[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 414 to 429

                         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 
          (Continued)                                                3
  Finding Aids:
      Table of CFR Titles and Chapters........................     923
      Alphabetical List of Agencies Appearing in the CFR......     943
      List of CFR Sections Affected...........................     953

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

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 42 CFR 414.1 refers 
                       to title 42, part 414, 
                       section 1.

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

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
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    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

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[[Page vii]]

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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.

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                         TITLE 42--PUBLIC HEALTH




                  (This book contains parts 414 to 429)

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

chapter iv--Centers for Medicare & Medicaid Services, 
  Department of Health and Human Services (Continued).......         414

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




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


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

               SUBCHAPTER B--MEDICARE PROGRAM (CONTINUED)
Part                                                                Page
414             Payment for Part B medical and other health 
                    services................................           5
415             Services furnished by physicians in 
                    providers, supervising physicians in 
                    teaching settings, and residents in 
                    certain settings........................         184
416             Ambulatory surgical services................         202
417             Health maintenance organizations, 
                    competitive medical plans, and health 
                    care prepayment plans...................         229
418             Hospice care................................         311
419             Prospective payment system for hospital 
                    outpatient department services..........         357
420             Program integrity: Medicare.................         377
421             Medicare contracting........................         387
422             Medicare advantage program..................         402
423             Voluntary medicare prescription drug benefit         573
424             Conditions for Medicare payment.............         774
425             Medicare shared savings program.............         839
426             Review of national coverage determinations 
                    and local coverage determinations.......         892
427-429

[Reserved]

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                SUBCHAPTER B_MEDICARE PROGRAM (CONTINUED)





PART 414_PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES--Table of Contents



                      Subpart A_General Provisions

Sec.
414.1  Basis and scope.
414.2  Definitions.
414.4  Fee schedule areas.
414.5  Hospital services paid under Medicare Part B when a Part A 
          hospital inpatient claim is denied because the inpatient 
          admission was not reasonable and necessary, but hospital 
          outpatient services would have been reasonable and necessary 
          in treating the beneficiary.

              Subpart B_Physicians and Other Practitioners

414.20  Formula for computing fee schedule amounts.
414.21  Medicare payment basis.
414.22  Relative value units (RVUs).
414.24  Publication of RVUs and direct PE inputs.
414.26  Determining the GAF.
414.28  Conversion factors.
414.30  Conversion factor update.
414.34  Payment for services and supplies incident to a physician's 
          service.
414.36  Payment for drugs incident to a physician's service.
414.39  Special rules for payment of care plan oversight.
414.40  Coding and ancillary policies.
414.42  Adjustment for first 4 years of practice.
414.44  Transition rules.
414.46  Additional rules for payment of anesthesia services.
414.48  Limits on actual charges of nonparticipating suppliers.
414.50  Physician or other supplier billing for diagnostic tests 
          performed or interpreted by a physician who does not share a 
          practice with the billing physician or other supplier.
414.52  Payment for physician assistants' services.
414.54  Payment for certified nurse-midwives' services.
414.56  Payment for nurse practitioners' and clinical nurse specialists' 
          services.
414.58  Payment of charges for physician services to patients in 
          providers.
414.60  Payment for the services of CRNAs.
414.61  Payment for anesthesia services furnished by a teaching CRNA.
414.62  Fee schedule for clinical psychologist services.
414.63  Payment for outpatient diabetes self-management training.
414.64  Payment for medical nutrition therapy.
414.65  Payment for telehealth services.
414.66  Incentive payments for physician scarcity areas.
414.67  Incentive payments for services furnished in Health Professional 
          Shortage Areas.
414.68  Imaging accreditation.
414.80  Incentive payment for primary care services.
414.90  Physician Quality Reporting System (PQRS).
414.92  Electronic Prescribing Incentive Program.
414.94  Appropriate use criteria for advanced diagnostic imaging 
          services.

   Subpart C_Fee Schedules for Parenteral and Enteral Nutrition (PEN) 
     Nutrients, Equipment and Supplies, Splints, Casts, and Certain 
                        Intraocular Lenses (IOLs)

414.100  Purpose.
414.102  General payment rules.
414.104  PEN Items and Services.
414.105  Application of competitive bidding information.
414.106  Splints and casts.
414.108  IOLs inserted in a physician's office.

   Subpart D_Payment for Durable Medical Equipment and Prosthetic and 
                            Orthotic Devices

414.200  Purpose.
414.202  Definitions.
414.210  General payment rules.
414.220  Inexpensive or routinely purchased items.
414.222  Items requiring frequent and substantial servicing.
414.224  Customized items.
414.226  Oxygen and oxygen equipment.
414.228  Prosthetic and orthotic devices.
414.229  Other durable medical equipment--capped rental items.
414.230  Determining a period of continuous use.
414.232  Special payment rules for transcutaneous electrical nerve 
          stimulators (TENS).
414.234  Prior authorization for items frequently subject to unnecessary 
          utilization.

  Subpart E_Determination of Reasonable Charges Under the ESRD Program

414.300  Scope of subpart.

[[Page 6]]

414.310  Determination of reasonable charges for physician services 
          furnished to renal dialysis patients.
414.313  Initial method of payment.
414.314  Monthly capitation payment method.
414.316  Payment for physician services to patients in training for 
          self-dialysis and home dialysis.
414.320  Determination of reasonable charges for physician renal 
          transplantation services.
414.330  Payment for home dialysis equipment, supplies, and support 
          services.
414.335  Payment for EPO furnished to a home dialysis patient for use in 
          the home.

  Subpart F_Competitive Bidding for Certain Durable Medical Equipment, 
              Prosthetics, Orthotics, and Supplies (DMEPOS)

414.400  Purpose and basis.
414.402  Definitions.
414.404  Scope and applicability.
414.406  Implementation of programs.
414.408  Payment rules.
414.409  Special payment rules.
414.410  Phased-in implementation of competitive bidding programs.
414.411  Special rule in case of competitions for diabetic testing 
          strips conducted on or after January 1, 2011.
414.412  Submission of bids under a competitive bidding program.
414.414  Conditions for awarding contracts.
414.416  Determination of competitive bidding payment amounts.
414.418  Opportunity for networks.
414.420  Physician or treating practitioner authorization and 
          consideration of clinical efficiency and value of items.
414.422  Terms of contracts.
414.423  Appeals process for breach of a DMEPOS competitive bidding 
          program contract actions.
414.424  Administrative or judicial review.
414.425  Claims for damages.
414.426  Adjustments to competitively bid payment amounts to reflect 
          changes in the HCPCS.

       Subpart G_Payment for Clinical Diagnostic Laboratory Tests

414.500  Basis and scope.
414.502  Definitions.
414.504  Data reporting requirements.
414.506  Procedures for public consultation for payment for a new 
          clinical diagnostic laboratory test.
414.507  Payment for clinical diagnostic laboratory tests.
414.508  Payment for a new clinical diagnostic laboratory test.
414.509  Reconsideration of basis for and amount of payment for a new 
          clinical diagnostic laboratory test.
414.510  Laboratory date of service for clinical laboratory and 
          pathology specimens.
414.522  Payment for new advanced diagnostic laboratory tests.

              Subpart H_Fee Schedule for Ambulance Services

414.601  Purpose.
414.605  Definitions.
414.610  Basis of payment.
414.615  Transition to the ambulance fee schedule.
414.617  Transition from regional to national ambulance fee schedule.
414.620  Publication of the ambulance fee schedule.
414.625  Limitation on review.

               Subpart I_Payment for Drugs and Biologicals

414.701  Purpose.
414.704  Definitions.
414.707  Basis of payment.

     Subpart J_Submission of Manufacturer's Average Sales Price Data

414.800  Purpose.
414.802  Definitions.
414.804  Basis of payment.
414.806  Penalties associated with the failure to submit timely and 
          accurate ASP data.

        Subpart K_Payment for Drugs and Biologicals Under Part B

414.900  Basis and scope.
414.902  Definitions.
414.904  Average sales price as the basis for payment.
414.906  Competitive acquisition program as the basis for payment.
414.908  Competitive acquisition program.
414.910  Bidding process.
414.912  Conflicts of interest.
414.914  Terms of contract.
414.916  Dispute resolution for vendors and beneficiaries.
414.917  Dispute resolution and process for suspension or termination of 
          approved CAP contract and termination of physician 
          participation under exigent circumstances.
414.918  Assignment.
414.920  Judicial review.
414.930  Compendia for determination of medically-accepted indications 
          for off-label uses of drugs and biologicals in an anti-cancer 
          chemotherapeutic regimen.

                 Subpart L_Supplying and Dispensing Fees

414.1000  Purpose.

[[Page 7]]

414.1001  Basis of Payment.

 Subpart M_Payment for Comprehensive Outpatient Rehabilitation Facility 
                             (CORF) Services

414.1100  Basis and scope.
414.1105  Payment for Comprehensive Outpatient Rehabilitation Facility 
          (CORF) services.

 Subpart N_Value-Based Payment Modifier Under the Physician Fee Schedule

414.1200  Basis and scope.
414.1205  Definitions.
414.1210  Application of the value-based payment modifier.
414.1215  Performance and payment adjustment periods for the value-based 
          payment modifier.
414.1220  Reporting mechanisms for the value-based payment modifier.
414.1225  Alignment of Physician Quality Reporting System quality 
          measures and quality measures for the value-based payment 
          modifier.
414.1230  Additional measures for groups and solo practitioners.
414.1235  Cost measures.
414.1240  Attribution for quality of care and cost measures.
414.1245  Scoring methods for the value-based payment modifier using the 
          quality-tiering approach.
414.1250  Benchmarks for quality of care measures.
414.1255  Benchmarks for cost measures.
414.1260  Composite scores.
414.1265  Reliability of measures.
414.1270  Determination and calculation of Value-Based Payment Modifier 
          adjustments.
414.1275  Value-based payment modifier quality-tiering scoring 
          methodology.
414.1280  Limitation on review.
414.1285  Informal inquiry process.

 Subpart O_Merit-Based Incentive Payment System and Alternative Payment 
                             Model Incentive

414.1300  Basis and scope.
414.1305  Definitions.
414.1310  Applicability.
414.1315  [Reserved]
414.1320  MIPS performance period.
414.1325  Data submission requirements.
414.1330  Quality performance category.
414.1335  Data submission criteria for the quality performance category.
414.1340  Data completeness criteria for the quality performance 
          category.
414.1350  Cost performance category.
414.1355  Improvement activities performance category.
414.1360  Data submission criteria for the improvement activities 
          performance category.
414.1365  Subcategories for the improvement activities performance 
          category.
414.1370  APM scoring standard under MIPS.
414.1375  Advancing care information performance category.
414.1380  Scoring.
414.1385  Targeted review and review limitations.
414.1390  Data validation and auditing.
414.1395  Public reporting.
414.1400  Third party data submission.
414.1405  Payment.
414.1410  Advanced APM determination.
414.1415  Advanced APM criteria.
414.1420  Other payer advanced APMs.
414.1425  Qualifying APM participant determination: In general.
414.1430  Qualifying APM participant determination: QP and partial QP 
          thresholds.
414.1435  Qualifying APM participant determination: Medicare option.
414.1440  Qualifying APM participant determination: All-payer 
          combination option.
414.1445  Identification of other payer advanced APMs.
414.1450  APM incentive payment.
414.1455  Limitation on review.
414.1460  Monitoring and program integrity.
414.1465  Physician-focused payment models.

    Authority: Secs. 1102, 1871, and 1881(b)(l) of the Social Security 
Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).

    Source: 55 FR 23441, June 8, 1990, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 414 appear at 60 FR 
50442, Sept. 29, 1995, and 60 FR 53877, Oct. 18, 1995.



                      Subpart A_General Provisions



Sec. 414.1  Basis and scope.

    This part implements the following provisions of the Act:

    1802--Rules for private contracts by Medicare beneficiaries.
    1833--Rules for payment for most Part B services.
    1834(a) and (h)--Amounts and frequency of payments for durable 
medical equipment and for prosthetic devices and orthotics and 
prosthetics.
    1834(l)--Establishment of a fee schedule for ambulance services.
    1834(m)--Rules for Medicare reimbursement for telehealth services.
    1834A--Improving policies for clinical diagnostic laboratory tests
    1842(o)--Rules for payment of certain drugs and biologicals.

[[Page 8]]

    1847(a) and (b)--Competitive bidding for certain durable medical 
equipment, prosthetics, orthotics, and supplies (DMEPOS).
    1848--Fee schedule for physician services.
    1881(b)--Rules for payment for services to ESRD beneficiaries.
    1887--Payment of charges for physician services to patients in 
providers.

[67 FR 9132, Feb. 27, 2002, as amended at 69 FR 1116, Jan. 7, 2004; 71 
FR 48409, Aug. 18, 2006; 81 FR 41098, June 23, 2016]



Sec. 414.2  Definitions.

    As used in this part, unless the context indicates otherwise--
    AA stands for anesthesiologist assistant.
    AHPB stands for adjusted historical payment basis.
    CF stands for conversion factor.
    CRNA stands for certified registered nurse anesthetist.
    CY stands for calendar year.
    FY stands for fiscal year.
    GAF stands for geographic adjustment factor.
    GPCI stands for geographic practice cost index.
    HCPCS stands for CMS Common Procedure Coding System.
    Health Professional Shortage Area (HPSA) means an area designated 
under section 332(a)(1)(A) of the Public Health Service Act as 
identified by the Secretary prior to the beginning of such year.
    Major surgical procedure means a surgical procedure for which a 10-
day or 90-day global period is used for payment under the physician fee 
schedule and section 1848(b) of the Act.
    Physician services means the following services to the extent that 
they are covered by Medicare:
    (1) Professional services of doctors of medicine and osteopathy 
(including osteopathic practitioners), doctors of optometry, doctors of 
podiatry, doctors of dental surgery and dental medicine, and 
chiropractors.
    (2) Supplies and services covered ``incident to'' physician services 
(excluding drugs as specified in Sec. 414.36).
    (3) Outpatient physical and occupational therapy services if 
furnished by a person or an entity that is not a Medicare provider of 
services as defined in Sec. 400.202 of this chapter.
    (4) Diagnostic x-ray tests and other diagnostic tests (excluding 
diagnostic laboratory tests paid under the fee schedule established 
under section 1833(h) of the Act).
    (5) X-ray, radium, and radioactive isotope therapy, including 
materials and services of technicians.
    (6) Antigens, as described in section 1861(s)(2)(G) of the Act.
    (7) Bone mass measurement.
    RVU stands for relative value unit.
    (8) Screening mammography services.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 
58 FR 63686, Dec. 2, 1993; 59 FR 63463, Dec. 8, 1994; 60 FR 63177, Dec. 
8, 1995; 63 FR 34328, June 24, 1998; 66 FR 55322, Nov. 1, 2001; 75 FR 
73616, Nov. 29, 2010]



Sec. 414.4  Fee schedule areas.

    (a) General. CMS establishes physician fee schedule areas that 
generally conform to the geographic localities in existence before 
January 1, 1992.
    (b) Changes. CMS announces proposed changes to fee schedule areas in 
the Federal Register and provides an opportunity for public comment. 
After considering public comments, CMS publishes the final changes in 
the Federal Register.

[59 FR 63463, Dec. 8, 1994]



Sec. 414.5  Hospital services paid under Medicare Part B when a Part A hospital 
inpatient claim is denied because the inpatient admission was not reasonable and 
          necessary, but hospital outpatient services would have been 
          reasonable and necessary in treating the beneficiary.

    (a) If a Medicare Part A claim for inpatient hospital services is 
denied because the inpatient admission was not reasonable and necessary, 
or if a hospital determines under Sec. 482.30(d) of this chapter or 
Sec. 485.641 of this chapter after a beneficiary is discharged that the 
beneficiary's inpatient admission was not reasonable and necessary, the 
hospital may be paid for any of the following Part B inpatient services 
that would have been reasonable and necessary if the beneficiary had 
been treated as a hospital outpatient rather than admitted as an 
inpatient, provided the beneficiary is enrolled in Medicare Part B:

[[Page 9]]

    (1) Services described in Sec. 419.21(a) of this chapter that do not 
require an outpatient status.
    (2) Physical therapy services, speech-language pathology services, 
and occupational therapy services.
    (3) Ambulance services, as described in section 1861(v)(1)(U) of the 
Act, or, if applicable, the fee schedule established under section 
1834(l) of Act.
    (4) Except as provided in Sec. 419.2(b)(11) of this chapter, 
prosthetic devices, prosthetics, prosthetic supplies, and orthotic 
devices.
    (5) Except as provided in Sec. 419.2(b)(10) of this chapter, durable 
medical equipment supplied by the hospital for the patient to take home.
    (6) Clinical diagnostic laboratory services.
    (7)(i) Effective December 8, 2003, screening mammography services; 
and
    (ii) Effective January 1, 2005, diagnostic mammography services.
    (8) Effective January 1, 2011, annual wellness visit providing 
personalized prevention plan services as defined in Sec. 410.15 of this 
chapter.
    (b) If a Medicare Part A claim for inpatient hospital services is 
denied because the inpatient admission was not reasonable and necessary, 
or if a hospital determines under Sec. 482.30(d) of this chapter or 
Sec. 485.641 of this chapter after a beneficiary is discharged that the 
beneficiary's inpatient admission was not reasonable and necessary, the 
hospital may be paid for hospital outpatient services described in 
Sec. 412.2(c)(5), Sec. 412.405, Sec. 412.540, or Sec. 412.604(f) of this 
chapter or Sec. 413.40(c)(2) of this chapter that are furnished to the 
beneficiary prior to the point of inpatient admission (that is, the 
inpatient admission order).
    (c) The claims for the Part B services filed under the circumstances 
described in this section must be filed in accordance with the time 
limits for filing claims specified in Sec. 424.44(a) of this chapter.

[78 FR 50968, Aug. 19, 2013]



              Subpart B_Physicians and Other Practitioners

    Source: 56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, 
unless otherwise noted.



Sec. 414.20  Formula for computing fee schedule amounts.

    (a) Participating supplier. The fee schedule amount for a 
participating supplier for a physician service as defined in Sec. 414.2 
is computed as the product of the following amounts:
    (1) The RVUs for the service.
    (2) The GAF for the fee schedule area.
    (3) The CF.
    (b) Nonparticipating supplier. The fee schedule amount for a 
nonparticipating supplier for a physician service as defined in 
Sec. 414.2 is 95 percent of the fee schedule amount as calculated in 
paragraph (a) of this section.

[62 FR 59101, Oct. 31, 1997]



Sec. 414.21  Medicare payment basis.

    Medicare payment is based on the lesser of the actual charge or the 
applicable fee schedule amount.

[62 FR 59101, Oct. 31, 1997]



Sec. 414.22  Relative value units (RVUs).

    CMS establishes RVUs for physicians' work, practice expense, and 
malpractice insurance.
    (a) Physician work RVUs--(1) General rule. Physician work RVUs are 
established using a relative value scale in which the value of physician 
work for a particular service is rated relative to the value of work for 
other physician services.
    (2) Special RVUs for anesthesia and radiology services)--(i) 
Anesthesia services. The rules for determining RVUs for anesthesia 
services are set forth in Sec. 414.46.
    (ii) Radiology services. CMS bases the RVUs for all radiology 
services on the relative value scale developed under section 
1834(b)(1)(A) of the Act, with appropriate modifications to ensure that 
the RVUs established for radiology services that are similar or related 
to other physician services are consistent with the RVUs established for 
those similar or related services.
    (b) Practice expense RVUs. (1) Practice expense RVUs are computed 
for each service or class of service by applying average historical 
practice cost percentages to the estimated average allowed charge during 
the 1991 base period.

[[Page 10]]

    (2) The average practice expense percentage for a service or class 
of services is computed as follows:
    (i) Multiply the average practice expense percentage for each 
specialty by the proportion of a particular service or class of service 
performed by that specialty.
    (ii) Add the products for all specialties.
    (3) For services furnished beginning calendar year (CY) 1994, for 
which 1994 practice expense RVUs exceed 1994 work RVUs and that are 
performed in office settings less than 75 percent of the time, the 1994, 
1995, and 1996 practice expense RVUs are reduced by 25 percent of the 
amount by which they exceed the number of 1994 work RVUs. Practice 
expense RVUs are not reduced to less than 128 percent of 1994 work RVUs.
    (4) For services furnished beginning January 1, 1998, practice 
expense RVUs for certain services are reduced to 110 percent of the work 
RVUs for those services. The following two categories of services are 
excluded from this limitation:
    (i) The service is provided more than 75 percent of the time in an 
office setting; or
    (ii) The service is one described in section 1848(c)(2)(G)(v) of the 
Act, codified at 42 U.S.C. 1395w-4(c)(2)(G). Section 1848(c)(2)(G)(v) of 
the Act refers to the 1998 proposed resource-based practice expense RVUs 
(as specified in the June 18, 1997 physician fee schedule proposed rule 
(62 FR 33158)) for the specific site, either in-office or out-of-office, 
increased from its 1997 practice expense RVUs.)
    (5) For services furnished in 2002 and subsequent years, the 
practice expense RVUs are based entirely on relative practice expense 
resources.
    (i) Usually there are two levels of practice expense RVUs that 
correspond to each code.
    (A) Facility practice expense RVUs. The facility practice expense 
RVUs apply to services furnished to patients in a hospital, a skilled 
nursing facility, a community mental health center, a hospice, or an 
ambulatory surgical center, or in a wholly owned or wholly operated 
entity providing preadmission services under Sec. 412.2(c)(5) of this 
chapter, or via telehealth under Sec. 410.78 of this chapter.
    (B) Nonfacility practice expense RVUs. The nonfacility practice 
expense RVUs apply to services furnished to patients in all locations 
other than those listed in paragraph (b)(5)(i)(A) of this section, but 
not limited to, a physician's office, the patient's home, a nursing 
facility, or a comprehensive outpatient rehabilitation facility (CORF).
    (C) Outpatient therapy and CORF services. Outpatient therapy 
services (including physical therapy, occupational therapy, and speech-
language pathology services) and CORF services billed under the 
physician fee schedule are paid using the nonfacility practice expense 
RVUs.
    (ii) [Reserved]
    (6)(i) CMS establishes criteria for supplemental surveys regarding 
specialty practice expenses submitted to CMS that may be used in 
determining practice expense RVUs.
    (ii) Any CMS-designated specialty group may submit a supplemental 
survey.
    (iii) CMS will consider for use in determining practice expense RVUs 
for the physician fee schedule survey data and related materials 
submitted to CMS by March 1, 2004 to determine CY 2005 practice expense 
RVUs and by March 1, 2005 to determine CY 2006 practice expense RVUs.
    (c) Malpractice insurance RVUs. (1) Malpractice insurance RVUs are 
computed for each service or class of services by applying average 
malpractice insurance historical practice cost percentages to the 
estimated average allowed charge during the 1991 base period.
    (2) The average historical malpractice insurance percentage for a 
service or class of services is computed as follows:
    (i) Multiply the average malpractice insurance percentage for each 
specialty by the proportion of a particular service or class of services 
performed by that specialty.
    (ii) Add all the products for all the specialties.

