may immediately review the following:
    (i) Any final jurisdictional dismissal decision by the contractor 
hearing officer(s), including any finding that the provider failed to 
demonstrate good cause for extending the time in which to request a 
hearing (as described in Secs. 405.1813(e)(1) and 405.1814(c)(3) of this 
subpart).
    (ii) Any final contractor hearing decision (as described in 
Sec. 405.1831 of this subpart).
    (iii) If the CMS reviewing official reviews a contractor hearing 
decision regarding a specific item, then the CMS reviewing official's 
review of such a contractor hearing decision will include, and any 
decision issued by the CMS reviewing official (under paragraph (e) of 
this section) will address, the contractor hearing officer(s)'s specific 
findings of fact and conclusions of law in such contractor hearing 
decision (as specified in Sec. 405.1832(b)(1) and (d)) on the question 
of whether the provider's cost report included an appropriate claim for 
the specific item under appeal (as specified in Sec. 413.24(j) of this 
chapter).
    (3) Nonfinal decisions and other nonfinal actions by the contractor 
hearing officer(s) are not subject to the CMS reviewing official 
procedure until

[[Page 252]]

the contractor hearing officer(s) issues a final decision as specified 
in paragraph (b)(2) of this section (as described in 
Secs. 405.1813(e)(2), 405.1814(c) and (d), and 405.1821(d)(1) of this 
subpart), except that the CMS reviewing official may immediately review 
a ruling, authorizing discovery or disclosure of a matter, where there 
is a claim of privilege or other protection from disclosure such as case 
preparation, confidentiality, or undue burden.
    (4) In order to facilitate the Administrator's exercise of this 
review authority, the contractor hearing officer(s) must promptly send 
copies of any decision specified in paragraph (b)(2) of this section or 
in Sec. 405.1821(d)(2) of this subpart to the appropriate component of 
CMS (currently the Center for Medicare Management).
    (i) All requests for review by a CMS reviewing official and all 
written submissions to a CMS reviewing official under paragraphs (c) and 
(d) of this section also must be sent to the appropriate component of 
CMS.
    (ii) The appropriate CMS component examines each contractor hearing 
officer decision that is reviewable under paragraph (b)(2) of this 
section or Sec. 405.1821(d)(2) of this subpart, along with any review 
requests and any other submissions made by a party in accordance with 
the provisions of this section, in order to assist the Administrator's 
exercise of this review authority.
    (c) Request for review. (1) A provider's request for review by a CMS 
reviewing official is granted if--
    (i) The date of receipt by the appropriate CMS component of the 
review request is no later than 60 days after the date of receipt by the 
provider of the contractor hearing officer decision; or
    (ii) The request seeks review of a decision listed in paragraph 
(b)(2) of this section, and the provider complies with the requirements 
of paragraph (c)(2) of this section.
    (2) The provider must submit its request for review in writing, 
attach a copy of the contractor decision for which it seeks review and 
include a brief description of all of the following:
    (i) Those aspects of the contractor hearing officer decision with 
which the provider is dissatisfied.
    (ii) The reasons for the provider's dissatisfaction.
    (iii) Any argument or record evidence the provider believes supports 
its position.
    (iv) Any additional, extra-record evidence relied on by the 
provider, along with a demonstration that such evidence was improperly 
excluded from the contractor hearing (as described in Sec. 405.1823 of 
this subpart).
    (3) A provider request for immediate review of a contractor hearing 
officer ruling authorizing discovery or disclosure in accordance with 
paragraph (b)(3) of this section must--
    (i) Be made as soon as practicable after the ruling is made, but in 
no event later than 5 business days after the date it received notice of 
the ruling; and
    (ii) State the reason(s) why the ruling is in error and the 
potential harm that may be caused if immed