[[Page 11]]

    (3) For services furnished in the year 2000 and subsequent years, 
the malpractice RVUs are based on the relative malpractice insurance 
resources.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42493, Sept. 15, 1992; 
58 FR 63687, Dec. 2, 1993; 62 FR 59102, Oct. 31, 1997; 63 FR 58910, Nov. 
2, 1998; 64 FR 59441, Nov. 2, 1999; 65 FR 25668, May 3, 2000; 65 FR 
65440, Nov. 1, 2000; 67 FR 43558, June 28, 2002; 68 FR 63261, Nov. 7, 
2003; 72 FR 66932, Nov. 27, 2007; 73 FR 69935, Nov. 19, 2008; 76 FR 
73471, Nov. 28, 2011; 81 FR 79879, Nov. 14, 2016; 81 FR 80553, Nov. 15, 
2016]



Sec. 414.24  Publication of RVUs and direct PE inputs.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    Existing code means a code that is not a new code under paragraph 
(c)(2) of this section, and includes codes for which the descriptor is 
revised and codes that are combinations or subdivisions of previously 
existing codes.
    New code means a code that describes a service that was not 
previously described or valued under the PFS using any other code or 
combination of codes.
    (b) Revisions of RVUs and Direct PE Inputs. For valuations for 
calendar year 2017 and beyond, CMS publishes, through notice and comment 
rulemaking in the Federal Register (including proposals in a proposed 
rule), changes in RVUs or direct PE inputs for existing codes.
    (c) Establishing RVUs and Direct PE inputs for new codes--(1) 
General rule. CMS establishes RVUs and direct PE inputs for new codes in 
the manner described in paragraph (b) of this section.
    (2) Exception for new codes for which CMS does not have sufficient 
information. When CMS determines for a new code that it does not have 
sufficient information to include proposed RVUs or direct PE inputs in 
the proposed rule, but that it is in the public interest for Medicare to 
use a new code during a payment year, CMS will publish in the Federal 
Register RVUs and direct PE inputs that are applicable on an interim 
basis subject to public comment. After considering public comments and 
other information on interim RVUs and PE inputs for the new code, CMS 
publishes in the Federal Register the final RVUs and PE inputs for the 
code.
    (d) Values for local codes (HCPCS Level 3). (1) Carriers establish 
relative values for local codes for services not included in HCPCS 
levels 1 or 2.
    (2) Carriers must obtain prior approval from CMS to establish local 
codes for services that meet the definition of ``physician services'' in 
Sec. 414.2.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 
79 FR 68003, Nov. 13, 2014]



Sec. 414.26  Determining the GAF.

    CMS establishes a GAF for each service in each fee schedule area.
    (a) Geographic indices. CMS uses the following indices to establish 
the GAF:
    (1) An index that reflects one-fourth of the difference between the 
relative value of physicians' work effort in each of the different fee 
schedule areas as determined under Sec. 414.22(a) and the national 
average of that work effort.
    (2) An index that reflects the relative costs of the mix of goods 
and services comprising practice expenses (other than malpractice 
expenses) in each of the different fee schedule areas as determined 
under Sec. 414.22(b) compared to the national average of those costs.
    (3) An index that reflects the relative costs of malpractice 
expenses in each of the different fee schedule areas as determined under 
Sec. 414.22(c) compared to the national average of those costs.
    (b) Class-specific practice cost indices. If the application of a 
single index to different classes of services would be substantially 
inequitable because of differences in the mix of goods and services 
comprising practice expenses for the different classes of services, more 
than one index may be established under paragraph (a)(2) of this 
section.
    (c) Adjusting the practice expense index to account for the Frontier 
State floor--(1) General criteria. Effective on or after January 1, 
2011, CMS will adjust the practice expense index for physicians' 
services furnished in qualifying States to recognize the practice 
expense index floor established for Frontier States. A qualifying State 
must meet the following criteria:
    (i) At least 50 percent of counties located within the State have a 
population density less than 6 persons per square mile.

[[Page 12]]

    (ii) The State does not receive a non-labor related share adjustment 
determined by the Secretary to take into account the unique 
circumstances of hospitals located in Alaska and Hawaii.
    (2) Amount of adjustment. The practice expense value applied for 
physicians' services furnished in a qualifying State will be not less 
than 1.00.
    (3) Process for determining adjustment. (i) CMS will use the most 
recent population estimate data published by the U.S. Census Bureau to 
determine county definitions and population density. This analysis will 
be periodically revised, such as for updates to the decennial census 
data.
    (ii) CMS will publish annually a listing of qualifying Frontier 
States receiving a practice expense index floor attributable to this 
provision.
    (d) Computation of GAF. The GAF for each fee schedule area is the 
sum of the physicians' work adjustment factor, the practice expense 
adjustment factor, and the malpractice cost adjustment factor, as 
defined in this section:
    (1) The geographic physicians' work adjustment factor for a service 
is the product of the proportion of the total relative value for the 
service that reflects the RVUs for the work component and the geographic 
physicians' work index value established under paragraph (a)(1) of this 
section.
    (2) The geographic practice expense adjustment factor for a service 
is the product of the proportion of the total relative value for the 
service that reflects the RVUs for the practice expense component, 
multiplied by the geographic practice cost index (GPCI) value 
established under paragraph (a)(2) of this section.
    (3) The geographic malpractice adjustment factor for a service is 
the product of the proportion of the total relative value for the 
service that reflects the RVUs for the malpractice component, multiplied 
by the GPCI value established under paragraph (a)(3) of this section.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 
75 FR 73616, Nov. 29, 2010]



Sec. 414.28  Conversion factors.

    CMS establishes CFs in accordance with section 1848(d) of the Act.
    (a) Base-year CFs. CMS established the CF for 1992 so that had 
section 1848 of the Act applied during 1991, it would have resulted in 
the same aggregate amount of payments for physician services as the 
estimated aggregate amount of these payments in 1991, adjusted by the 
update for 1992 computed as specified in Sec. 414.30.
    (b) Subsequent CFs. For calendar years 1993 through 1995, the CF for 
each year is equal to the CF for the previous year, adjusted in 
accordance with Sec. 414.30. Beginning January 1, 1996, the CF for each 
calendar year may be further adjusted so that adjustments to the fee 
schedule in accordance with section 1848(c)(2)(B)(ii) of the Act do not 
cause total expenditures under the fee schedule to differ by more than 
$20 million from the amount that would have been spent if these 
adjustments had not been made.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 
60 FR 53877, Oct. 18, 1995; 60 FR 63177, Dec. 8, 1995]



Sec. 414.30  Conversion factor update.

    Unless Congress acts in accordance with section 1848(d)(3) of the 
Act--
    (a) General rule. The CF update for a CY equals the Medicare 
Economic Index increased or decreased by the number of percentage points 
by which the percentage increase in expenditures for physician services 
(or for a particular category of physician services, such as surgical 
services) in the second preceding FY over the third preceding FY exceeds 
the performance standard rate of increase established for the second 
preceding FY.
    (b) Downward adjustment. The downward adjustment may not exceed the 
following:
    (1) For CYs 1992 and 1993, 2 percentage points.
    (2) For CY 1994, 2.5 percentage points.
    (3) For CYs 1995 and thereafter, 5 percentage points.

[55 FR 23441, June 8, 1990, as amended at 60 FR 63177, Dec. 8, 1995; 61 
FR 42385, Aug. 15, 1996]

[[Page 13]]



Sec. 414.34  Payment for services and supplies incident to a physician's service.

    (a) Medical supplies. (1) Except as otherwise specified in this 
paragraph, office medical supplies are considered to be part of a 
physician's practice expense, and payment for them is included in the 
practice expense portion of the payment to the physician for the medical 
or surgical service to which they are incidental.
    (2) If physician services of the type routinely furnished in 
provider settings are furnished in a physician's office, separate 
payment may be made for certain supplies furnished incident to that 
physician service if the following requirements are met:
    (i) It is a procedure that can safely be furnished in the office 
setting in appropriate circumstances.
    (ii) It requires specialized supplies that are not routinely 
available in physicians' offices and that are generally disposable.
    (iii) It is furnished before January 1, 1999.
    (3) For the purpose of paragraph (a)(2) of this section, provider 
settings include only the following settings:
    (i) Hospital inpatient and outpatient departments.
    (ii) Ambulatory surgical centers.
    (4) For the purpose of paragraph (a)(2) of this section, ``routinely 
furnished in provider settings'' means furnished in inpatient or 
outpatient hospital settings or ambulatory surgical centers more than 50 
percent of the time.
    (5) CMS establishes a list of services for which a separate supply 
payment may be made under this section.
    (6) The fee schedule amount for supplies billed separately is not 
subject to a GPCI adjustment.
    (b) Services of nonphysicians that are incident to a physician's 
service. Services of nonphysicians that are covered as incident to a 
physician's service are paid as if the physician had personally 
furnished the service.

[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at 
63 FR 58911, Nov. 2, 1998]



Sec. 414.36  Payment for drugs incident to a physician's service.

    Payment for drugs incident to a physician's service is made in 
accordance with Sec. 405.517 of this chapter.



Sec. 414.39  Special rules for payment of care plan oversight.

    (a) General. Except as specified in paragraphs (b) and (c) of this 
section, payment for care plan oversight is included in the payment for 
visits and other services under the physician fee schedule. For purposes 
of this section a nonphysician practitioner (NPP) is a nurse 
practitioner, clinical nurse specialist or physician assistant.
    (b) Exception. Separate payment is made under the following 
conditions for physician care plan oversight services furnished to 
beneficiaries who receive HHA and hospice services that are covered by 
Medicare:
    (1) The care plan oversight services require recurrent physician 
supervision of therapy involving 30 or more minutes of the physician's 
time per month.
    (2) Payment is made to only one physician per patient for services 
furnished during a calendar month period. The physician must have 
furnished a service requiring a face-to-face encounter with the patient 
at least once during the 6-month period before the month for which care 
plan oversight payment is first billed. The physician may not have a 
significant ownership interest in, or financial or contractual 
relationship with, the HHA in accordance with Sec. 424.22(d) of this 
chapter. The physician may not be the medical director or employee of 
the hospice and may not furnish services under an arrangement with the 
hospice.
    (3) If a physician furnishes care plan oversight services during a 
postoperative period, payment for care plan oversight services is made 
if the services are documented in the patient's medical record as 
unrelated to the surgery.
    (c) Special rules for payment of care plan oversight provided by 
nonphysician practitioners for beneficiaries who receive HHA services 
covered by Medicare. (1) An NPP can furnish physician care plan 
oversight (but may not certify a patient as needing home health 
services) only if the physician who signs the

[[Page 14]]

plan of care provides regular ongoing care under the same plan of care 
as does the NPP billing for care plan oversight and either--
    (i) The physician and NPP are part of the same group practice; or
    (ii) If the NPP is a nurse practitioner or clinical nurse 
specialist, the physician signing the plan of care also has a 
collaborative agreement with the NPP; or
    (iii) If the NPP is a physician assistant, the physician signing the 
plan of care is also the physician who provides general supervision of 
physician assistant services for the practice.
    (2) Payment may be made for care plan oversight services furnished 
by an NPP when:
    (i) The NPP providing the care plan oversight has seen and examined 
the patient;
    (ii) The NPP providing care plan oversight is not functioning as a 
consultant whose participation is limited to a single medical condition 
rather than multi-disciplinary coordination of care; and
    (iii) The NPP providing care plan oversight integrates his or her 
care with that of the physician who signed the plan of care.

[59 FR 63463, Dec. 8, 1994; 60 FR 49, Jan. 3, 1995; 60 FR 36733, July 
18, 1995, as amended at 69 FR 66423, Nov. 15, 2004; 70 FR 16722, Apr. 1, 
2005]



Sec. 414.40  Coding and ancillary policies.

    (a) General rule. CMS establishes uniform national definitions of 
services, codes to represent services, and payment modifiers to the 
codes.
    (b) Specific types of policies. CMS establishes uniform national 
ancillary policies necessary to implement the fee schedule for physician 
services. These include, but are not limited to, the following policies:
    (1) Global surgery policy (for example, post- and pre-operative 
periods and services, and intra-operative services).
    (2) Professional and technical components (for example, payment for 
services, such as an EEG, which typically comprise a technical component 
(the taking of the test) and a professional component (the 
interpretation)).
    (3) Payment modifiers (for example, assistant-at-surgery, multiple 
surgery, bilateral surgery, split surgical global services, team 
surgery, and unusual services).



Sec. 414.42  Adjustment for first 4 years of practice.

    (a) General rule. For services furnished during CYs 1992 and 1993, 
except as specified in paragraph (b) of this section, the fee schedule 
payment amount or prevailing charge must be phased in as specified in 
paragraph (d) of this section for physicians, physical therapists (PTs), 
occupational therapists (OTs), and all other health care practitioners 
who are in their first through fourth years of practice.
    (b) Exception. The reduction required in paragraph (d) of this 
section does not apply to primary care services or to services furnished 
in a rural area as defined in section 1886(d)(2)(D) of the Act that is 
designated under section 332(a)(1)(A) of the Public Health Service Act 
as a Health Professional Shortage Area.
    (c) Definition of years of practice. (1) The ``first year of 
practice`` is the first full CY during the first 6 months of which the 
physician, PT, OT, or other health care practitioner furnishes 
professional services for which payment may be made under Medicare Part 
B, plus any portion of the prior CY if that prior year does not meet the 
first 6 months test.
    (2) The ``second, third, and fourth years of practice`` are the 
first, second, and third CYs following the first year of practice, 
respectively.
    (d) Amounts of adjustment. The fee schedule payment for the service 
of a new physician, PT, OT, or other health care practitioner is limited 
to the following percentages for each of the indicated years:
    (1) First year--80 percent
    (2) Second year--85 percent
    (3) Third year--90 percent
    (4) Fourth year--95 percent

[57 FR 42493, Sept. 15, 1992, as amended at 58 FR 63687, Dec. 2, 1993]



Sec. 414.44  Transition rules.

    (a) Adjusted historical payment basis--(1) All services other than 
radiology and nuclear medicine services. For all physician services 
other than radiology services, furnished in a fee schedule area,

[[Page 15]]

the adjusted historical payment basis (AHPB) is the estimated weighted 
average prevailing charge applied in the fee schedule area for the 
service in CY 1991, as determined by CMS without regard to physician 
specialty and as adjusted to reflect payments for services below the 
prevailing charge, adjusted by the update established for CY 1992.
    (2) Radiology services. For radiology services, the AHPB is the 
amount paid for the service in the fee schedule area in CY 1991 under 
the fee schedule established under section 1834(b), adjusted by the 
update established for CY 1992.
    (3) Nuclear medicine services. For nuclear medicine services, the 
AHPB is the amount paid for the service in the fee schedule area in CY 
1991 under the fee schedule established under section 6105(b) of Public 
Law 101-239 and section 4102(g) of Public Law 101-508, adjusted by the 
update established for CY 1992.
    (4) Transition adjustment. CMS adjusts the AHPB for all services by 
5.5 percent to produce budget-neutral payments for 1992.
    (b) Adjustment of 1992 payments for physician services other than 
radiology services. For physician services furnished during CY 1992 the 
following rules apply:
    (1) If the AHPB determined under paragraph (a) of this section is 
from 85 percent to 115 percent of the fee schedule amount for the area 
for services furnished in 1992, payment is at the fee schedule amount.
    (2) If the AHPB determined under paragraph (a) of this section is 
less than 85 percent of the fee schedule amount for the area for 
services furnished in 1992, an amount equal to the AHPB plus 15 percent 
of the fee schedule amount is substituted for the fee schedule amount.
    (3) If the AHPB determined under paragraph (a) of this section is 
greater than 115 percent of the fee schedule amount for the area for 
services furnished in 1992, an amount equal to the AHPB minus 15 percent 
of the fee schedule amount is substituted for the fee schedule amount.
    (c) Adjustment of 1992 payments for radiology services. For 
radiology services furnished during CY 1992 the following rules apply:
    (1) If the AHPB determined under paragraph (a) of this section is 
from 85 percent to 109 percent of the fee schedule amount for the area 
for services furnished in 1992, payment is at the fee schedule amount.
    (2) If the AHPB determined under paragraph (a) of this section is 
less than 85 percent of the fee schedule amount for the area for 
services furnished in 1992, an amount equal to the AHPB plus 15 percent 
of the fee schedule amount is substituted for the fee schedule amount.
    (3) If the AHPB determined under paragraph (a) of this section is 
greater than 109 percent of the fee schedule amount for the area for 
services furnished in 1992, an amount equal to the AHPB minus 9 percent 
of the fee schedule amount is substituted for the fee schedule amount.
    (d) Computation of payments for CY 1993. For physician services 
subject to the transition rules in CY 1992 and furnished during CY 1993, 
the fee schedule is equal to 75 percent of the amount that would have 
been paid in the fee schedule area under the 1992 transition rules, 
adjusted by the amount of the 1993 update, plus 25 percent of the 1993 
fee schedule amount.
    (e) Computation of payments for CY 1994. For physician services 
subject to the transition rules in CY 1993, and furnished during CY 
1994, the fee schedule is equal to 67 percent of the amount that would 
have been paid in the fee schedule area under the 1993 transition rules, 
adjusted by the amount of the 1994 update, plus 33 percent of the 1994 
fee schedule amount.
    (f) Computation of payments for CY 1995. For physician services 
subject to the transition rules in CY 1994 and furnished during CY 1995, 
the fee schedule is equal to 50 percent of the amount that would have 
been paid in the fee schedule area under the 1994 transition rules, 
adjusted by the amount of the 1995 update, plus 50 percent of the 1995 
fee schedule amount.



Sec. 414.46  Additional rules for payment of anesthesia services.

    (a) Definitions. For purposes of this section, the following 
definitions apply:

[[Page 16]]

    (1) Base unit means the value for each anesthesia code that reflects 
all activities other than anesthesia time. These activities include 
usual preoperative and postoperative visits, the administration of 
fluids and blood incident to anesthesia care, and monitoring services.
    (2) Anesthesia practitioner, for the purpose of anesthesia time, 
means a physician who performs the anesthesia service alone, a CRNA who 
is not medically directed who performs the anesthesia service alone, or 
a medically directed CRNA.
    (3) Anesthesia time means the time during which an anesthesia 
practitioner is present with the patient. It starts when the anesthesia 
practitioner begins to prepare the patient for anesthesia services and 
ends when the anesthesia practitioner is no longer furnishing anesthesia 
services to the beneficiary, that is, when the beneficiary may be placed 
safely under postoperative care. Anesthesia time is a continuous time 
period from the start of anesthesia to the end of an anesthesia service. 
In counting anesthesia time, the anesthesia practitioner can add blocks 
of anesthesia time around an interruption in anesthesia time as long as 
the anesthesia practitioner is furnishing continuous anesthesia care 
within the time periods around the interruption.
    (b) Determinations of payment amount--Basic rule. For anesthesia 
services performed, medically directed, or medically supervised by a 
physician, CMS pays the lesser of the actual charge or the anesthesia 
fee schedule amount.
    (1) The carrier bases the fee schedule amount for an anesthesia 
service on the product of the sum of allowable base and time units and 
an anesthesia-specific CF. The carrier calculates the time units from 
the anesthesia time reported by the anesthesia practitioner for the 
anesthesia procedure. The physician who fulfills the conditions for 
medical direction in Sec. 415.110 (Conditions for payment: 
Anesthesiology services) reports the same anesthesia time as the 
medically-directed CRNA.
    (2) CMS furnishes the carrier with the base units for each 
anesthesia procedure code. The base units are derived from the 1988 
American Society of Anesthesiologists' Relative Value Guide except that 
the number of base units recognized for anesthesia services furnished 
during cataract or iridectomy surgery is four units.
    (3) Modifier units are not allowed. Modifier units include 
additional units charged by a physician or a CRNA for patient health 
status, risk, age, or unusual circumstances.
    (c) Physician personally performs the anesthesia procedure. (1) CMS 
considers an anesthesia service to be personally performed under any of 
the following circumstances:
    (i) The physician performs the entire anesthesia service alone.
    (ii) The physician establishes an attending physician relationship 
in one or two concurrent cases involving an intern or resident and the 
service was furnished before January 1, 1994.
    (iii) The physician establishes an attending physician relationship 
in one case involving an intern or resident and the service was 
furnished on or after January 1, 1994 but prior to January 1, 1996. For 
services on or after January 1, 1996, the physician must be the teaching 
physician as defined in Secs. 415.170 through 415.184 of this chapter.
    (iv) The physician and the CRNA or AA are involved in a single case 
and the services of each are found to be medically necessary.
    (v) The physician is continuously involved in a single case 
involving a student nurse anesthetist.
    (vi) The physician is continuously involved in a single case 
involving a CRNA or AA and the service was furnished prior to January 1, 
1998.
    (2) CMS determines the fee schedule amount for an anesthesia service 
personally performed by a physician on the basis of an anesthesia-
specific fee schedule CF and unreduced base units and anesthesia time 
units. One anesthesia time unit is equivalent to 15 minutes of 
anesthesia time, and fractions of a 15-minute period are recognized as 
fractions of an anesthesia time unit.
    (d) Anesthesia services medically directed by a physician. (1) CMS 
considers an anesthesia service to be medically directed by a physician 
if:

[[Page 17]]

    (i) The physician performs the activities described in Sec. 415.110 
of this chapter.
    (ii) The physician directs qualified individuals involved in two, 
three, or four concurrent cases.
    (iii) Medical direction can occur for a single case furnished on or 
after January 1, 1998 if the physician performs the activities described 
in Sec. 415.110 of this chapter and medically directs a single CRNA or 
AA.
    (2) The rules for medical direction differ for certain time periods 
depending on the nature of the qualified individual who is directed by 
the physician.
    (i) If more than two procedures are directed on or after January 1, 
1994, the qualified individuals could be AAs, CRNAs, interns, or 
residents. The medical direction rules apply to student nurse 
anesthetists only if the physician directs two concurrent cases, each of 
which involves a student nurse anesthetist or the physician directs one 
case involving a student nurse anesthetist and the other involving a 
CRNA, AA, intern, or resident.
    (ii) For services furnished on or after January 1, 2010, the medical 
direction rules do not apply to a single anesthesia resident case that 
is concurrent to another case which is paid under the medical direction 
payment rules as specified in paragraph (e) of this section.
    (3) Payment for medical direction is based on a specific percentage 
of the payment allowance recognized for the anesthesia service 
personally performed by a physician alone. The following percentages 
apply for the years specified:
    (i) CY 1994--60 percent of the payment allowance for personally 
performed procedures.
    (ii) CY 1995--57.5 percent of the payment allowance for personally 
performed services.
    (iii) CY 1996--55 percent of the payment allowance for personally 
performed services.
    (iv) CY 1997--52.5 percent of the payment allowance for personally 
performed services.
    (v) CY 1998 and thereafter--50 percent of the payment allowance for 
personally performed services.
    (e) Special payment rule for teaching anesthesiologist involved in a 
single resident case or two concurrent cases. For physicians' services 
furnished on or after January 1, 2010, if the teaching anesthesiologist 
is involved in the training of physician residents in a single 
anesthesia case or two concurrent anesthesia cases, the fee schedule 
amount must be 100 percent of the fee schedule amount otherwise 
applicable if the anesthesia services were personally performed by the 
teaching anesthesiologist and the teaching anesthesiologist fulfilled 
the criteria in Sec. 415.178 of this chapter. This special payment rule 
also applies if the teaching anesthesiologist is involved in one 
resident case that is concurrent to another case paid under the medical 
direction payment rules.
    (f) Physician medically supervises anesthesia services. If the 
physician medically supervises more than four concurrent anesthesia 
services, CMS bases the fee schedule amount on an anesthesia-specific CF 
and three base units. This represents payment for the physician's 
involvement in the pre-surgical anesthesia services.
    (g) Payment for medical or surgical services furnished by a 
physician while furnishing anesthesia services. (1) CMS allows separate 
payment under the fee schedule for certain reasonable and medically 
necessary medical or surgical services furnished by a physician while 
furnishing anesthesia services to the patient. CMS makes payment for 
these services in accordance with the general physician fee schedule 
rules in Sec. 414.20. These services are described in program operating 
instructions.
    (2) CMS makes no separate payment for other medical or surgical 
services, such as the pre-anesthetic examination of the patient, pre- or 
post-operative visits, or usual monitoring functions, that are 
ordinarily included in the anesthesia service.
    (h) Physician involved in multiple anesthesia services. If the 
physician is involved in multiple anesthesia services for the same 
patient during the same operative session, the carrier makes payment 
according to the base unit associated with the anesthesia service having 
the highest base unit value and anesthesia time that encompasses the

[[Page 18]]

multiple services. The carrier makes payment for add-on anesthesia codes 
according to program operating instructions.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 
58 FR 63687, Dec. 2, 1993; 60 FR 63177, Dec. 8, 1995; 64 FR 59441, Nov. 
2, 1999; 67 FR 80041, Dec. 31, 2002; 68 FR 63261, Nov. 7, 2003; 74 FR 
62006, Nov. 25, 2009]



Sec. 414.48  Limits on actual charges of nonparticipating suppliers.

    (a) General rule. A supplier, as defined in Sec. 400.202 of this 
chapter, who is nonparticipating and does not accept assignment may 
charge a beneficiary an amount up to the limiting charge described in 
paragraph (b) of this section.
    (b) Specific limits. For items or services paid under the physician 
fee schedule, the limiting charge is 115 percent of the fee schedule 
amount for nonparticipating suppliers. For items or services CMS 
excludes from payment under the physician fee schedule (in accordance 
with section 1848 (j)(3) of the Act), the limiting charge is 115 percent 
of 95 percent of the payment basis applicable to participating suppliers 
as calculated in Sec. 414.20(b).

[58 FR 63687, Dec. 2, 1993, as amended at 62 FR 59102, Oct. 31, 1997]



Sec. 414.50  Physician or other supplier billing for diagnostic tests performed
or interpreted by a physician who does not share a practice with the billing 
          physician or other supplier.

    (a) General rules. (1) For services covered under section 1861(s)(3) 
of the Act and paid for under part 414 of this chapter (other than 
clinical diagnostic laboratory tests paid under section 1833(a)(2)(D) of 
the Act, which are subject to the special billing rules set forth in 
section 1833(h)(5)(A) of the Act), if a physician or other supplier 
bills for the technical component (TC) or professional component (PC) of 
a diagnostic test that was ordered by the physician or other supplier 
(or ordered by a party related to such physician or other supplier 
through common ownership or control as described in Sec. 413.17 of this 
chapter) and the diagnostic test is performed by a physician who does 
not share a practice with the billing physician or other supplier, the 
payment to the billing physician or other supplier (less the applicable 
deductibles and coinsurance paid by the beneficiary or on behalf of the 
beneficiary) for the TC or PC of the diagnostic test may not exceed the 
lowest of the following amounts:
    (i) The performing supplier's net charge to the billing physician or 
other supplier. For purposes of this paragraph (a)(1) only, with respect 
to the TC, the performing supplier is the physician who supervised the 
TC, and with respect to the PC, the performing supplier is the physician 
who performed the PC.
    (ii) The billing physician or other supplier's actual charge.
    (iii) The fee schedule amount for the test that would be allowed if 
the performing supplier billed directly.
    (2) The following requirements are applicable for purposes of 
paragraph (a)(1) of this section:
    (i) The net charge must be determined without regard to any charge 
that is intended to reflect the cost of equipment or space leased to the 
performing supplier by or through the billing physician or other 
supplier.
    (ii) A performing physician shares a practice with the billing 
physician or other supplier if he or she furnishes substantially all 
(which, for purposes of this section, means ``at least 75 percent'') of 
his or her professional services through such billing physician or other 
supplier. The ``substantially all'' requirement will be satisfied if, at 
the time the billing physician or other supplier submits a claim for a 
service furnished by the performing physician, the billing physician or 
other supplier has a reasonable belief that:
    (A) For the 12 months prior to and including the month in which the 
service was performed, the performing physician furnished substantially 
all of his or her professional services through the billing physician or 
other supplier; or
    (B) The performing physician will furnish substantially all of his 
or her professional services through the billing physician or other 
supplier for the next 12 months (including the month in which the 
service is performed).

[[Page 19]]

    (iii) A physician will be deemed to share a practice with the 
billing physician or other supplier with respect to the performance of 
the TC or PC of a diagnostic test if the physician is an owner, employee 
or independent contractor of the billing physician or other supplier and 
the TC or PC is performed in the office of the billing physician or 
other supplier. The ``office of the billing physician or other 
supplier'' is any medical office space, regardless of number of 
locations, in which the ordering physician or other ordering supplier 
regularly furnishes patient care, and includes space where the billing 
physician or other supplier furnishes diagnostic testing, if the space 
is located in the same building (as defined in Sec. 411.351) in which 
the ordering physician or other ordering supplier regularly furnishes 
patient care. With respect to a billing physician or other supplier that 
is a physician organization (as defined in Sec. 411.351 of this 
chapter), the ``office of the billing physician or other supplier'' is 
space in which the ordering physician provides substantially the full 
range of patient care services that the ordering physician provides 
generally. The performance of the TC includes both the conducting of the 
TC as well as the supervision of the TC.
    (b) Restriction on payment. (1) The billing physician or other 
supplier must identify the performing supplier and indicate the 
performing supplier's net charge for the test. If the billing physician 
or other supplier fails to provide this information, CMS makes no 
payment to the billing physician or other supplier and the billing 
physician or other supplier may not bill the beneficiary.
    (2) Physicians and other suppliers that accept Medicare assignment 
may bill beneficiaries for only the applicable deductibles and 
coinsurance.
    (3) Physicians and other suppliers that do not accept Medicare 
assignment may not bill the beneficiary more than the payment amount 
described in paragraph (a) of this section.

[72 FR 66400, Nov. 27, 2007, as amended at 73 FR 2432, Jan. 15, 2008; 73 
FR 69935, Nov. 19, 2008]



Sec. 414.52  Payment for physician assistants' services.

    Allowed amounts for the services of a physician assistant furnished 
beginning January 1, 1992 and ending December 31, 1997, may not exceed 
the limits specified in paragraphs (a) through (c) of this section. 
Allowed amounts for the services of a physician assistant furnished 
beginning January 1, 1998, may not exceed the limits specified in 
paragraph (d) of this section.
    (a) For assistant-at-surgery services, 65 percent of the amount that 
would be allowed under the physician fee schedule if the assistant-at-
surgery service was furnished by a physician.
    (b) For services (other than assistant-at-surgery services) 
furnished in a hospital, 75 percent of the physician fee schedule amount 
for the service.
    (c) For all other services, 85 percent of the physician fee schedule 
amount for the service.
    (d) For services (other than assistant-at-surgery services) 
furnished beginning January 1, 1998, 85 percent of the physician fee 
schedule amount for the service. For assistant-at-surgery services, 85 
percent of the physician fee schedule amount that would be allowed under 
the physician fee schedule if the assistant-at-surgery service were 
furnished by a physician.

[56 FR 59624, Nov. 25, 1991; 57 FR 42492, Sept. 15, 1992, as amended at 
63 FR 58911, Nov. 2, 1998]



Sec. 414.54  Payment for certified nurse-midwives' services.

    (a) For services furnished after December 31, 1991, allowed amounts 
under the fee schedule established under section 1833(a)(1)(K) of the 
Act for the payment of certified nurse-midwife services may not exceed 
65 percent of the physician fee schedule amount for the service.
    (b) For certified nurse-midwife services furnished on or after 
January 1, 2011, allowed amounts may not exceed 100 percent of the 
physician fee schedule amount that would be paid to a physician for the 
services.

[75 FR 73616, Nov. 29, 2010]

[[Page 20]]



Sec. 414.56  Payment for nurse practitioners' and clinical nurse 
specialists' services.

    (a) Rural areas. For services furnished beginning January 1, 1992 
and ending December 31, 1997, allowed amounts for the services of a 
nurse practitioner or a clinical nurse specialist in a rural area (as 
described in section 1861(s)(2)(K)(iii) of the Act) may not exceed the 
following limits:
    (1) For services furnished in a hospital (including assistant-at-
surgery services), 75 percent of the physician fee schedule amount for 
the service.
    (2) For all other services, 85 percent of the physician fee schedule 
amount for the service.
    (b) Non-rural areas. For services furnished beginning January 1, 
1992 and ending December 31, 1997, allowed amounts for the services of a 
nurse practitioner or a clinical nurse specialist in a nursing facility 
may not exceed 85 percent of the physician fee schedule amount for the 
service.
    (c) Beginning January 1, 1998. For services (other than assistant-
at-surgery services) furnished beginning January 1, 1998, allowed 
amounts for the services of a nurse practitioner or clinical nurse 
specialist may not exceed 85 percent of the physician fee schedule 
amount for the service. For assistant-at-surgery services, allowed 
amounts for the services of a nurse practitioner or clinical nurse 
specialist may not exceed 85 percent of the physician fee schedule 
amount that would be allowed under the physician fee schedule if the 
assistant-at-surgery service were furnished by a physician.

[63 FR 58911, Nov. 2, 1998]



Sec. 414.58  Payment of charges for physician services to patients in providers.

    (a) Payment under the physician fee schedule. In addition to the 
special conditions for payment in Secs. 415.100 through 415.130, and 
Sec. 415.190 of this chapter, CMS establishes payment for physician 
services to patients in providers under the physician fee schedule in 
accordance with Secs. 414.1 through 414.48.
    (b) Teaching hospitals. Services furnished by physicians in teaching 
hospitals may be made on a reasonable cost basis set forth in 
Sec. 415.162 of this chapter if the hospital exercises the election 
described in Sec. 415.160 of this chapter.

[56 FR 59624, Nov. 25, 1991, as amended at 57 FR 42492, Sept. 15, 1992; 
60 FR 63189, Dec. 8, 1995]



Sec. 414.60  Payment for the services of CRNAs.

    (a) Basis for payment. The allowance for the anesthesia service 
furnished by a CRNA, medically directed or not medically directed, is 
based on allowable base and time units as defined in Sec. 414.46(a). 
Beginning with CY 1994--
    (1) The allowance for an anesthesia service furnished by a medically 
directed CRNA is based on a fixed percentage of the allowance recognized 
for the anesthesia service personally performed by the physician alone, 
as specified in Sec. 414.46(d)(3); and
    (2) The CF for an anesthesia service furnished by a CRNA not 
directed by a physician may not exceed the CF for a service personally 
performed by a physician.
    (b) To whom payment may be made. Payment for an anesthesia service 
furnished by a CRNA may be made to the CRNA or to any individual or 
entity (such as a hospital, critical access hospital, physician, group 
practice, or ambulatory surgical center) with which the CRNA has an 
employment or contract relationship that provides for payment to be made 
to the individual or entity.
    (c) Condition for payment. Payment for the services of a CRNA may be 
made only on an assignment related basis, and any assignment accepted by 
a CRNA is binding on any other person presenting a claim or request for 
payment for the service.

[60 FR 63178, Dec. 8, 1995, as amended at 62 FR 46037, Aug. 29, 1997; 64 
FR 59441, Nov. 2, 1999; 77 FR 69363, Nov. 16, 2012]



Sec. 414.61  Payment for anesthesia services furnished by a teaching CRNA.

    (a) Basis for payment. Beginning January 1, 2010, anesthesia 
services furnished by a teaching CRNA may be paid under one of the 
following conditions:
    (1) The teaching CRNA, who is not under medical direction of a 
physician,

[[Page 21]]

is present with the student nurse anesthetist for the pre and post 
anesthesia services included in the anesthesia base units payment and is 
continuously present during anesthesia time in a single case with a 
student nurse anesthetist.
    (2) The teaching CRNA, who is not under the medical direction of a 
physician, is involved with two concurrent anesthesia cases with student 
nurse anesthetists. The teaching CRNA must be present with the student 
nurse anesthetist for the pre and post anesthesia services included in 
the anesthesia base unit. For the anesthesia time of the two concurrent 
cases, the teaching CRNA can only be involved with those two concurrent 
cases and may not perform services for other patients.
    (b) Level of payment. The allowance for the service of the teaching 
CRNA, furnished under paragraph (a) of this section, is determined in 
the same way as for a physician who personally performs the anesthesia 
service alone as specified in Sec. 414.46(c) of this subpart.

[74 FR 62006, Nov. 25, 2009]



Sec. 414.62  Fee schedule for clinical psychologist services.

    The fee schedule for clinical psychologist services is set at 100 
percent of the amount determined for corresponding services under the 
physician fee schedule.

[62 FR 59102, Oct. 31, 1997]



Sec. 414.63  Payment for outpatient diabetes self-management training.

    (a) Payment under the physician fee schedule. Except as provided in 
paragraph (d) of this section, payment for outpatient diabetes self-
management training is made under the physician fee schedule in 
accordance with Secs. 414.1 through 414.48.
    (b) To whom payment may be made. Payment may be made to an entity 
approved by CMS to furnish outpatient diabetes self-management training 
in accordance with part 410, subpart H of this chapter.
    (c) Limitation on payment. Payment may be made for training sessions 
actually attended by the beneficiary and documented on attendance 
sheets.
    (d) Payments made to those not paid under the physician fee 
schedule. Payments may be made to other entities not routinely paid 
under the physician fee schedule, such as hospital outpatient 
departments, ESRD facilities, and DME suppliers. The payment equals the 
amounts paid under the physician fee schedule.
    (e) Other conditions for fee-for-service payment. The beneficiary 
must meet the following conditions:
    (1) Has not previously received initial training for which Medicare 
payment was made under this benefit.
    (2) Is not receiving services as an inpatient in a hospital, SNF, 
hospice, or nursing home.
    (3) Is not receiving services as an outpatient in an RHC or FQHC.

[65 FR 83153, Dec. 29, 2000]



Sec. 414.64  Payment for medical nutrition therapy.

    (a) Payment under the physician fee schedule. Medicare payment for 
medical nutrition therapy is made under the physician fee schedule in 
accordance with subpart B of this part. Payment to non-physician 
professionals, as specified in paragraph (b) of this section, is the 
lesser of the actual charges or 80 percent of 85 percent of the 
physician fee schedule amount.
    (b) To whom payment may be made. Payment may be made to a registered 
dietician or nutrition professional qualified to furnish medical 
nutrition therapy in accordance with part 410, subpart G of this 
chapter.
    (c) Effective date of payment. Medicare pays suppliers of medical 
nutrition therapy on or after the effective date of enrollment of the 
supplier at the carrier.
    (d) Limitation on payment. Payment is made only for documented 
nutritional therapy sessions actually attended by the beneficiary.
    (e) Other conditions for fee-for-service payment. Payment is made 
only if the beneficiary:
    (1) Is not an inpatient of a hospital, SNF, nursing home, or 
hospice.
    (2) Is not receiving services in an RHC, FQHC or ESRD dialysis 
facility.

[66 FR 55332, Nov. 1, 2001]

[[Page 22]]



Sec. 414.65  Payment for telehealth services.

    (a) Professional service. Medicare payment for the professional 
service via an interactive telecommunications system is made according 
to the following limitations:
    (1) The Medicare payment amount for office or other outpatient 
visits, subsequent hospital care services (with the limitation of one 
telehealth visit every 3 days by the patient's admitting physician or 
practitioner), subsequent nursing facility care services (with the 
limitation of one telehealth visit every 30 days by the patient's 
admitting physician or nonphysician practitioner), professional 
consultations, psychiatric diagnostic interview examination, 
neurobehavioral status exam, individual psychotherapy, pharmacologic 
management, end-stage renal disease-related services included in the 
monthly capitation payment (except for one ``hands on'' visit per month 
to examine the access site), individual and group medical nutrition 
therapy services, individual and group kidney disease education 
services, individual and group diabetes self-management training 
services (except for one hour of ``hands on'' services to be furnished 
in the initial year training period to ensure effective injection 
training), individual and group health and behavior assessment and 
intervention, smoking cessation services, alcohol and/or substance abuse 
and brief intervention services, screening and behavioral counseling 
interventions in primary care to reduce alcohol misuse, screening for 
depression in adults, screening for sexually transmitted infections 
(STIs) and high intensity behavioral counseling (HIBC) to prevent STIs, 
intensive behavioral therapy for cardiovascular disease, behavioral 
counseling for obesity, and transitional care management services 
furnished via an interactive telecommunications system is equal to the 
current fee schedule amount applicable for the service of the physician 
or practitioner.
    (i) Emergency department or initial inpatient telehealth 
consultations. The Medicare payment amount for emergency department or 
initial inpatient telehealth consultations furnished via an interactive 
telecommunications system is equal to the current fee schedule amount 
applicable to initial hospital care provided by a physician or 
practitioner.
    (ii) Follow-up inpatient telehealth consultations. The Medicare 
payment amount for follow-up inpatient telehealth consultations 
furnished via an interactive telecommunications system is equal to the 
current fee schedule amount applicable to subsequent hospital care 
provided by a physician or practitioner.
    (2) Only the physician or practitioner at the distant site may bill 
and receive payment for the professional service via an interactive 
telecommunications system.
    (3) Payments made to the physician or practitioner at the distant 
site, including deductible and coinsurance, for the professional service 
may not be shared with the referring practitioner or telepresenter.
    (b) Originating site facility fee. For telehealth services furnished 
on or after October 1, 2001:
    (1) For services furnished on or after October 1, 2001 through 
December 31, 2002, the payment amount to the originating site is the 
lesser of the actual charge or the originating site facility fee of $20. 
For services furnished on or after January 1 of each subsequent year, 
the facility fee for the originating site will be updated by the 
Medicare Economic Index (MEI) as defined in section 1842(i)(3) of the 
Act.
    (2) Only the originating site may bill for the originating site 
facility fee and only on an assignment-related basis. The distant site 
physician or practitioner may not bill for or receive payment for 
facility fees associated with the professional service furnished via an 
interactive telecommunications system.
    (c) Deductible and coinsurance apply. The payment for the 
professional service and originating site facility fee is subject to the 
coinsurance and deductible requirements of sections 1833(a)(1) and (b) 
of the Act.
    (d) Assignment required for physicians, practitioners, and 
originating sites. Payment to physicians, practitioners, and originating 
sites is made only on an assignment-related basis.

[[Page 23]]

    (e) Sanctions. A distant site practitioner or originating site 
facility may be subject to the applicable sanctions provided for in 
chapter IV, part 402 and chapter V, parts 1001, 1002, and 1003 of this 
title if he or she does any of the following:
    (1) Knowingly and willfully bills or collects for services in 
violation of the limitation of this section.
    (2) Fails to timely correct excess charges by reducing the actual 
charge billed for the service in an amount that does not exceed the 
limiting charge for the service or fails to timely refund excess 
collections.
    (3) Fails to submit a claim on a standard form for services provided 
for which payment is made on a fee schedule basis.
    (4) Imposes a charge for completing and submitting the standard 
claims form.

[66 FR 55332, Nov. 1, 2001, as amended at 67 FR 80041, Dec. 31, 2003; 69 
FR 66424, Nov. 15, 2004; 70 FR 70332, Nov. 21, 2005; 72 FR 66401, Nov. 
27, 2007; 73 FR 69936, Nov. 19, 2008; 74 FR 62006, Nov. 25, 2009; 75 FR 
73617, Nov. 29, 2010; 76 FR 73471, Nov. 28, 2011; 77 FR 69363, Nov. 16, 
2012; 78 FR 74812, Dec. 10, 2013]



Sec. 414.66  Incentive payments for physician scarcity areas.

    (a) Definition. As used in this section, the following definitions 
apply.
    Physician scarcity area is defined as an area with a shortage of 
primary care physicians or specialty physicians to the Medicare 
population in that area.
    Primary care physician is defined as a general practitioner, family 
practice practitioner, general internist, obstetrician or gynecologist.
    (b) Physicians' services furnished to a beneficiary in a Physician 
Scarcity Area (PSA) for primary or specialist care are eligible for a 5 
percent incentive payment.
    (c) Primary care physicians furnishing services in primary care PSAs 
are entitled to an additional 5 percent incentive payment above the 
amount paid under the physician fee schedule for their professional 
services furnished on or after January 1, 2005 and before January 1, 
2008.
    (d) Physicians, as defined in section 1861(r)(1) of the Act, 
furnishing services in specialist care PSAs are entitled to an 
additional 5 percent payment above the amount paid under the physician 
fee schedule for their professional services furnished on or after 
January 1, 2005 and before January 1, 2008.

[69 FR 66424, Nov. 15, 2004]



Sec. 414.67  Incentive payments for services furnished in Health 
Professional Shortage Areas.

    (a) Health Professional Shortage Area (HPSA) physician bonus 
program. A HPSA physician incentive payment will be made subject to the 
following:
    (1) HPSA bonuses are payable for services furnished by physicians as 
defined in section 1861(r) of the Act in areas designated as of December 
31 of the prior year as geographic primary medical care HPSAs as defined 
in section 332(a)(1)(A) of the Public Health Service Act.
    (2) HPSA bonuses are payable for services furnished by psychiatrists 
in areas designated as of December 31 of the prior year as geographic 
mental health HPSAs if the services are not already eligible for the 
bonus based on being in a geographic primary care HPSA.
    (3) Physicians eligible for the HPSA physician bonus are entitled to 
a 10 percent incentive payment above the amount paid for their 
professional services under the physician fee schedule.
    (4) Physicians furnishing services in areas that are designated as 
geographic HPSAs prior to the beginning of the year but not included on 
the published list of zip codes for which automated HPSA bonus payments 
are made must use the AQ modifier to receive the HPSA physician bonus 
payment.
    (b) HPSA surgical incentive payment program. A HPSA surgical 
incentive payment will be made subject to the following:
    (1) A major surgical procedure as defined in Sec. 414.2 of this part 
is furnished by a general surgeon on or after January 1, 2011 and before 
January 1, 2016 in an area recognized for the HPSA physician bonus 
program under paragraph (a)(1) of this section.
    (2) Payment will be made on a quarterly basis in an amount equal to 
10 percent of the Part B payment amount for major surgical procedures 
furnished

[[Page 24]]

as described in paragraph (b)(1) of this section, in addition to the 
amount the physician would otherwise be paid.
    (3) Physicians furnishing services in areas that are designated as 
geographic HPSAs eligible for the HPSA physician bonus program under 
paragraph (a)(1) of this section prior to the beginning of the year but 
not included on the published list of zip codes for which automated HPSA 
surgical incentive payments are made should report HCPCS modifier -AQ to 
receive the HPSA surgical incentive payment.
    (4) The payment described in paragraph (b)(2) of this section is 
made to the surgeon or, where the surgeon has reassigned his or her 
benefits to a critical access hospital (CAH) paid under the optional 
method, to the CAH based on an institutional claim.

[75 FR 73617, Nov. 29, 2010]



Sec. 414.68  Imaging accreditation.

    (a) Scope and purpose. Section 1834(e) of the Act requires the 
Secretary to designate and approve independent accreditation 
organizations for purposes of accrediting suppliers furnishing the 
technical component (TC) of advanced diagnostic imaging services and 
establish procedures to ensure that the criteria used by an 
accreditation organization is specific to each imaging modality. 
Suppliers of the TC of advanced diagnostic imaging services for which 
payment is made under the fee schedule established in section 1848(b) of 
the Act must become accredited by an accreditation organization 
designated by the Secretary beginning January 1, 2012.
    (b) Definitions. As used in this section, the following definitions 
are applicable:
    Accredited supplier means a supplier that has been accredited by a 
CMS-designated accreditation organization as specified in this part.
    Advanced diagnostic imaging service means any of the following 
diagnostic services:
    (i) Magnetic resonance imaging.
    (ii) Computed tomography.
    (iii) Nuclear medicine.
    (iv) Positron emission tomography.
    CMS-approved accreditation organization means an accreditation 
organization designated by CMS to perform the accreditation functions 
specified in section 1834(e) of the Act.
    (c) Application and reapplication procedures for accreditation 
organizations. An independent accreditation organization applying for 
approval or reapproval of authority to survey suppliers for purposes of 
accrediting suppliers furnishing the TC of advanced diagnostic imaging 
services is required to furnish CMS with all of the following:
    (1) A detailed description of how the organization's accreditation 
criteria satisfy the statutory standards authorized by section 
1834(e)(3) of the Act, specifically--
    (i) Qualifications of medical personnel who are not physicians and 
who furnish the TC of advanced diagnostic imaging services;
    (ii) Qualifications and responsibilities of medical directors and 
supervising physicians (who may be the same person), such as their 
training in advanced diagnostic imaging services in a residency program, 
expertise obtained through experience, or continuing medical education 
courses;
    (iii) Procedures to ensure the reliability, clarity, and accuracy of 
the technical quality of diagnostic images produced by the supplier, 
including a thorough evaluation of equipment performance and safety;
    (iv) Procedures to ensure the safety of persons who furnish the TC 
of advanced diagnostic imaging services and individuals to whom such 
services are furnished;
    (v) Procedures to assist the beneficiary in obtaining the 
beneficiary's imaging records on request; and
    (vi) Procedures to notify the accreditation organization of any 
changes to the modalities subsequent to the organization's accreditation 
decision.
    (2) An agreement to conform accreditation requirements to any 
changes in Medicare statutory requirements authorized by section 1834(e) 
of the Act. The accreditation organization must maintain or adopt 
standards that are equal to, or more stringent than, those of Medicare.
    (3) Information that demonstrates the accreditation organization's 
knowledge and experience in the advanced diagnostic imaging arena.

[[Page 25]]

    (4) The organization's proposed fees for accreditation for each 
modality in which the organization intends to offer accreditation, 
including any plans for reducing the burden and cost of accreditation to 
small and rural suppliers.
    (5) Any specific documentation requirements and attestations 
requested by CMS as a condition of designation under this part.
    (6) A detailed description of the organization's survey process, 
including the following:
    (i) Type and frequency of the surveys performed.
    (ii) The ability of the organization to conduct timely reviews of 
accreditation applications, to include the organizations national 
capacity.
    (iii) Description of the organization's audit procedures, including 
random site visits, site audits, or other strategies for ensuring 
suppliers maintain compliance for the duration of accreditation.
    (iv) Procedures for performing unannounced site surveys.
    (v) Copies of the organization's survey forms.
    (vi) A description of the accreditation survey review process and 
the accreditation status decision-making process, including the process 
for addressing deficiencies identified with the accreditation 
requirements, and the procedures used to monitor the correction of 
deficiencies found during an accreditation survey.
    (vii) Procedures for coordinating surveys with another accrediting 
organization if the organization does not accredit all products the 
supplier provides.
    (viii) Detailed information about the individuals who perform 
evaluations for the accreditation organization, including all of the 
following information:
    (A) The number of professional and technical staff that are 
available for surveys.
    (B) The education, employment, and experience requirements surveyors 
must meet.
    (C) The content and length of the orientation program.
    (ix) The frequency and types of in-service training provided to 
survey personnel.
    (x) The evaluation systems used to monitor the performance of 
individual surveyors and survey teams.
    (xi) The policies and procedures regarding an individual's 
participation in the survey or accreditation decision process of any 
organization with which the individual is professionally or financially 
affiliated.
    (xii) The policies and procedures used when an organization has a 
dispute regarding survey findings or an adverse decision.
    (7) Detailed information about the size and composition of survey 
teams for each category of advanced medical imaging service supplier 
accredited.
    (8) A description of the organization's data management and analysis 
system for its surveys and accreditation decisions, including the kinds 
of reports, tables, and other displays generated by that system.
    (9) The organization's procedures for responding to and for the 
investigation of complaints against accredited facilities, including 
policies and procedures regarding coordination of these activities with 
appropriate licensing bodies and CMS.
    (10) The organization's policies and procedures for the withholding 
or removal of accreditation status for facilities that fail to meet the 
accreditation organization's standards or requirements, and other 
actions taken by the organization in response to noncompliance with its 
standards and requirements. These policies and procedures must include 
notifying CMS of Medicare facilities that fail to meet the requirements 
of the accrediting organization.
    (11) A list of all currently accredited suppliers, the type and 
category of accreditation currently held by each supplier, and the 
expiration date of each supplier's current accreditation.
    (12) A written presentation that demonstrates the organization's 
ability to furnish CMS with electronic data in ASCII comparable code.
    (13) A resource analysis that demonstrates that the organization's 
staffing, funding, and other resources are adequate to perform the 
required surveys and related activities.

[[Page 26]]

    (14) A statement acknowledging that, as a condition for approval of 
designation, the organization agrees to carry out the following 
activities:
    (i) Prioritize surveys for those suppliers needing to be accredited 
by January 1, 2012.
    (ii) Notify CMS, in writing, of any Medicare supplier that had its 
accreditation revoked, withdrawn, revised, or any other remedial or 
adverse action taken against it by the accreditation organization within 
30 calendar days of any such action taken.
    (iii) Notify all accredited suppliers within 10 calendar days of the 
organization's removal from the list of designated accreditation 
organizations.
    (iv) Notify CMS, in writing, at least 30 calendar days in advance of 
the effective date of any significant proposed changes in its 
accreditation requirements.
    (v) Permit its surveyors to serve as witnesses if CMS takes an 
adverse action based on accreditation findings.
    (vi) Notify CMS, in writing (electronically or hard copy), within 2 
business days of a deficiency identified in any accreditation supplier 
from any source where the deficiency poses an immediate jeopardy to the 
supplier's beneficiaries or a hazard to the general public.
    (vii) Provide, on an annual basis, summary data specified by CMS 
that relates to the past year's accreditations and trends.
    (viii) Attest that the organization will not perform any 
accreditation surveys of Medicare-participating suppliers with which it 
has a financial relationship in which it has an interest.
    (ix) Conform accreditation requirements to changes in Medicare 
requirements.
    (x) If CMS withdraws an accreditation organization's approved 
status, work collaboratively with CMS to direct suppliers to the 
remaining accreditation organizations within a reasonable period of 
time.
    (d) Determination of whether additional information is needed. If 
CMS determines that additional information is necessary to make a 
determination for approval or denial of the accreditation organization's 
application for designation, the organization must be notified and 
afforded an opportunity to provide the additional information.
    (e) Visits to the organization's office. CMS may visit the 
organization's offices to verify representations made by the 
organization in its application, including, but not limited to, 
reviewing documents and interviewing the organization's staff.
    (f) Formal notice from CMS. The accreditation organization will 
receive a formal notice from CMS stating whether the request for 
designation has been approved or denied. If approval was denied the 
notice includes the basis for denial and reconsideration and 
reapplication procedures.
    (g) Ongoing responsibilities of a CMS-approved accreditation 
organization. An accreditation organization approved by CMS must carry 
out the following activities on an ongoing basis:
    (1) Provide CMS with all of the following in written format (either 
electronic or hard copy):
    (i) Copies of all accreditation surveys, together with any survey-
related information that CMS may require (including corrective action 
plans and summaries of findings with respect to unmet CMS requirements).
    (ii) Notice of all accreditation decisions.
    (iii) Notice of all complaints related to suppliers.
    (iv) Information about all accredited suppliers against which the 
accreditation organization has taken remedial or adverse action, 
including revocation, withdrawal, or revision of the supplier's 
accreditation.
    (v) Notice of any proposed changes in its accreditation standards or 
requirements or survey process. If the organization implements the 
changes before or without CMS' approval, CMS may withdraw its approval 
of the accreditation organization.
    (2) Within 30 calendar days after a change in CMS requirements, the 
accreditation organization must submit an acknowledgment of receipt of 
CMS' notification to CMS.
    (3) The accreditation organization must permit its surveyors to 
serve as witnesses if CMS takes an adverse action based on accreditation 
findings.

[[Page 27]]

    (4) Within 2 business days of identifying a deficiency of an 
accredited supplier that poses immediate jeopardy to a beneficiary or to 
the general public, the accreditation organization must provide CMS with 
written notice of the deficiency and any adverse action implemented by 
the accreditation organization.
    (5) Within 10 calendar days after CMS' notice to a CMS-approved 
accreditation organization that CMS intends to withdraw approval of the 
accreditation organization, the accreditation organization must provide 
written notice of the withdrawal to all of the organization's accredited 
suppliers.
    (6) The organization must provide, on an annual basis, summary data 
specified by CMS that relate to the past year's accreditation activities 
and trends.
    (h) Continuing Federal oversight of approved accreditation 
organizations. This paragraph establishes specific criteria and 
procedures for continuing oversight and for withdrawing approval of a 
CMS-approved accreditation organization.
    (1) Validation audits. (i) CMS or its contractor may conduct an 
audit of an accredited supplier to validate the survey accreditation 
process of approved accreditation organizations for the TC of advanced 
diagnostic imaging services.
    (ii) The audits must be conducted on a representative sample of 
suppliers who have been accredited by a particular accrediting 
organization or in response to allegations of supplier noncompliance 
with the standards.
    (A) When conducted on a representative sample basis, the audit is 
comprehensive and addresses all of the standards, or may focus on a 
specific standard in issue.
    (B) When conducted in response to an allegation, CMS audits any 
standards that CMS determines are related to the allegations.
    (2) Notice of intent to withdraw approval. (i) If, during the audit 
specified in paragraph (h)(1) of this section, CMS identifies any 
accreditation programs for which validation audit results indicate--
    (A) A 10 percent or greater rate of disparity between findings by 
the accreditation organization and findings by CMS on standards that do 
not constitute immediate jeopardy to patient health and safety if unmet; 
or
    (B) Any disparity between findings by the accreditation organization 
and findings by CMS on standards that constitute immediate jeopardy to 
patient health and safety if unmet; or,
    (C) Irrespective of the rate of disparity, widespread or systemic 
problems in an organization's accreditation process such that 
accreditation by that accreditation organization no longer provides CMS 
with adequate assurance that suppliers meet or exceed the Medicare 
requirements; then CMS will give the organization written notice of its 
intent to withdraw approval as specified in paragraph (h)(3) of this 
section.
    (ii) CMS may also provide the organization written notice of its 
intent to withdraw approval if an equivalency review, onsite 
observation, or CMS' daily experience with the accreditation 
organization suggests that the accreditation organization is not meeting 
the requirements of this section.
    (3) Withdrawal of approval. CMS may withdraw its approval of an 
accreditation organization at any time if CMS determines that--
    (i) Accreditation by the organization no longer adequately assures 
that the suppliers furnishing the technical component of advanced 
diagnostic imaging service are meeting the established industry 
standards for each modality and that failure to meet those requirements 
could jeopardize the health or safety of Medicare beneficiaries and 
could constitute a significant hazard to the public health; or
    (ii) The accreditation organization has failed to meet its 
obligations with respect to application or reapplication procedures.
    (i) Reconsideration. An accreditation organization dissatisfied with 
a determination that its accreditation requirements do not provide or do 
not continue to provide reasonable assurance that the suppliers 
accredited by the accreditation organization meet the applicable quality 
standards is entitled to a reconsideration. CMS reconsiders any 
determination to deny, remove, or not renew the approval of designation 
to accreditation organizations

[[Page 28]]

if the accreditation organization files a written request for 
reconsideration by its authorized officials or through its legal 
representative.
    (1) Filing requirements. (i) The request must be filed within 30 
calendar days of the receipt of CMS notice of an adverse determination 
or non-renewal.
    (ii) The request for reconsideration must specify the findings or 
issues with which the accreditation organization disagrees and the 
reasons for the disagreement.
    (iii) A requestor may withdraw its request for reconsideration at 
any time before the issuance of a reconsideration determination.
    (2) CMS response to a filing request. In response to a request for 
reconsideration, CMS provides the accreditation organization with--
    (i) The opportunity for an informal hearing to be conducted by a 
hearing officer appointed by the Administrator of CMS and provide the 
accreditation organization the opportunity to present, in writing and in 
person, evidence or documentation to refute the determination to deny 
approval, or to withdraw or not renew designation; and
    (ii) Written notice of the time and place of the informal hearing at 
least 10 business days before the scheduled date.
    (3) Hearing requirements and rules. (i) The informal reconsideration 
hearing is open to all of the following:
    (A) CMS.
    (B) The organization requesting the reconsideration including--
    (1) Authorized representatives;
    (2) Technical advisors (individuals with knowledge of the facts of 
the case or presenting interpretation of the facts); and
    (3) Legal counsel.
    (ii) The hearing is conducted by the hearing officer who receives 
testimony and documents related to the proposed action.
    (iii) Testimony and other evidence may be accepted by the hearing 
officer even though such evidence may be inadmissible under the Federal 
Rules of Civil Procedure.
    (iv) The hearing officer does not have the authority to compel by 
subpoena the production of witnesses, papers, or other evidence.
    (v) Within 45 calendar days of the close of the hearing, the hearing 
officer presents the findings and recommendations to the accreditation 
organization that requested the reconsideration.
    (vi) The written report of the hearing officer includes separate 
numbered findings of fact and the legal conclusions of the hearing 
officer.
    (vii) The hearing officer's decision is final.

[74 FR 62006, Nov. 25, 2009]



Sec. 414.80  Incentive payment for primary care services.

    (a) Definitions. As defined in this section--
    Eligible primary care practitioner means one of the following:
    (i) A physician (as defined in section 1861(r)(1) of the Act) who 
meets all of the following criteria:
    (A) Enrolled in Medicare with a primary specialty designation of 08-
family practice, 11-internal medicine, 37-pediatrics, or 38-geriatrics.
    (B) At least 60 percent of the physician's allowed charges under the 
physician fee schedule (excluding hospital inpatient care and emergency 
department visits) during a reference period specified by the Secretary 
are for primary care services.
    (ii) A nurse practitioner, clinical nurse specialist, or physician 
assistant (as defined in section 1861(aa)(5) of the Act) who meets all 
of the following criteria:
    (A) Enrolled in Medicare with a primary specialty designation of 50-
nurse practitioner, 89-certified clinical nurse, or 97-physician 
assistant.
    (B) At least 60 percent of the practitioner's allowed charges under 
the physician fee schedule (excluding hospital inpatient care and 
emergency department visits) during a reference period specified by the 
Secretary are for primary care services.
    Primary care services means--
    (i) New and established patient office or other outpatient 
evaluation and management (E/M) visits;
    (ii) Initial, subsequent, discharge, and other nursing facility E/M 
services;
    (iii) New and established patient domiciliary, rest home (for 
example,

[[Page 29]]

boarding home), or custodial care E/M services;
    (iv) Domiciliary, rest home (for example, assisted living facility), 
or home care plan oversight services; and
    (v) New and established patient home E/M visits.
    (b) Payment. (1) For primary care services furnished by an eligible 
primary care practitioner on or after January 1, 2011 and before January 
1, 2016, payment is made on a quarterly basis in an amount equal to 10 
percent of the payment amount for the primary care services under Part 
B, in addition to the amount the primary care practitioner would 
otherwise be paid for the primary care services under Part B.
    (2) The payment described in paragraph (b)(1) of this section is 
made to the eligible primary care practitioner or, where the physician 
has reassigned his or her benefits to a critical access hospital (CAH) 
paid under the optional method, to the CAH based on an institutional 
claim.

[75 FR 73617, Nov. 29, 2010]



Sec. 414.90  Physician Quality Reporting System (PQRS).

    (a) Basis and scope. This section implements the following 
provisions of the Act:
    (1) 1848(a)--Payment Based on Fee Schedule.
    (2) 1848(k)--Quality Reporting System.
    (3) 1848(m)--Incentive Payments for Quality Reporting.
    (b) Definitions. As used in this section, unless otherwise 
indicated--
    Administrative claims means a reporting mechanism under which an 
eligible professional or group practice uses claims to report data on 
PQRS quality measures. Under this reporting mechanism, CMS analyzes 
claims data to determine which measures an eligible professional or 
group practice reports.
    Certified survey vendor means a vendor that is certified by CMS for 
a particular program year to transmit survey measures data to CMS.
    Covered professional services means services for which payment is 
made under, or is based on, the Medicare physician fee schedule as 
provided under section 1848(k)(3) of the Act and which are furnished by 
an eligible professional.
    Direct electronic health record (EHR) product means an electronic 
health record vendor's product and version that submits data on PQRS 
measures directly to CMS.
    Electronic health record (EHR) data submission vendor product means 
an entity that receives and transmits data on PQRS measures from an EHR 
product to CMS.
    Eligible professional means any of the following:
    (i) A physician.
    (ii) A practitioner described in section 1842(b)(18)(C) of the Act.
    (iii) A physical or occupational therapist or a qualified speech-
language pathologist.
    (iv) A qualified audiologist (as defined in section 1861(ll)(3)(B) 
of the Act).
    Group practice means a physician group practice that is defined by a 
TIN, with 2 or more individual eligible professionals (or, as identified 
by NPIs) that has reassigned their billing rights to the TIN.
    Group practice reporting option (GPRO) web interface means a web 
product developed by CMS that is used by group practices that are 
selected to participate in the group practice reporting option (GPRO) to 
submit data on PQRS quality measures.
    Maintenance of Certification Program means a continuous assessment 
program, such as qualified American Board of Medical Specialties 
Maintenance of Certification Program or an equivalent program (as 
determined by the Secretary), that advances quality and the lifelong 
learning and self-assessment of board certified specialty physicians by 
focusing on the competencies of patient care, medical knowledge, 
practice-based learning, interpersonal and communication skills, and 
professionalism. Such a program must include the following:
    (i) The program requires the physician to maintain a valid 
unrestricted license in the United States.
    (ii) The program requires a physician to participate in educational 
and self-assessment programs that require an assessment of what was 
learned.

[[Page 30]]

    (iii) The program requires a physician to demonstrate, through a 
formalized secure examination, that the physician has the fundamental 
diagnostic skills, medical knowledge, and clinical judgment to provide 
quality care in their respective specialty.
    (iv) The program requires successful completion of a qualified 
maintenance of certification program practice assessment.
    Maintenance of Certification Program Practice Assessment means an 
assessment of a physician's practice that--
    (i) Includes an initial assessment of an eligible professional's 
practice that is designed to demonstrate the physician's use of 
evidence-based medicine.
    (ii) Includes a survey of patient experience with care.
    (iii) Requires a physician to implement a quality improvement 
intervention to address a practice weakness identified in the initial 
assessment under paragraph (h) of this section and then to remeasure to 
assess performance improvement after such intervention.
    Measures group means a subset of six or more PQRS measures that have 
a particular clinical condition or focus in common. The denominator 
definition and coding of the measures group identifies the condition or 
focus that is shared across the measures within a particular measures 
group.
    Physician Quality Reporting System (PQRS) means the physician 
reporting system under section 1848(k) of the Act for the reporting by 
eligible professionals of data on quality measures and the incentive 
payment associated with this physician reporting system.
    Performance rate means the percentage of a defined population who 
receives a particular process of care or achieve a particular outcome 
for a particular quality measure.
    Qualified clinical data registry means a CMS-approved entity that 
has self-nominated and successfully completed a qualification process 
that collects medical and/or clinical data for the purpose of patient 
and disease tracking to foster improvement in the quality of care 
provided to patients. A qualified clinical data registry must perform 
the following functions:
    (i) Submit quality measures data or results to CMS for purposes of 
demonstrating that, for a reporting period, its eligible professionals 
have satisfactorily participated in PQRS. A qualified clinical data 
registry must have in place mechanisms for the transparency of data 
elements and specifications, risk models, and measures.
    (ii) Submit to CMS, for purposes of demonstrating satisfactory 
participation, quality measures data on multiple payers, not just 
Medicare patients.
    (iii) Provide timely feedback, at least four times a year, on the 
measures at the individual participant level for which the qualified 
clinical data registry reports on the eligible professional's behalf for 
purposes of the individual eligible professional's satisfactory 
participation in the clinical quality data registry.
    (iv) Possess benchmarking capacity that measures the quality of care 
an eligible professional provides with other eligible professionals 
performing the same or similar functions.
    Qualified registry means a medical registry or a maintenance of 
certification program operated by a specialty body of the American Board 
of Medical Specialties that, with respect to a particular program year, 
has self-nominated and successfully completed a vetting process (as 
specified by CMS) to demonstrate its compliance with the PQRS 
qualification requirements specified by CMS for that program year. The 
registry may act as a data submission vendor, which has the requisite 
legal authority to provide PQRS data (as specified by CMS) on behalf of 
an eligible professional to CMS. If CMS finds that a qualified registry 
submits grossly inaccurate data for reporting periods occurring in a 
particular year, CMS reserves the right to disqualify a registry for 
reporting periods occurring in the subsequent year.
    Reporting rate means the percentage of patients that the eligible 
professional indicated a quality action was or was not performed divided 
by the total number of patients in the denominator of the measure.

[[Page 31]]

    (c) Incentive payments. For 2007 to 2014, with respect to covered 
professional services furnished during a reporting period by an eligible 
professional, an eligible professional (or in the case of a group 
practice under paragraph (i) of this section, a group practice) may 
receive an incentive if--
    (1) There are any quality measures that have been established under 
the PQRS that are applicable to any such services furnished by such 
professional (or in the case of a group practice under paragraph (i) of 
this section, such group practice) for such reporting period; and
    (2) If the eligible professional (or in the case of a group practice 
under paragraph (j) of this section, the group practice) satisfactorily 
submits (as determined under paragraph (g) of this section for the 
eligible professional and paragraph (i) of this section for the group 
practice) to the Secretary data on such quality measures in accordance 
with the PQRS for such reporting period, in addition to the amount 
otherwise paid under section 1848 of the Act, there also must be paid to 
the eligible professional (or to an employer or facility in the cases 
described in section 1842(b)(6)(A) of the Act or, in the case of a group 
practice under paragraph (i) of this section, to the group practice) 
from the Federal Supplementary Medical Insurance Trust Fund established 
under section 1841 of the Act an amount equal to the applicable quality 
percent (as specified in paragraph (c)(3) of this section) of the 
eligible professional's (or, in the case of a group practice under 
paragraph (i) of this section, the group practice's) total estimated 
allowed charges for all covered professional services furnished by the 
eligible professional (or, in the case of a group practice under 
paragraph (i) of this section, by the group practice) during the 
reporting period.
    (3) The applicable quality percent is as follows:
    (i) For 2007 and 2008, 1.5 percent.
    (ii) For 2009 and 2010, 2.0 percent.
    (iii) For 2011, 1.0 percent.
    (iv) For 2012, 2013, and 2014, 0.5 percent.
    (4) For purposes of this paragraph (c)--
    (i) The eligible professional's (or, in the case of a group practice 
under paragraph (i) of this section, the group practice's) total 
estimated allowed charges for covered professional services furnished 
during a reporting period are determined based on claims processed in 
the National Claims History (NCH) no later than 2 months after the end 
of the applicable reporting period;
    (ii) In the case of the eligible professional who furnishes covered 
professional services in more than one practice, incentive payments are 
separately determined for each practice based on claims submitted for 
the eligible professional for each practice;
    (iii) Incentive payments to a group practice under this paragraph 
must be in lieu of the payments that would otherwise be made under the 
PQRS to eligible professionals in the group practice for meeting the 
criteria for satisfactory reporting for individual eligible 
professionals. For any program year in which the group practice (as 
identified by the TIN) is selected to participate in the PQRS group 
practice reporting option, the eligible professional cannot individually 
qualify for a PQRS incentive payment by meeting the requirements 
specified in paragraph (g) of this section.
    (iv) Incentive payments earned by the eligible professional (or in 
the case of a group practice under paragraph (i) of this section, by the 
group practice) for a particular program year will be paid as a single 
consolidated payment to the TIN holder of record.
    (5) The Secretary must treat an individual eligible professional, as 
identified by a unique TIN/NPI combination, as satisfactorily submitting 
data on quality measures (as determined under paragraph (g) of this 
section), if the eligible professional is satisfactorily participating 
(as determined under paragraph (h) of this section), in a qualified 
clinical data registry.
    (d) Additional incentive payment. Through 2014, if an eligible 
professional meets the requirements described in paragraph (d)(2) of 
this section, the applicable percent for such year, as described in 
paragraphs (c)(3)(iii) and (iv) of this section, must be increased by 
0.5 percentage points.

[[Page 32]]

    (1) In order to qualify for the additional incentive payment 
described in paragraph (d) of this section, an eligible professional 
must meet all of the following requirements:
    (i) Satisfactorily submits data on quality measures, or, for 2014, 
in lieu of satisfactory reporting, satisfactorily participates in a 
qualified clinical data registry for purposes of this section for the 
applicable incentive year.
    (ii) Have such data submitted on their behalf through a Maintenance 
of Certification program that meets:
    (A) The criteria for a registry (as specified by CMS); or
    (B) An alternative form and manner determined appropriate by the 
Secretary.
    (iii) The eligible professional, more frequently than is required to 
qualify for or maintain board certification status--
    (A) Participates in a maintenance of certification program for a 
year; and
    (B) Successfully completes a qualified maintenance of certification 
program practice assessment for such year.
    (2) In order for an eligible professional to receive the additional 
incentive payment, a Maintenance of Certification Program must submit to 
the Secretary, on behalf of the eligible professional, information--
    (i) In a form and manner specified by the Secretary, that the 
eligible professional has successfully met the requirements of paragraph 
(d)(1)(iii) of this section, which may be in the form of a structural 
measure.
    (ii) If requested by the Secretary, on the survey of patient 
experience with care.
    (iii) As the Secretary may require, on the methods, measures, and 
data used under the Maintenance of Certification Program and the 
qualified Maintenance of Certification Program practice assessment.
    (e) Payment adjustments. For 2015 through 2018, with respect to 
covered professional services furnished by an eligible professional, if 
the eligible professional does not satisfactorily submit data on quality 
measures for covered professional services for the quality reporting 
period for the year (as determined under section 1848(m)(3)(A) of the 
Act), the fee schedule amount for such services furnished by such 
professional during the year (including the fee schedule amount for 
purposes for determining a payment based on such amount) must be equal 
to the applicable percent of the fee schedule amount that would 
otherwise apply to such services under this paragraph (e).
    (1) The applicable percent is as follows:
    (i) For 2015, 98.5 percent.
    (ii) For 2016 through 2018, 98 percent.
    (2) The Secretary must treat an individual eligible professional, as 
identified by a unique TIN/NPI combination, as satisfactorily submitting 
data on quality measures (as determined under paragraph (h) of this 
section), if the eligible professional is satisfactorily participating, 
in a qualified clinical data registry.
    (f) Use of appropriate and consensus-based quality measures. For 
measures selected for inclusion in the PQRS quality measure set, CMS 
will use group practice measures determined appropriate by CMS and 
consensus-based quality measures that meet one of the following 
criteria:
    (1) Be such measures selected by the Secretary from measures that 
have been endorsed by the entity with a contract with the Secretary 
under section 1890(a) of the Act. In the case of a specified area or 
medical topic determined appropriate by the Secretary for which a 
feasible and practical measure has not been endorsed by the entity with 
a contract under section 1890(a) of the Act, the Secretary may specify a 
measure that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary.
    (2) For each quality measure adopted by the Secretary under this 
paragraph, the Secretary ensures that eligible professionals have the 
opportunity to provide input during the development, endorsement, or 
selection of quality measures applicable to services they furnish.
    (g) Use of quality measures for satisfactory participation in a 
qualified clinical data registry. For measures selected for reporting to 
meet the criteria for satisfactory participation in a qualified

[[Page 33]]

clinical data registry, CMS will use measures selected by qualified 
clinical data registries based on parameters set by CMS.
    (h) Satisfactory reporting requirements for the incentive payments. 
In order to qualify to earn a PQRS incentive payment for a particular 
program year, an individual eligible professional, as identified by a 
unique TIN/NPI combination, must meet the criteria for satisfactory 
reporting specified by CMS under paragraph (h)(3) of (h)(5) of this 
section for such year by reporting on either individual PQRS quality 
measures or PQRS measures groups identified by CMS during a reporting 
period specified in paragraph (h)(1) of this section, using one of the 
reporting mechanisms specified in paragraph (h)(2) or (4) of this 
section, and using one of the reporting criteria specified in paragraph 
(h)(3) or (5) of this section.
    (1) Reporting periods. For purposes of this paragraph, the reporting 
period is--
    (i) The 12-month period from January 1 through December 31 of such 
program year.
    (ii) A 6-month period from July 1 through December 31 of such 
program year.
    (A) For 2011, such 6-month reporting period is not available for 
EHR-based reporting of individual PQRS quality measures.
    (B) For 2012 and subsequent program years, such 6-month reporting 
period from July 1 through December 31 of such program year is only 
available for registry-based reporting of PQRS measures groups by 
eligible professionals.
    (2) Reporting mechanisms for individual eligible professionals. An 
individual eligible professional who wishes to participate in the PQRS 
must report information on PQRS quality measures identified by CMS in 
one of the following manners:
    (i) Claims. Reporting PQRS quality measures or PQRS measures groups 
to CMS, by no later than 2 months after the end of the applicable 
reporting period, on the eligible professional's Medicare Part B claims 
for covered professional services furnished during the applicable 
reporting period.
    (A) If an eligible professional re-submits a Medicare Part B claim 
for reprocessing, the eligible professional may not attach a G-code at 
that time for reporting on individual PQRS measures or measures groups.
    (B) [Reserved]
    (ii) Registry. Reporting PQRS quality measures or PQRS measures 
groups to a qualified registry in the form and manner and by the 
deadline specified by the qualified registry selected by the eligible 
professional. The selected registry must submit information, as required 
by CMS, for covered professional services furnished by the eligible 
professional during the applicable reporting period to CMS on the 
eligible professional's behalf.
    (iii) Direct EHR product. Reporting PQRS quality measures to CMS by 
extracting clinical data using a secure data submission method, as 
required by CMS, from a direct EHR product by the deadline specified by 
CMS for covered professional services furnished by the eligible 
professional during the applicable reporting period.
    (iv) EHR data submission vendor. Reporting PQRS quality measures to 
CMS by extracting clinical data using a secure data submission method, 
as required by CMS, from an EHR data submission vendor product by the 
deadline specified by CMS for covered professional services furnished by 
the eligible professional during the applicable reporting period.
    (v) Although an eligible professional may attempt to qualify for the 
PQRS incentive payment by reporting on both individual PQRS quality 
measures and measures groups, using more than one reporting mechanism 
(as specified in paragraph (g)(2) of this section), or reporting for 
more than one reporting period, he or she will receive only one PQRS 
incentive payment per TIN/NPI combination for a program year.
    (3) Satisfactory reporting criteria for individual eligible 
professionals for the 2014 PQRS incentive. An individual eligible 
professional who wishes to qualify for the 2014 PQRS incentive must 
report information on PQRS quality measures data in one of the following 
manners:
    (i) Via Claims. For the 12-month 2014 PQRS incentive reporting 
period--

[[Page 34]]

    (A) Report at least 9 measures covering at least 3 National Quality 
Strategy domains, and report each measure for at least 50 percent of the 
Medicare Part B FFS patients seen during the reporting period to which 
the measure applies; or if less than 9 measures covering at least 3 
National Quality Strategy domains apply to the eligible professional, 
report 1 to 8 measures covering 1 to 3 National Quality Strategy domains 
and report each measure for at least 50 percent of the Medicare Part B 
FFS patients seen during the reporting period to which the measure 
applies. For an eligible professional who reports fewer than 9 measures 
covering at least 3 NQS domains via the claims-based reporting 
mechanism, the eligible professional would be subject to the Measures 
Applicability Validation process, which would allow us to determine 
whether an eligible professional should have reported quality data codes 
for additional measures and/or covering additional National Quality 
Strategy domains. Measures with a 0 percent performance rate would not 
be counted.
    (B) [Reserved]
    (ii) Via Qualified Registry. (A) For the 12-month 2014 PQRS 
incentive reporting period--
    (1) Report at least 9 measures covering at least 3 of the National 
Quality Strategy domains report each measure for at least 50 percent of 
the eligible professional's Medicare Part B FFS patients seen during the 
reporting period to which the measure applies; or, if less than 9 
measures covering at least 3 NQS domains apply to the eligible 
professional, report 1 to 8 measures covering 1 to 3 National Quality 
Strategy domains for which there is Medicare patient data and report 
each measure for at least 50 percent of the eligible professional's 
Medicare Part B FFS patients seen during the reporting period to which 
the measure applies. For an eligible professional who reports fewer than 
9 measures covering at least 3 NQS domains via the qualified registry-
based reporting mechanism, the eligible professional will be subject to 
the Measures Applicability Validation process, which would allow us to 
determine whether an eligible professional should have reported on 
additional measures and/or measures covering additional National Quality 
Strategy domains. Measures with a 0 percent performance rate would not 
be counted.
    (2) Report at least 1 measures group and report each measures group 
for at least 20 patients, a majority of which much be Medicare Part B 
FFS patients. Measures with a 0 percent performance rate or measures 
groups containing a measure with a 0 percent performance rate will not 
be counted.
    (B) For the 6-month 2014 PQRS incentive reporting period, report at 
least 1 measures group and report each measures group for at least 20 
patients, a majority of which much be Medicare Part B FFS patients. 
Measures groups containing a measure with a 0 percent performance rate 
will not be counted.
    (iii) Via EHR Direct Product. For the 12-month 2014 PQRS incentive 
reporting period, report 9 measures covering at least 3 of the National 
Quality Strategy domains. If an eligible professional's CEHRT does not 
contain patient data for at least 9 measures covering at least 3 
domains, then the eligible professional must report the measures for 
which there is Medicare patient data. An eligible professional must 
report on at least 1 measure for which there is Medicare patient data.
    (iv) Via EHR Data Submission Vendor. For the 12-month 2014 PQRS 
incentive reporting period, report 9 measures covering at least 3 of the 
National Quality Strategy domains. If an eligible professional's CEHRT 
does not contain patient data for at least 9 measures covering at least 
3 domains, then the eligible professional must report the measures for 
which there is Medicare patient data. An eligible professional must 
report on at least 1 measure for which there is Medicare patient data.
    (4) Reporting mechanisms for group practices. With the exception of 
a group practice who wishes to participate in the PQRS using the 
certified survey vendor mechanism (as specified in paragraph (h)(4)(v) 
of this section), a group practice must report information on PQRS 
quality measures identified by CMS in one of the following reporting 
mechanisms:
    (i) Web interface. For 2013 and subsequent years, reporting PQRS 
quality

[[Page 35]]

measures to CMS using a CMS web interface in the form and manner and by 
the deadline specified by CMS.
    (ii) Registry. For 2013 and subsequent years, reporting on PQRS 
quality measures to a qualified registry in the form and manner and by 
the deadline specified by the qualified registry selected by the 
eligible professional. The selected registry must submit information, as 
required by CMS, for covered professional services furnished by the 
eligible professional during the applicable reporting period to CMS on 
the eligible professional's behalf.
    (iii) Direct EHR product. For 2014 and subsequent years, reporting 
PQRS quality measures to CMS by extracting clinical data using a secure 
data submission method, as required by CMS, from a direct EHR product by 
the deadline specified by CMS for covered professional services 
furnished by the eligible professional during the applicable reporting 
period.
    (iv) EHR data submission vendor. For 2014 and subsequent years, 
reporting PQRS quality measures to CMS by extracting clinical data using 
a secure data submission method, as required by CMS, from an EHR data 
submission vendor product by the deadline specified by CMS for covered 
professional services furnished by the eligible professional during the 
applicable reporting period.
    (v) Certified survey vendors. For 2014 and subsequent years, 
reporting CAHPS for PQRS survey measures to CMS using a vendor that is 
certified by CMS for a particular program year to transmit survey 
measures data to CMS. Group practices that elect this reporting 
mechanism must select an additional group practice reporting mechanism 
in order to meet the criteria for satisfactory reporting for the 
incentive payments.
    (vi) Although a group practice may attempt to qualify for the PQRS 
incentive payment by using more than one reporting mechanism (as 
specified in paragraph (g)(3) of this section), or reporting for more 
than one reporting period, the group practice will receive only one PQRS 
incentive payment for a program year.
    (5) Satisfactory reporting criteria for group practices for the 2014 
PQRS incentive. A group practice who wishes to qualify for the 2014 PQRS 
incentive must report information on PQRS quality measures identified by 
CMS in one of the following manners:
    (i) Via the GPRO web interface. (A) For the 12-month 2014 PQRS 
incentive reporting period, for a group practice of 25 to 99 eligible 
professionals, report on all measures included in the web interface and 
populate data fields for the first 218 consecutively ranked and assigned 
beneficiaries in the order in which they appear in the group's sample 
for each module or preventive care measure. If the pool of eligible 
assigned beneficiaries is less than 218, then report on 100 percent of 
assigned beneficiaries.
    (B) For the 12-month 2014 PQRS incentive reporting period, for a 
group practice of 100 or more eligible professionals, report on all 
measures included in the web interface and populate data fields for the 
first 411 consecutively ranked and assigned beneficiaries in the order 
in which they appear in the group's sample for each module or preventive 
care measure. If the pool of eligible assigned beneficiaries is less 
than 411, then report on 100 percent of assigned beneficiaries. In 
addition, for the 12-month 2014 PQRS incentive reporting period, the 
group practice must report all CAHPS for PQRS survey measures via a CMS-
certified survey vendor, and report at least 6 measures covering at 
least 2 of the National Quality Strategy domains using a qualified 
registry, direct EHR product, or EHR data submission vendor.
    (ii) Via Qualified Registry. For the 12-month 2014 PQRS incentive 
reporting period, for a group practice of 2 or more eligible 
professionals, report at least 9 measures, covering at least 3 of the 
National Quality Strategy domains and report each measure for at least 
50 percent of the group practice's Medicare Part B FFS patients seen 
during the reporting period to which the measure applies; or, if less 
than 9 measures covering at least 3 NQS domains apply to the group 
practice, then the group practice must report 1-8 measures for which 
there is Medicare patient data and report each measure for

[[Page 36]]

at least 50 percent of the group practice's Medicare Part B FFS patients 
seen during the reporting period to which the measure applies. For a 
group practice who reports fewer than 9 measures covering at least 3 NQS 
domains via the qualified registry-based reporting mechanism, the group 
practice would be subject to the Measures Applicability Validation 
process, which would allow us to determine whether a group practice 
should have reported on additional measures and/or measures covering 
additional National Quality Strategy domains. Measures with a 0 percent 
performance rate would not be counted.
    (iii) Via EHR Direct Product. For the 12-month 2014 PQRS incentive 
reporting period, for a group practice of 2 or more eligible 
professionals, report 9 measures covering at least 3 of the National 
Quality Strategy domains. If a group practice's CEHRT does not contain 
patient data for at least 9 measures covering at least 3 domains, then 
the group practice must report the measures for which there is Medicare 
patient data. A group practice must report on at least 1 measure for 
which there is Medicare patient data.
    (iv) Via EHR Data Submission Vendor. For the 12-month 2014 PQRS 
incentive reporting period, for a group practice of 2 or more eligible 
professionals, report 9 measures covering at least 3 of the National 
Quality Strategy domains. If a group practice's CEHRT does not contain 
patient data for at least 9 measures covering at least 3 domains, then 
the group practice must report the measures for which there is Medicare 
patient data. A group practice must report on at least 1 measure for 
which there is Medicare patient data.
    (v) Via a Certified survey vendor, in addition to the GPRO web 
interface, qualified registry, direct EHR product, or EHR data 
submission vendor reporting mechanisms. For the 12-month 2014 PQRS 
incentive reporting period, for a group practice of 25 or more eligible 
professionals, report all CAHPS for PQRS survey measures via a CMS-
certified survey vendor, and report at least 6 measures covering at 
least 2 of the National Quality Strategy domains using a qualified 
registry, direct EHR product, EHR data submission vendor, or GPRO web 
interface.
    (i) Satisfactory participation requirements for the incentive 
payments for individual eligible professionals. To qualify for the 2014 
PQRS incentive using a qualified clinical data registry, an individual 
eligible professional, as identified by a unique TIN/NPI combination, 
must meet the criteria for satisfactory participation as specified under 
paragraph (i)(3) of this section by reporting on quality measures 
identified by a qualified clinical data registry during a reporting 
period specified in paragraph (i)(1) of this section, and using the 
reporting mechanism specified in paragraph (i)(2) of this section.
    (1) Reporting period. For purposes of this paragraph, the reporting 
period is the 12-month period from January 1 through December 31.
    (2) Reporting Mechanism. An individual eligible professional who 
wishes to meet the criteria for satisfactory participation in a 
qualified clinical data registry must use a qualified clinical data 
registry to report information on quality measures identified by the 
qualified clinical data registry.
    (3) Satisfactory participation criteria for individual eligible 
professionals for the 2014 PQRS incentive. An individual eligible 
professional who wishes to qualify for the 2014 PQRS incentive through 
satisfactory participation in a qualified clinical data registry must 
report information on quality measures identified by the qualified 
clinical data registry in the following manner:
    (i) For the 12-month 2014 PQRS incentive reporting period, report at 
least 9 measures designated for reporting under a qualified clinical 
data registry covering at least 3 of the National Quality Strategy 
domains and report each measure for at least 50 percent of the eligible 
professional's patients. Of the measures reported via a qualified 
clinical data registry, the eligible professional must report on at 
least 1 outcome measure.
    (ii) [Reserved]
    (j) Satisfactory reporting requirements for the payment adjustments. 
In order to satisfy the requirements for the PQRS payment adjustment for 
a particular program year, an individual eligible professional, as 
identified by a unique

[[Page 37]]

TIN/NPI combination, or a group practice must meet the criteria for 
satisfactory reporting specified by CMS for such year by reporting on 
either individual PQRS measures or PQRS measures groups identified by 
CMS during a reporting period specified in paragraph (j)(1) of this 
section, using one of the reporting mechanisms specified in paragraph 
(j)(2) or (4) of this section, and using one of the reporting criteria 
specified in section (j)(3) or (5) of this section.
    (1) For purposes of this paragraph (j), the reporting period for the 
payment adjustment, with respect to a payment adjustment year, is the 
12-month period from January 1 through December 31 that falls 2 years 
prior to the year in which the payment adjustment is applied.
    (i) For the 2015 and 2016 PQRS payment adjustments only, an 
alternative 6-month reporting period, from July 1-December 31 that fall 
2 years prior to the year in which the payment adjustment is applied, is 
also available.
    (ii) Secondary Reporting Period for the 2017 PQRS payment adjustment 
for certain eligible professionals or group practices- Individual 
eligible professionals or group practices, who bill under the TIN of an 
ACO participant if the ACO failed to report data on behalf of such EPs 
or group practices during the previously established reporting period 
for the 2017 PQRS payment adjustment, may separately report during a 
secondary reporting period for the 2017 PQRS payment adjustment. The 
secondary reporting period for the 2017 PQRS payment adjustment for the 
affected individual eligible professionals or group practices is January 
1, 2016 through December 31, 2016.
    (2) Reporting mechanisms for individual eligible professionals. An 
individual eligible professional participating in the PQRS must report 
information on PQRS quality measures identified by CMS in one of the 
following manners:
    (i) Claims. Reporting PQRS quality measures or PQRS measures groups 
to CMS, by no later than 2 months after the end of the applicable 
reporting period, on the eligible professional's Medicare Part B claims 
for covered professional services furnished during the applicable 
reporting period.
    (A) If an eligible professional re-submits a Medicare Part B claim 
for reprocessing, the eligible professional may not attach a G-code at 
that time for reporting on individual PQRS measures or measures groups.
    (B) [Reserved]
    (ii) Registry. Reporting PQRS quality measures or PQRS measures 
groups to a qualified registry in the form and manner and by the 
deadline specified by the qualified registry selected by the eligible 
professional. The selected registry must submit information, as required 
by CMS, for covered professional services furnished by the eligible 
professional during the applicable reporting period to CMS on the 
eligible professional's behalf.
    (iii) Direct EHR product. Reporting PQRS quality measures to CMS by 
extracting clinical data using a secure data submission method, as 
required by CMS, from a direct EHR product by the deadline specified by 
CMS for covered professional services furnished by the eligible 
professional during the applicable reporting period.
    (iv) EHR data submission vendor. Reporting PQRS quality measures to 
CMS by extracting clinical data using a secure data submission method, 
as required by CMS, from an EHR data submission vendor product by the 
deadline specified by CMS for covered professional services furnished by 
the eligible professional during the applicable reporting period.
    (v) Administrative claims. For 2015, reporting data on PQRS quality 
measures via administrative claims during the applicable reporting 
period. Eligible professionals that are administrative claims reporters 
must meet the following requirement for the payment adjustment:
    (A) Elect to participate in the PQRS using the administrative claims 
reporting option.
    (B) Reporting Medicare Part B claims data for CMS to determine 
whether the eligible professional has performed services applicable to 
certain individual PQRS quality measures.
    (3) Satisfactory reporting criteria for individual eligible 
professionals for the 2016 PQRS payment adjustment. An individual 
eligible professional who wishes

[[Page 38]]

to meet the criteria for satisfactory reporting for the 2016 PQRS 
payment adjustment must report information on PQRS quality measures 
identified by CMS in one of the following manners:
    (i) Via Claims. (A) For the 12-month 2016 PQRS payment adjustment 
reporting period--
    (1)(i) Report at least 9 measures covering at least 3 National 
Quality Strategy domains and report each measure for at least 50 percent 
of the Medicare Part B FFS patients seen during the reporting period to 
which the measure applies; or if less than 9 measures covering at least 
3 NQS domains apply to the eligible professional, report 1-8 measures 
covering 1-3 National Quality Strategy domains, and report each measure 
for at least 50 percent of the Medicare Part B FFS patients seen during 
the reporting period to which the measure applies. For an eligible 
professional who reports fewer than 9 measures covering at least 3 NQS 
domains via the claims-based reporting mechanism, the eligible 
professional would be subject to the Measures Applicability Validation 
process, which would allow us to determine whether an eligible 
professional should have reported quality data codes for additional 
measures and/or covering additional National Quality Strategy domains; 
or
    (ii) Report at least 3 measures covering at least 1 NQS domain, or, 
if less than 3 measures covering at least 1 NQS domain apply to the 
eligible professional, report 1-2 measures covering at least 1 NQS 
domain; and report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies.
    (2) Measures with a 0 percent performance rate would not be counted.
    (ii) Via Qualified Registry. (A) For the 12-month 2016 PQRS payment 
adjustment reporting period--
    (1)(i) Report at least 9 measures covering at least 3 of the 
National Quality Strategy domains; or if less than 9 measures covering 
at least 3 NQS domains apply to the eligible professional, report 1 to 8 
measures covering 1 to 3 National Quality Strategy domains for which 
there is Medicare patient data, and report each measure for at least 50 
percent of the eligible professional's Medicare Part B FFS patients seen 
during the reporting period to which the measure applies. For an 
eligible professional who reports fewer than 9 measures covering at 
least 3 NQS domains via the qualified registry-based reporting 
mechanism, the eligible professional would be subject to the Measures 
Applicability Validation process, which would allow us to determine 
whether an eligible professional should have reported on additional 
measures and/or measures covering additional National Quality Strategy 
domains; or
    (ii) Report at least 3 measures covering at least 1 of the NQS 
domains; or if less than 3 measures covering at least 1 NQS domain apply 
to the eligible professional, report 1 to 2 measures covering 1 National 
Quality Strategy domain for which there is Medicare patient data, and 
report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. For an eligible professional who 
reports fewer than 3 measures covering 1 NQS domain via the registry-
based reporting mechanism, the eligible professional would be subject to 
the Measures Applicability Validation process, which would allow us to 
determine whether an eligible professional should have reported on 
additional measures; or
    (iii) Report at least 1 measures group and report each measures 
group for at least 20 patients, a majority of which much be Medicare 
Part B FFS patients.
    (2) Measures with a 0 percent performance rate or measures groups 
containing a measure with a 0 percent performance rate will not be 
counted.
    (B) For the 6-month 2016 PQRS payment adjustment reporting period--
    (1) Report at least 1 measures group and report each measures group 
for at least 20 patients, a majority of which much be Medicare Part B 
FFS patients. Measures groups containing a measure with a 0 percent 
performance rate will not be counted.
    (iii) Via EHR Direct Product. For the 12-month 2016 PQRS payment 
adjustment reporting period, report 9 measures covering at least 3 of 
the National

[[Page 39]]

Quality Strategy domains. If an eligible professional's CEHRT does not 
contain patient data for at least 9 measures covering at least 3 
domains, then the eligible professional must report the measures for 
which there is Medicare patient data. An eligible professional must 
report on at least 1 measure for which there is Medicare patient data.
    (iv) Via EHR Data Submission Vendor. For the 12-month 2016 PQRS 
payment adjustment reporting period, report 9 measures covering at least 
3 of the National Quality Strategy domains. If an eligible 
professional's CEHRT does not contain patient data for at least 9 
measures covering at least 3 domains, then the eligible professional 
must report the measures for which there is Medicare patient data. An 
eligible professional must report on at least 1 measure for which there 
is Medicare patient data.
    (4) Satisfactory Reporting Criteria for Individual Eligible 
Professionals for the 2017 PQRS Payment Adjustment. An individual 
eligible professional who wishes to meet the criteria for satisfactory 
reporting for the 2017 PQRS payment adjustment must report information 
on PQRS quality measures identified by CMS in one of the following 
manners:
    (i) Via Claims. (A) For the 12-month 2017 PQRS payment adjustment 
reporting period--
    (1)(i) Report at least 9 measures, covering at least 3 of the NQS 
domains and report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. Of the 9 measures reported, if the 
eligible professional sees at least 1 Medicare patient in a face-to-face 
encounter, the eligible professional must report on at least 1 measure 
contained in the cross-cutting measure set specified by CMS. If less 
than 9 measures apply to the eligible professional, report up to 8 
measures and report each measure for at least 50 percent of the Medicare 
Part B FFS patients seen during the reporting period to which the 
measure applies. Measures with a 0 percent performance rate would not be 
counted.
    (ii) [Reserved]
    (ii) Via Qualified Registry. (A) For the 12-month 2017 PQRS payment 
adjustment reporting period--
    (1)(i) Report at least 9 measures, covering at least 3 of the NQS 
domains and report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. Of the 9 measures reported, if the 
eligible professional sees at least 1 Medicare patient in a face-to-face 
encounter, the eligible professional must report on at least 1 measure 
contained in the cross-cutting measure set specified by CMS. If less 
than 9 measures apply to the eligible professional, report up to 8 
measures and report each measure for at least 50 percent of the Medicare 
Part B FFS patients seen during the reporting period to which the 
measure applies.
    (ii) Report at least 1 measures group and report each measures group 
for at least 20 patients, a majority of which much be Medicare Part B 
FFS patients.
    (2) Measures with a 0 percent performance rate or measures groups 
containing a measure with a 0 percent performance rate will not be 
counted.
    (iii) Via EHR Direct Product. For the 12-month 2017 PQRS payment 
adjustment reporting period, report 9 measures covering at least 3 of 
the NQS domains. If an eligible professional's direct EHR product does 
not contain patient data for at least 9 measures covering at least 3 
domains, then the eligible professional must report the measures for 
which there is Medicare patient data. An eligible professional must 
report on at least 1 measure for which there is Medicare patient data.
    (iv) Via EHR Data Submission Vendor. For the 12-month 2017 PQRS 
payment adjustment reporting period, report 9 measures covering at least 
3 of the NQS domains. If an eligible professional's EHR data submission 
vendor product does not contain patient data for at least 9 measures 
covering at least 3 domains, then the eligible professional must report 
the measures for which there is Medicare patient data. An eligible 
professional must report on at least 1 measure for which there is 
Medicare patient data.

[[Page 40]]

    (v) Paragraphs (j)(8)(ii), (iii), and (iv) of this section apply to 
individuals reporting using the secondary reporting period established 
under paragraph (j)(1)(ii) of this section for the 2017 PQRS payment 
adjustment.
    (5) Reporting mechanisms for group practices. With the exception of 
a group practice who wishes to participate in the PQRS using the 
certified survey vendor mechanism, a group practice participating in the 
PQRS must report information on PQRS quality measures identified by CMS 
in one of the following reporting mechanisms:
    (i) Web interface. For the 2015 payment adjustment and subsequent 
payment adjustments, reporting PQRS quality measures to CMS using a CMS 
web interface in the form and manner and by the deadline specified by 
CMS.
    (ii) Registry. For the 2015 subsequent adjustment and subsequent 
payment adjustments, reporting on PQRS quality measures to a qualified 
registry in the form and manner and by the deadline specified by the 
qualified registry selected by the eligible professional. The selected 
registry will submit information, as required by CMS, for covered 
professional services furnished by the eligible professional during the 
applicable reporting period to CMS on the eligible professional's 
behalf.
    (iii) Direct EHR product. For the 2016 subsequent adjustment and 
subsequent payment adjustments, reporting PQRS quality measures to CMS 
by extracting clinical data using a secure data submission method, as 
required by CMS, from a direct EHR product by the deadline specified by 
CMS for covered professional services furnished by the eligible 
professional during the applicable reporting period.
    (iv) EHR data submission vendor. For the 2016 subsequent adjustment 
and subsequent payment adjustments, reporting PQRS quality measures to 
CMS by extracting clinical data using a secure data submission method, 
as required by CMS, from an EHR data submission vendor product by the 
deadline specified by CMS for covered professional services furnished by 
the group practice during the applicable reporting period.
    (v) Administrative claims. For 2015, reporting data on PQRS quality 
measures via administrative claims during the applicable reporting 
period. Group practices that are administrative claims reporters must 
meet the following requirement for the payment adjustment:
    (A) Elect to participate in the PQRS using the administrative claims 
reporting option.
    (B) Reporting Medicare Part B claims data for CMS to determine 
whether the group practice has performed services applicable to certain 
individual PQRS quality measures.
    (vi) Certified Survey Vendors. For 2016 and subsequent years, 
reporting CAHPS for PQRS survey measures to CMS using a vendor that is 
certified by CMS for a particular program year to transmit survey 
measures data to CMS. Group practices that elect this reporting 
mechanism must select an additional group practice reporting mechanism 
in order to meet the criteria for satisfactory reporting for the payment 
adjustment.
    (6) Satisfactory reporting criteria for group practices for the 2016 
PQRS payment adjustment. A group practice who wishes to meet the 
criteria for satisfactory reporting for the 2016 PQRS payment adjustment 
must report information on PQRS quality measures identified by CMS in 
one of the following manners:
    (i) Via the GPRO web interface. (A) For the 12-month 2016 PQRS 
payment adjustment reporting period, for a group practice of 25 to 99 
eligible professionals, report on all measures included in the web 
interface and populate data fields for the first 218 consecutively 
ranked and assigned beneficiaries in the order in which they appear in 
the group's sample for each module or preventive care measure. If the 
pool of eligible assigned beneficiaries is less than 218, then report on 
100 percent of assigned beneficiaries.
    (B) For the 12-month 2016 PQRS payment adjustment reporting period, 
for a group practice of 100 or more eligible professionals, report on 
all measures included in the Web interface and populate data fields for 
the first 411 consecutively ranked and assigned beneficiaries in the 
order in which they appear in the group's sample for each module or 
preventive care measure. If

[[Page 41]]

the pool of eligible assigned beneficiaries is less than 411, then 
report on 100 percent of assigned beneficiaries. In addition, the group 
practice must also report all CAHPS for PQRS survey measures via 
certified survey vendor.
    (ii) Via Qualified Registry. (A) For the 12-month 2016 PQRS payment 
adjustment reporting period, for a group practice of 2 or more eligible 
professionals--
    (1) Report at least 9 measures, covering at least 3 of the National 
Quality Strategy domains and report each measure for at least 50 percent 
of the group practice's Medicare Part B FFS patients seen during the 
reporting period to which the measure applies; or If less than 9 
measures covering at least 3 NQS domains apply to the eligible 
professional, then the group practices must report 1-8 measures for 
which there is Medicare patient data and report each measure for at 
least 50 percent of the group practice's Medicare Part B FFS patients 
seen during the reporting period to which the measure applies. For a 
group practice who reports fewer than 9 measures covering at least 3 NQS 
domains via the registry-based reporting mechanism, the group practice 
would be subject to the Measures Applicability Validation process, which 
would allow us to determine whether a group practice should have 
reported on additional measures. Measures with a 0 percent performance 
rate would not be counted; or
    (2) Report at least 3 measures, covering at least 1 of the National 
Quality Strategy domains and report each measure for at least 50 percent 
of the group practice's Medicare Part B FFS patients seen during the 
reporting period to which the measure applies; or if less than 3 
measures covering at least 1 NQS domain apply to the group practice, 
then the group practice must report 1-2 measures for which there is 
Medicare patient data and report each measure for at least 50 percent of 
the group practice's Medicare Part B FFS patients seen during the 
reporting period to which the measure applies. For a group practice who 
reports fewer than 3 measures covering at least 1 NQS domain via the 
registry-based reporting mechanism, the group practice would be subject 
to the Measures Applicability Validation process, which would allow us 
to determine whether a group practice should have reported on additional 
measures. Measures with a 0 percent performance rate would not be 
counted.
    (iii) Via EHR Direct Product. For a group practice of 2 or more 
eligible professionals, for the 12-month 2016 PQRS payment adjustment 
reporting period, report 9 measures covering at least 3 of the National 
Quality Strategy domains. If a group practice's CEHRT does not contain 
patient data for at least 9 measures covering at least 3 domains, then 
the group practice must report the measures for which there is Medicare 
patient data. A group practice must report on at least 1 measure for 
which there is Medicare patient data.
    (iv) Via EHR Data Submission Vendor. For a group practice of 2 or 
more eligible professionals, for the 12-month 2016 PQRS payment 
adjustment reporting period, report 9 measures covering at least 3 of 
the National Quality Strategy domains. If a group practice's CEHRT does 
not contain patient data for at least 9 measures covering at least 3 
domains, then the group practice must report the measures for which 
there is Medicare patient data. A group practice must report on at least 
1 measure for which there is Medicare patient data.
    (v) Via a Certified survey vendor, in addition to the GPRO Web 
interface, qualified registry, direct EHR product, or EHR data 
submission vendor reporting mechanisms. For a group practice of 25 or 
more eligible professionals, for the 12-month 2016 PQRS payment 
adjustment reporting period, report all CAHPS for PQRS survey measures 
via a CMS-certified survey vendor and report at least 6 measures 
covering at least 2 of the National Quality Strategy domains using a 
qualified registry, direct EHR product, EHR data submission vendor, or 
GPRO Web interface.
    (7) Satisfactory reporting criteria for group practices for the 2017 
PQRS payment adjustment. A group practice who

[[Page 42]]

wishes to meet the criteria for satisfactory reporting for the 2017 PQRS 
payment adjustment must report information on PQRS quality measures 
identified by CMS in one of the following manners:
    (i) Via the GPRO web interface. For the 12-month 2017 PQRS payment 
adjustment reporting period, for a group practice of 25 to 99 eligible 
professionals, report on all measures included in the web interface and 
populate data fields for the first 248 consecutively ranked and assigned 
beneficiaries in the order in which they appear in the group's sample 
for each module or preventive care measure. If the pool of eligible 
assigned beneficiaries is less than 248, then report on 100 percent of 
assigned beneficiaries. A group practice must report on at least 1 
measure for which there is Medicare patient data.
    (ii) Via Qualified Registry. For a group practice of 2 to 99 
eligible professionals, for the 12-month 2017 PQRS payment adjustment 
reporting period, report at least 9 measures, covering at least 3 of the 
NQS domains and report each measure for at least 50 percent of the group 
practice's Medicare Part B FFS patients seen during the reporting period 
to which the measure applies; or if less than 9 measures covering at 
least 3 NQS domains apply to the eligible professional, then the group 
practice must report up to 8 measures for which there is Medicare 
patient data and report each measure for at least 50 percent of the 
group practice's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. Of the measures reported, if any 
eligible professional in the group practice sees at least 1 Medicare 
patient in a face-to-face encounter, the group practice must report on 
at least 1 measure contained in the cross-cutting measure set specified 
by CMS. Measures with a 0 percent performance rate would not be counted; 
or
    (iii) Via EHR Direct Product. For a group practice of 2 to 99 
eligible professionals, for the 12-month 2017 PQRS payment adjustment 
reporting period, report 9 measures covering at least 3 of the NQS 
domains. If a group practice's direct EHR product does not contain 
patient data for at least 9 measures covering at least 3 domains, then 
the group practice must report the measures for which there is Medicare 
patient data. A group practice must report on at least 1 measure for 
which there is Medicare patient data.
    (iv) Via EHR Data Submission Vendor. For a group practice of 2 to 99 
eligible professionals, for the 12-month 2017 PQRS payment adjustment 
reporting period, report 9 measures covering at least 3 of the NQS 
domains. If a group practice's EHR data submission vendor product does 
not contain patient data for at least 9 measures covering at least 3 
domains, then the group practice must report the measures for which 
there is Medicare patient data. A group practice must report on at least 
1 measure for which there is Medicare patient data.
    (v) Via a Certified Survey Vendor in addition to a Qualified 
Registry. For a group practice of 2 or more eligible professionals, for 
the 12-month 2017 PQRS payment adjustment reporting period, report all 
CAHPS for PQRS survey measures via a CMS-certified survey vendor and 
report at least 6 additional measures covering at least 2 of the NQS 
domains using a qualified registry. If less than 6 measures apply to the 
group practice, the group practice must report up to 5 measures. Of the 
additional measures that must be reported in conjunction with reporting 
the CAHPS for PQRS survey measures, if any eligible professional in the 
group practice sees at least 1 Medicare patient in a face-to-face 
encounter, the group practice must report on at least 1 measure in the 
cross-cutting measure set specified by CMS.
    (vi) Via a Certified Survey Vendor in addition a Direct EHR Product 
or EHR Data Submission Vendor. For a group practice of 2 or more 
eligible professionals, for the 12-month 2017 PQRS payment adjustment 
reporting period, report all CAHPS for PQRS survey measures via a CMS-
certified survey vendor and report at least 6 additional measures, 
outside of CAHPS for PQRS, covering at least 2 of the NQS domains using 
the direct EHR product that is CEHRT or EHR data submission vendor 
product that is CEHRT. If less than 6 measures apply to the group 
practice, the group practice must report up to 5

[[Page 43]]

measures. Of the additional measures that must be reported in 
conjunction with reporting the CAHPS for PQRS survey measures, the group 
practice must report on at least 1 measure for which there is Medicare 
patient data.
    (vii) Via a Certified Survey Vendor in addition to the GPRO Web 
interface. (A) For a group practice of 25 or more eligible 
professionals, for the 12-month 2017 PQRS payment adjustment reporting 
period, report all CAHPS for PQRS survey measures via a CMS-certified 
survey vendor and report on all measures included in the GPRO web 
interface; AND populate data fields for the first 248 consecutively 
ranked and assigned beneficiaries in the order in which they appear in 
the group's sample for each module or preventive care measure. If the 
pool of eligible assigned beneficiaries is less than 248, then the group 
practice would report on 100 percent of assigned beneficiaries. A group 
practice must report on at least 1 measure for which there is Medicare 
patient data.
    (B) [Reserved]
    (viii) Paragraphs (j)(9)(ii), (iii), and (iv) of this section apply 
to group practices reporting using the secondary reporting period 
established under paragraph (j)(1)(ii) of this section for the 2017 PQRS 
payment adjustment.
    (8) Satisfactory reporting criteria for individual eligible 
professionals for the 2018 PQRS payment adjustment. An individual 
eligible professional who wishes to meet the criteria for satisfactory 
reporting for the 2018 PQRS payment adjustment must report information 
on PQRS quality measures identified by CMS in one of the following 
manners:
    (i) Via claims. (A) For the 12-month 2018 PQRS payment adjustment 
reporting period--
    (1)(i) Report at least 9 measures, covering at least 3 of the NQS 
domains AND report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. Of the measures reported, if the 
eligible professional sees at least 1 Medicare patient in a face-to-face 
encounter, the eligible professional will report on at least 1 measure 
contained in the proposed cross-cutting measure set. If less than 9 
measures apply to the eligible professional, the eligible professional 
must report on each measure that is applicable, AND report each measure 
for at least 50 percent of the Medicare Part B FFS patients seen during 
the reporting period to which the measure applies. Measures with a 0 
percent performance rate would not be counted.
    (ii) [Reserved]
    (2) [Reserved]
    (B) [Reserved]
    (ii) Via qualified registry. (A) For the 12-month 2018 PQRS payment 
adjustment reporting period--
    (1)(i) Report at least 9 measures, covering at least 3 of the NQS 
domains AND report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. Of the measures reported, if the 
eligible professional sees at least 1 Medicare patient in a face-to-face 
encounter, the eligible professional will report on at least 1 measure 
contained in the proposed cross-cutting measure set. If less than 9 
measures apply to the eligible professional, the eligible professional 
must report on each measure that is applicable to the eligible 
professional, AND report each measure for at least 50 percent of the 
Medicare Part B FFS patients seen during the reporting period to which 
the measure applies.
    (ii) Report at least 1 measures group and report each measures group 
for at least 20 patients, a majority of which must be Medicare Part B 
FFS patients.
    (2) Measures with a 0 percent performance rate or measures groups 
containing a measure with a 0 percent performance rate will not be 
counted.
    (B) [Reserved]
    (iii) Via EHR direct product. For the 12-month 2018 PQRS payment 
adjustment reporting period, report 9 measures covering at least 3 of 
the NQS domains. If an eligible professional's direct EHR product or EHR 
data submission vendor product does not contain patient data for at 
least 9 measures covering at least 3 domains, then the eligible 
professional must report all of

[[Page 44]]

the measures for which there is Medicare patient data. An eligible 
professional must report on at least 1 measure for which there is 
Medicare patient data.
    (iv) Via EHR data submission vendor. For the 12-month 2018 PQRS 
payment adjustment reporting period, report 9 measures covering at least 
3 of the NQS domains. If an eligible professional's direct EHR product 
or EHR data submission vendor product does not contain patient data for 
at least 9 measures covering at least 3 domains, then the eligible 
professional would be required to report all of the measures for which 
there is Medicare patient data. An eligible professional would be 
required to report on at least 1 measure for which there is Medicare 
patient data.
    (9) Satisfactory reporting criteria for group practices for the 2018 
PQRS payment adjustment. A group practice who wishes to meet the 
criteria for satisfactory reporting for the 2018 PQRS payment adjustment 
must report information on PQRS quality measures identified by CMS in 
one of the following manners:
    (i) Via the GPRO web interface. For the 12-month 2018 PQRS payment 
adjustment reporting period, for a group practice of 25 or more eligible 
professionals, report on all measures included in the web interface; AND 
populate data fields for the first 248 consecutively ranked and assigned 
beneficiaries in the order in which they appear in the group's sample 
for each module or preventive care measure. If the pool of eligible 
assigned beneficiaries is less than 248, then the group practice must 
report on 100 percent of assigned beneficiaries. In some instances, the 
sampling methodology will not be able to assign at least 248 patients on 
which a group practice may report, particularly those group practices on 
the smaller end of the range of 25-99 eligible professionals. If the 
group practice is assigned less than 248 Medicare beneficiaries, then 
the group practice must report on 100 percent of its assigned 
beneficiaries. A group practice must report on at least 1 measure for 
which there is Medicare patient data.
    (ii) Via qualified registry. For a group practice of 2 or more 
eligible professionals, for the 12-month 2018 PQRS payment adjustment 
reporting period, report at least 9 measures, covering at least 3 of the 
NQS domains. Of these measures, if a group practice sees at least 1 
Medicare patient in a face-to-face encounter, the group practice would 
report on at least 1 measure in the cross-cutting measure set. If less 
than 9 measures covering at least 3 NQS domains apply to the group 
practice, the group practice would report on each measure that is 
applicable to the group practice, AND report each measure for at least 
50 percent of the group's Medicare Part B FFS patients seen during the 
reporting period to which the measure applies. Measures with a 0 percent 
performance rate would not be counted.
    (iii) Via EHR direct product. For a group practice of 2 or more 
eligible professionals, for the 12-month 2018 PQRS payment adjustment 
reporting period, report 9 measures covering at least 3 domains. If the 
group practice's direct EHR product or EHR data submission vendor 
product does not contain patient data for at least 9 measures covering 
at least 3 domains, then the group practice must report all of the 
measures for which there is Medicare patient data. A group practice must 
report on at least 1 measure for which there is Medicare patient data.
    (iv) Via EHR data submission vendor. For a group practice of 2 or 
more eligible professionals, for the 12-month 2018 PQRS payment 
adjustment reporting period, report 9 measures covering at least 3 
domains. If the group practice's direct EHR product or EHR data 
submission vendor product does not contain patient data for at least 9 
measures covering at least 3 domains, then the group practice must 
report all of the measures for which there is Medicare patient data. A 
group practice must report on at least 1 measure for which there is 
Medicare patient data.
    (v) Via a certified survey vendor in addition to a qualified 
registry. For a group practice of 2 or more eligible professionals that 
elects to report via a certified survey vendor in addition to a 
qualified registry for the 12-month 2018 PQRS payment adjustment 
reporting

[[Page 45]]

period, the group practice must have all CAHPS for PQRS survey measures 
reported on its behalf via a CMS-certified survey vendor, and report at 
least 6 additional measures, outside of CAHPS for PQRS, covering at 
least 2 of the NQS domains using the qualified registry. If less than 6 
measures apply to the group practice, the group practice must report on 
each measure that is applicable to the group practice. Of the additional 
measures that must be reported in conjunction with reporting the CAHPS 
for PQRS survey measures, if any eligible professional in the group 
practice sees at least 1 Medicare patient in a face-to-face encounter, 
the group practice must report on at least 1 measure in the cross-
cutting measure set.
    (vi) Via a certified survey vendor in addition to a direct EHR 
product or EHR data submission vendor. For a group practice of 2 or more 
eligible professionals that elects to report via a certified survey 
vendor in addition to a direct EHR product or EHR data submission vendor 
for the 12-month 2018 PQRS payment adjustment reporting period, the 
group practice must have all CAHPS for PQRS survey measures reported on 
its behalf via a CMS-certified survey vendor, and report at least 6 
additional measures, outside of CAHPS for PQRS, covering at least 2 of 
the NQS domains using the direct EHR product or EHR data submission 
vendor product. If less than 6 measures apply to the group practice, the 
group practice must report all of the measures for which there is 
patient data. Of the additional 6 measures that must be reported in 
conjunction with reporting the CAHPS for PQRS survey measures, a group 
practice would be required to report on at least 1 measure for which 
there is Medicare patient data.
    (vii) Via a certified survey vendor in addition to the GPRO web 
interface. (A) For a group practice of 25 or more eligible 
professionals, for the 12-month 2018 PQRS payment adjustment reporting 
period, the group practice must have all CAHPS for PQRS survey measures 
reported on its behalf via a CMS-certified survey vendor. In addition, 
the group practice must report on all measures included in the GPRO web 
interface; AND populate data fields for the first 248 consecutively 
ranked and assigned beneficiaries in the order in which they appear in 
the group's sample for each module or preventive care measure. If the 
pool of eligible assigned beneficiaries is less than 248, then the group 
practice must report on 100 percent of assigned beneficiaries. A group 
practice will be required to report on at least 1 measure for which 
there is Medicare patient data.
    (B) [Reserved]
    (viii) If the CAHPS for PQRS survey is applicable to the practice, 
group practices comprised of 100 or more eligible professionals that 
register to participate in the GPRO must administer the CAHPS for PQRS 
survey, regardless of the GPRO reporting mechanism selected.
    (k) Satisfactory participation requirements for the payment 
adjustments for individual eligible professionals and group practices. 
In order to satisfy the requirements for the PQRS payment adjustment for 
a particular program year through participation in a qualified clinical 
data registry, an individual eligible professional, as identified by a 
unique TIN/NPI combination, or group practice must meet the criteria for 
satisfactory participation as specified in paragraph (k)(3) of this 
section for such year, by reporting on quality measures identified by a 
qualified clinical data registry during a reporting period specified in 
paragraph (k)(1) of this section, using the reporting mechanism 
specified in paragraph (k)(2) of this section.
    (1) Reporting period. For purposes of this paragraph, the reporting 
period is--
    (i) The 12-month period from January 1 through December 31 that 
falls 2 years prior to the year in which the payment adjustment is 
applied.
    (ii) [Reserved]
    (2) Reporting mechanism. An individual eligible professional or 
group practice who wishes to meet the criteria for satisfactory 
participation in a qualified clinical data registry must use the 
qualified clinical data registry to report information on quality 
measures identified by the qualified clinical data registry.
    (3) Satisfactory participation criteria for individual eligible 
professionals for the 2016 PQRS payment adjustment. An

[[Page 46]]

individual eligible professional who wishes to meet the criteria for 
satisfactory participation in a qualified clinical data registry for the 
2016 PQRS payment adjustment must report information on quality measures 
identified by the qualified clinical data registry in one of the 
following manners:
    (i) For the 12-month 2016 PQRS payment adjustment reporting period--
    (A) Report at least 9 measures available for reporting under a 
qualified clinical data registry covering at least 3 of the National 
Quality Strategy domains and report each measure for at least 50 percent 
of the eligible professional's patients; or
    (B) Report at least 3 measures available for reporting under a 
qualified clinical data registry covering at least 1 of the National 
Quality Strategy domains and report each measure for at least 50 percent 
of the eligible professional's patients.
    (4) Satisfactory participation criteria for individual eligible 
professionals for the 2017 PQRS payment adjustment. An individual 
eligible professional who wishes to meet the criteria for satisfactory 
participation in a QCDR for the 2017 PQRS payment adjustment must report 
information on quality measures identified by the QCDR in one of the 
following manner:
    (i) For the 12-month 2017 PQRS payment adjustment reporting period, 
report at least 9 measures available for reporting under a QCDR covering 
at least 3 of the NQS domains, and report each measure for at least 50 
percent of the eligible professional's patients. Of these measures, 
report on at least 2 outcome measures, or, if 2 outcomes measures are 
not available, report on at least 2 outcome measures and at least 1 of 
the following types of measures--resource use, patient experience of 
care, efficiency/appropriate use or patient safety.
    (ii) Section 414.90(k)(5) applies to individuals and group practices 
reporting using the secondary reporting period established under 
paragraph (j)(1)(ii) of this section for the 2017 PQRS payment 
adjustment.
    (5) Satisfactory participation criteria for individual eligible 
professionals and group practices for the 2018 PQRS payment adjustment. 
An individual eligible professional or group practice who wishes to meet 
the criteria for satisfactory participation in a QCDR for the 2018 PQRS 
payment adjustment must report information on quality measures 
identified by the QCDR in the following manner:
    (i) If a group practice does not report the CAHPS for PQRS survey 
measures, report at least 9 measures available for reporting under a 
QCDR covering at least 3 of the NQS domains, and report each measure for 
at least 50 percent of the eligible professional's patients. Of these 
measures, report on at least 3 outcome measures, or, if 3 outcomes 
measures are not available, report on at least 2 outcome measures and at 
least 1 of the following types of measures--resource use, patient 
experience of care, efficiency/appropriate use, or patient safety. If a 
group practice reports the CAHPS for PQRS survey measures, apply reduced 
criteria as follows: 6 QCDR measures covering 2 NQS domains; and, of the 
non-CAHPS for PQRS measures, 2 outcome measures or 1 outcome and 1 other 
specified type of measure, as applicable.
    (ii) [Reserved]
    (l) Requirements for group practices. Under the PQRS, a group 
practice must meet all of the following requirements:
    (1) Meet the participation requirements specified by CMS for the 
PQRS group practice reporting option.
    (2) Report measures in the form and manner specified by CMS.
    (3) Meet other requirements for satisfactory reporting specified by 
CMS.
    (4) Meet participation requirements.
    (i) If an eligible professional, as identified by an individual NPI, 
has reassigned his or her Medicare billing rights to a group practice 
(as identified by the TIN) selected to participate in the PQRS group 
practice reporting option for a program year, then for that program year 
the eligible professional must participate in the PQRS via the group 
practice reporting option.
    (ii) If, for the program year, the eligible professional 
participates in the PQRS as part of a group practice (as identified by 
the TIN) that is not selected to participate in the PQRS group practice 
reporting option for that program year, then the eligible professional 
may individually participate and qualify for a PQRS incentive

[[Page 47]]

by meeting the requirements specified in paragraph (g) of this section 
under that TIN.
    (m) Informal review. Eligible professionals or group practices may 
seek an informal review of the determination that an eligible 
professional or group practices did not satisfactorily submit data on 
quality measures under the PQRS, or, for individual eligible 
professionals, in lieu of satisfactory reporting, did not satisfactorily 
participate in a qualified clinical data registry.
    (1) To request an informal review for reporting periods that occur 
prior to 2014, an eligible professional or group practice must submit a 
request to CMS within 90 days of the release of the feedback reports. To 
request an informal review for reporting periods that occur in 2014 and 
subsequent years, an eligible professional or group practice must submit 
a request to CMS within 60 days of the release of the feedback reports. 
The request must be submitted in writing and summarize the concern(s) 
and reasons for requesting an informal review and may also include 
information to assist in the review.
    (2) CMS will provide a written response within 90 days of the 
receipt of the original request.
    (i) All decisions based on the informal review will be final.
    (ii) There will be no further review or appeal.
    (3) If, during the informal review process, CMS finds errors in data 
that was submitted by a third-party vendor on behalf of an eligible 
professional or group practice using either the qualified registry, EHR 
data submission vendor, or QCDR reporting mechanisms, CMS may allow for 
the resubmission of data to correct these errors.
    (i) CMS will not allow resubmission of data submitted via claims, 
direct EHR, and the GPRO web interface reporting mechanisms.
    (ii) CMS will only allow resubmission of data that was already 
previously submitted to CMS.
    (iii) CMS will only accept data that was previously submitted for 
the reporting periods for which the corresponding informal review period 
applies.
    (n) Limitations on review. Except as specified in paragraph (i) of 
this section, there is no administrative or judicial review under 
section 1869 or 1879 of the Act, or otherwise of--
    (1) The determination of measures applicable to services furnished 
by eligible professionals under the PQRS;
    (2) The determination of satisfactory reporting; and
    (3) The determination of any Physician Quality Reporting System 
incentive payment and the PQRS payment adjustment.
    (o) Public reporting of an eligible professional's or group 
practice's PQRS data. For each program year, CMS will post on a public 
Web site, in an easily understandable format, a list of the names of 
eligible professionals (or in the case of reporting under paragraph (g) 
of this section, group practices) who satisfactorily submitted PQRS 
quality measures.

[78 FR 74812, Dec. 10, 2013, as amended at 79 FR 68003, Nov. 13, 2014; 
81 FR 34913, June 1, 2016; 81 FR 77537, Nov. 4, 2016; 81 FR 80554, Nov. 
15, 2016]



Sec. 414.92  Electronic Prescribing Incentive Program.

    (a) Basis and scope. This section implements the following 
provisions of the Act:
    (1) Section 1848(a)--Payment Based on Fee Schedule.
    (2) Section 1848(m)--Incentive Payments for Quality Reporting.
    (b) Definitions. As used in this section, unless otherwise 
indicated--
    Certified electronic health record technology means an electronic 
health record vendor's product and version as described in 45 CFR 
170.102.
    Covered professional services means services for which payment is 
made under, or is based on, the Medicare physician fee schedule which 
are furnished by an eligible professional.
    Electronic Prescribing Incentive Program means the incentive payment 
program established under section 1848(m) of the Act for the adoption 
and use of electronic prescribing technology by eligible professionals.
    Eligible professional means any of the following healthcare 
professionals who have prescribing authority:
    (i) A physician.
    (ii) A practitioner described in section 1842(b)(18)(C) of the Act.

[[Page 48]]

    (iii) A physical or occupational therapist or a qualified speech-
language pathologist.
    (iv) A qualified audiologist (as defined in section 1861(ll)(3)(B) 
of the Act).
    Group practice means a group practice that is--
    (i)(A) Defined at Sec. 414.90(b), that is participating in the 
Physician Quality Reporting System; or
    (B) In a Medicare-approved demonstration project or other Medicare 
program, under which Physician Quality Reporting System requirements and 
incentives have been incorporated; and
    (ii) Has indicated its desire to participate in the electronic 
prescribing group practice option.
    Qualified electronic health record product means an electronic 
health record product and version that, with respect to a particular 
program year, is designated by CMS as a qualified electronic health 
record product for the purpose of the Physician Quality Reporting System 
(as described in Sec. 414.90) and the product's vendor has indicated a 
desire to have the product qualified for purposes of the product's users 
to submit information related to the electronic prescribing measure.
    Qualified registry means a medical registry or a Maintenance of 
Certification Program operated by a specialty body of the American Board 
of Medical Specialties that, with respect to a particular program year, 
is designated by CMS as a qualified registry for the purpose of the 
Physician Quality Reporting System (as described in Sec. 414.90) and 
that has indicated its desire to be qualified to submit the electronic 
prescribing measure on behalf of eligible professionals for the purposes 
of the Electronic Prescribing Incentive Program.
    (c) Incentive payments and payment adjustments. (1) Incentive 
payments. Subject to paragraph (c)(3) of this section, with respect to 
covered professional services furnished during a reporting period by an 
eligible professional, if the eligible professional is a successful 
electronic prescriber for such reporting period, in addition to the 
amount otherwise paid under section 1848 of the Act, there also must be 
paid to the eligible professional (or to an employer or facility in the 
cases described in section 1842(b)(6)(A) of the Act) or, in the case of 
a group practice under paragraph (e) of this section, to the group 
practice, from the Federal Supplementary Medical Insurance Trust Fund 
established under section 1841 of the Act an amount equal to the 
applicable electronic prescribing percent (as specified in paragraph 
(c)(1)(ii) of this section) of the eligible professional's (or, in the 
case of a group practice under paragraph (e) of this section, the group 
practice's) total estimated allowed charges for all covered professional 
services furnished by the eligible professional (or, in the case of a 
group practice under paragraph (e) of this section, by the group 
practice) during the applicable reporting period.
    (i) For purposes of paragraph (c)(1) of this section,
    (A) The eligible professional's (or, in the case of a group practice 
under paragraph (e) of this section, the group practice's) total 
estimated allowed charges for covered professional services furnished 
during a reporting period are determined based on claims processed in 
the National Claims History (NCH) no later than 2 months after the end 
of the applicable reporting period;
    (B) In the case of an eligible professional who furnishes covered 
professional services in more than one practice, incentive payments are 
separately determined for each practice based on claims submitted for 
the eligible professional for each practice;
    (C) Incentive payments earned by an eligible professional (or in the 
case of a group practice under paragraph (e) of this section, by a group 
practice) for a particular program year will be paid as a single 
consolidated payment to the TIN holder of record.
    (ii) Applicable electronic prescribing percent. The applicable 
electronic prescribing percent is as follows:
    (A) For the 2011 and 2012 program years, 1.0 percent.
    (B) For the 2013 program year, 0.5 percent.
    (iii) Limitation with respect to electronic health record (EHR) 
incentive payments. The provisions of this paragraph do not apply to an 
eligible professional (or, in the case of a group practice

[[Page 49]]

under paragraph (e) of this section, a group practice) if, for the 
electronic health record reporting period the eligible professional (or 
group practice) receives an incentive payment under section 
1848(o)(1)(A) of the Act with respect to a certified electronic health 
record technology (as defined in section 1848(o)(4) of the Act) that has 
the capability of electronic prescribing.
    (2) Payment adjustment. Subject to paragraphs (c)(1)(ii) and (c)(3) 
of this section, with respect to covered professional services furnished 
by an eligible professional during 2012, 2013, or 2014, if the eligible 
professional (or in the case of a group practice under paragraph (e) of 
this section, the group practice) is not a successful electronic 
prescriber (as specified by CMS for purposes of the payment adjustment) 
for an applicable reporting period (as specified by CMS) the fee 
schedule amount for such services furnished by such professional (or 
group practice) during the program year (including the fee schedule 
amount for purposes of determining a payment based on such amount) is 
equal to the applicable percent (as specified in paragraph (c)(2)(i) of 
this section) of the fee schedule amount that would otherwise apply to 
such services under section 1848 of the Act.
    (i) Applicable percent. The applicable percent is as follows:
    (A) For 2012, 99 percent;
    (B) For 2013, 98.5 percent; and
    (C) For 2014, 98 percent.
    (ii) Significant hardship exception. CMS may, on a case-by-case 
basis, exempt an eligible professional (or in the case of a group 
practice under paragraph (e) of this section, a group practice) from the 
application of the payment adjustment under paragraph (c)(2) of this 
section if, CMS determines, subject to annual renewal, that compliance 
with the requirement for being a successful electronic prescriber would 
result in a significant hardship. Eligible professionals (or, in the 
case of a group practice under paragraph (e) of this section, a group 
practice) may request consideration for a significant hardship exemption 
from a eRx payment adjustment if one of the following circumstances 
apply:
    (A) From the 2012 payment adjustments by meeting one of the 
following:
    (1) The practice is located in a rural area without high speed 
internet access.
    (2) The practice is located in an area without sufficient available 
pharmacies for electronic prescribing.
    (3) Registration to participate in the Medicare or Medicaid EHR 
Incentive Program and adoption of Certified EHR Technology.
    (4) Inability to electronically prescribe due to local, State or 
Federal law or regulation.
    (5) Eligible professionals who achieve meaningful use during the 
respective 6 or 12-month payment adjustment reporting periods.
    (6) Eligible professionals who have registered to participate in the 
EHR Incentive Program and adopted Certified EHR Technology prior to 
application of the respective payment adjustment.
    (B) From the 2013 and 2014 payment adjustments by meeting one of the 
following:
    (1) The eligible professional or group practice is located in a 
rural area without high speed internet access.
    (2) The eligible professional or group practice is located in an 
area without sufficient available pharmacies for electronic prescribing.
    (3) The eligible professional or group practice is unable to 
electronically prescribe due to local, State, or Federal law or 
regulation.
    (4) The eligible professional or group practice has limited 
prescribing activity, as defined by an eligible professional generating 
fewer than 100 prescriptions during a 6-month reporting period.
    (iii) Other limitations to the payment adjustment. An eligible 
professional (or in the case of a group practice under paragraph (b) of 
this section, a group practice) is exempt from the application of the 
payment adjustment under paragraph (c)(2) of this section if one of the 
following applies:
    (A) The eligible professional is not an MD, DO, podiatrist, nurse 
practitioner, or physician assistant.
    (B) The eligible professional does not have at least 100 cases 
containing an encounter code that falls within the denominator of the 
electronic prescribing measure for dates of service during the

[[Page 50]]

6-month reporting period specified in paragraph (f)(1) of this section.
    (3) Limitation with respect to electronic prescribing quality 
measures. The provisions of paragraphs (c)(1) and (c)(2) of this section 
do not apply to an eligible professional (or, in the case of a group 
practice under paragraph (e) of this section, a group practice) if for 
the reporting period the allowed charges under section 1848 of the Act 
for all covered professional services furnished by the eligible 
professional (or group, as applicable) for the codes to which the 
electronic prescribing measure applies are less than 10 percent of the 
total of the allowed charges under section 1848 of the Act for all such 
covered professional services furnished by the eligible professional (or 
the group practice, as applicable).
    (d) Requirements for individual eligible professionals to qualify to 
receive an incentive payment. In order to be considered a successful 
electronic prescriber and qualify to earn an electronic prescribing 
incentive payment (subject to paragraph (c)(3) of this section), an 
individual eligible professional, as identified by a unique TIN/NPI 
combination, must meet the criteria for being a successful electronic 
prescriber under section 1848(m)(3)(B) of the Act and as specified by 
CMS during the reporting period specified in paragraph (d)(1) of this 
section and using one of the reporting mechanisms specified in paragraph 
(d)(2) of this section. Although an eligible professional may attempt to 
qualify for the electronic prescribing incentive payment using more than 
one reporting mechanism (as specified in paragraph (d)(2) of this 
section), the eligible professional will receive only one electronic 
prescribing incentive payment per TIN/NPI combination for a program 
year.
    (1) Reporting period. For purposes of this paragraph, the reporting 
period with respect to a program year is the entire calendar year.
    (2) Reporting mechanisms. An eligible professional who wishes to 
participate in the Electronic Prescribing Incentive Program must report 
information on the electronic prescribing measure identified by CMS to--
    (i) CMS, by no later than 2 months after the end of the applicable 
reporting period, on the eligible professional's Medicare Part B claims 
for covered professional services furnished by the eligible professional 
during the reporting period specified in paragraph (d)(1) of this 
section;
    (ii) A qualified registry (as defined in paragraph (b) of this 
section) in the form and manner and by the deadline specified by the 
qualified registry selected by the eligible professional. The selected 
qualified registry will submit information, as required by CMS, for 
covered professional services furnished by the eligible professional 
during the reporting period specified in paragraph (d)(1) of this 
section to CMS on the eligible professional's behalf; or
    (iii) CMS by extracting clinical data using a secure data submission 
method, as required by CMS, from a qualified electronic health record 
product (as defined in paragraph (b) of this section) by the deadline 
specified by CMS for covered professional services furnished by the 
eligible professional during the reporting period specified in paragraph 
(d)(1) of this section. Prior to actual data submission for a given 
program year and by a date specified by CMS, the eligible professional 
must submit a test file containing real or dummy clinical quality data 
extracted from the qualified electronic health record product selected 
by the eligible professional using a secure data submission method, as 
required by CMS.
    (e) Requirements for group practices to qualify to receive an 
incentive payment. (1) A group practice (as defined in paragraph (b) of 
this section) will be treated as a successful electronic prescriber for 
covered professional services for a reporting period if the group 
practice meets the criteria for successful electronic prescriber 
specified by CMS in the form and manner and at the time specified by 
CMS.
    (2) No double payments. Payments to a group practice under this 
paragraph must be in lieu of the payments that would otherwise be made 
under the Electronic Prescribing Incentive Program to eligible 
professionals in the group practice for being a successful electronic 
prescriber.
    (i) If an eligible professional, as identified by an individual NPI, 
has reassigned his or her Medicare billing

[[Page 51]]

rights to a TIN selected to participate in the electronic prescribing 
group practice reporting option for a program year, then for that 
program year the eligible professional must participate in the 
Electronic Prescribing Incentive Program via the group practice 
reporting option. For any program year in which the TIN is selected to 
participate in the Electronic Prescribing Incentive Program group 
practice reporting option, the eligible professional cannot individually 
qualify for an electronic prescribing incentive payment by meeting the 
requirements specified in paragraph (d) of this section.
    (ii) If, for the program year, the eligible professional 
participates in the Electronic Prescribing Incentive Program under a TIN 
that is not selected to participate in the Electronic Prescribing 
Incentive Program group practice reporting option for that program year, 
then the eligible professional may individually qualify for an 
electronic prescribing incentive by meeting the requirements specified 
in paragraph (d) of this section under that TIN.
    (f) Requirements for individual eligible professionals and group 
practices for the payment adjustment. In order to be considered a 
successful electronic prescriber for the electronic prescribing payment 
adjustment, an individual eligible professional (or, in the case of a 
group practice under paragraph (b) of this section, a group practice), 
as identified by a unique TIN/NPI combination, must meet the criteria 
for being a successful electronic prescriber specified by CMS, in the 
form and manner specified in paragraph (f)(2) of this section, and 
during the reporting period specified in paragraph (f)(1) of this 
section.
    (1) Reporting periods. (i) For purposes of this paragraph (f), the 
reporting period for the 2013 payment adjustment is either of the 
following:
    (A) The 12-month period from January 1, 2011 through December 31, 
2011.
    (B) The 6-month period from January 1, 2012 through June 30, 2012.
    (ii) For purposes of this paragraph (f), the reporting period for 
the 2014 payment adjustment is either of the following:
    (A) The 12-month period from January 1, 2012 through December 31, 
2012.
    (B) The 6-month period from January 1, 2013 through June 30, 2013.
    (2) Reporting mechanisms. An eligible professional (or, in the case 
of a group practice under paragraph (e) of this section, a group 
practice) who wishes to participate in the Electronic Prescribing 
Incentive Program must report information on the electronic prescribing 
measure identified by CMS to one of the following:
    (i) For the 6- and 12-month reporting periods under paragraph (f)(1) 
of this section, CMS, by no later than 2 months after the end of the 
applicable 12-month reporting period or by no later than 1 month after 
the end of the applicable 6-month reporting period, on the eligible 
professional's Medicare Part B claims for covered professional services 
furnished by the eligible professional during the reporting period 
specified in paragraph (f)(1) of this section.
    (A) If an eligible professional re-submits a Medicare Part B claim 
for reprocessing, the eligible professional may not attach a G-code at 
that time for reporting on the electronic prescribing measure.
    (B) [Reserved]
    (ii) For the 12-month reporting period under paragraph (f)(1) of 
this section, a qualified registry (as defined in paragraph (b) of this 
section) in the form and manner and by the deadline specified by the 
qualified registry selected by the eligible professional. The selected 
qualified registry submits information, as required by CMS, for covered 
professional services furnished by the eligible professional during the 
reporting period specified in paragraph (f)(1) of this section to CMS on 
the eligible professional's behalf.
    (iii) For the 12-month reporting period under paragraph (f)(1) of 
this section, CMS by extracting clinical data using a secure data 
submission method, as required by CMS, from a qualified electronic 
health record product (as defined in paragraph (b) of this section) by 
the deadline specified by CMS for covered professional services 
furnished by the eligible professional during the reporting period 
specified in paragraph (f)(1) of this section. Prior to actual

[[Page 52]]

data submission for a given program year and by a date specified by CMS, 
the eligible professional must submit a test file containing dummy 
clinical quality data extracted from the qualified electronic health 
record product selected by the eligible professional using a secure data 
submission method, as required by CMS.
    (g) Informal review. Eligible professionals (or in the case of 
reporting under paragraph (e) of this section, group practices) may seek 
an informal review of the determination that an eligible professional 
(or in the case of reporting under paragraph (e) of this section, group 
practices) did not meet the requirements for the 2012 and 2013 
incentives or the 2013 and 2014 payment adjustments.
    (1) To request an informal review for the 2012 and 2013 incentives, 
an eligible professional or group practice must submit a request to CMS 
via email within 90 days of the release of the feedback reports. The 
request must be submitted in writing and summarize the concern(s) and 
reasons for requesting an informal review and may also include 
information to assist in the review.
    (2) To request an informal review for the 2013 and 2014 payment 
adjustments, an eligible professional or group practices must submit a 
request to CMS via email by February 28 of the year in which the 
eligible professional is receiving the applicable payment adjustment. 
The request must be submitted in writing and summarize the concern(s) 
and reasons for requesting an informal review and may also include 
information to assist in the review.
    (3) CMS will provide a written response of CMS' determination.
    (i) All decisions based on the informal review will be final.
    (ii) There will be no further review or appeal.
    (h) Public reporting of an eligible professional's or group 
practice's Electronic Prescribing Incentive Program data. For each 
program year, CMS will post on a public Web site, in an easily 
understandable format, a list of the names of eligible professionals (or 
in the case of reporting under paragraph (e) of this section, group 
practices) who are successful electronic prescribers.

[75 FR 73620, Nov. 29, 2010, as amended at 76 FR 54968, Sept. 6, 2011; 
76 FR 73472, Nov. 28, 2011; 77 FR 69368, Nov. 16, 2012; 80 FR 71379, 
Nov. 16, 2015]



Sec. 414.94  Appropriate use criteria for advanced diagnostic 
imaging services.

    (a) Basis and scope. This section implements the following 
provisions of the Act:
    (1) Section 1834(q)--Recognizing Appropriate Use Criteria for 
Certain Imaging Services.
    (2) Section 1834(q)(1)--Program Established.
    (3) Section 1834(q)(2)--Establishment of Applicable Appropriate Use 
Criteria.
    (b) Definitions. As used in this section unless otherwise 
indicated--
    Advanced diagnostic imaging service means an imaging service as 
defined in section 1834(e)(1)(B) of the Act.
    Applicable imaging service means an advanced diagnostic imaging 
service (as defined in section 1834(e)(1)(B) of the Act) for which the 
Secretary determines--
    (i) One or more applicable appropriate use criteria apply;
    (ii) There are one or more qualified clinical decision support 
mechanisms listed; and
    (iii) One or more of such mechanisms is available free of charge.
    Applicable payment system means the following:
    (i) The physician fee schedule established under section 1848(b) of 
the Act;
    (ii) The prospective payment system for hospital outpatient 
department services under section 1833(t) of the Act; and
    (iii) The ambulatory surgical center payment systems under section 
1833(i) of the Act.
    Applicable setting means a physician's office, a hospital outpatient 
department (including an emergency department), an ambulatory surgical 
center, and any other provider-led outpatient setting determined 
appropriate by the Secretary.
    Appropriate use criteria (AUC) means criteria only developed or 
endorsed by national professional medical specialty societies or other 
provider-led entities,

[[Page 53]]

to assist ordering professionals and furnishing professionals in making 
the most appropriate treatment decision for a specific clinical 
condition for an individual. To the extent feasible, such criteria must 
be evidence-based. An AUC set is a collection of individual appropriate 
use criteria. An individual criterion is information presented in a 
manner that links: a specific clinical condition or presentation; one or 
more services; and, an assessment of the appropriateness of the 
service(s).
    Clinical decision support mechanism (CDSM) means the following: an 
interactive, electronic tool for use by clinicians that communicates AUC 
information to the user and assists them in making the most appropriate 
treatment decision for a patient's specific clinical condition. Tools 
may be modules within or available through certified EHR technology (as 
defined in section 1848(o)(4)) of the Act or private sector mechanisms 
independent from certified EHR technology or established by the 
Secretary.
    Furnishing professional means a physician (as defined in section 
1861(r) of the Act) or a practitioner described in section 
1842(b)(18)(C) of the Act who furnishes an applicable imaging service.
    Ordering professional means a physician (as defined in section 
1861(r) of the Act) or a practitioner described in section 
1842(b)(18)(C) of the Act who orders an applicable imaging service.
    Priority clinical areas means clinical conditions, diseases or 
symptom complexes and associated advanced diagnostic imaging services 
identified by CMS through annual rulemaking and in consultation with 
stakeholders which may be used in the determination of outlier ordering 
professionals.
    Provider-led entity (PLE) means a national professional medical 
specialty society or other organization that is comprised primarily of 
providers or practitioners who, either within the organization or 
outside of the organization, predominantly provide direct patient care.
    Specified applicable appropriate use criteria means any individual 
appropriate use criterion or AUC set developed, modified or endorsed by 
a qualified PLE.
    (c) Qualified provider-led entity. To be qualified by CMS, a PLE 
must adhere to the evidence-based processes described in paragraph 
(c)(1) of this section when developing or modifying AUC. A qualified PLE 
may develop AUC, modify AUC developed by another qualified PLE, or 
endorse AUC developed by other qualified PLEs.
    (1) Requirements for qualified PLEs developing or modifying AUC. A 
PLE must perform all of the following when developing or modifying AUC:
    (i) Utilize an evidentiary review process when developing or 
modifying AUC that includes:
    (A) A systematic literature review of the clinical topic and 
relevant imaging studies; and
    (B) An assessment of the evidence using a formal, published and 
widely recognized methodology for grading evidence. Consideration of 
relevant published consensus statements by professional medical 
specialty societies must be part of the evidence assessment.
    (ii) Utilize at least one multidisciplinary team with autonomous 
governance, decision-making and accountability for developing or 
modifying AUC. At a minimum the team must be comprised of seven members 
including at least one practicing physician with expertise in the 
clinical topic related to the appropriate use criterion being developed 
or modified, at least one practicing physician with expertise in the 
imaging studies related to the appropriate use criterion, at least one 
primary care physician or practitioner as described in sections 
1833(u)(6), 1833(x)(2)(A)(i)(I), and 1833(x)(2)(A)(i)(II) of the Act, at 
least one expert in statistical analysis and at least one expert in 
clinical trial design. A given team member may be the team's expert in 
more than one domain.
    (iii) Utilize a publicly transparent process for identifying 
potential conflicts of interest and for resolving conflicts of interest 
of members on the multidisciplinary team, the PLE and any other party 
participating in AUC development or modification, to include recusal or 
exclusion of individuals as appropriate. The PLE must document the 
following information and make it available in timely fashion to

[[Page 54]]

a public request, for a period of not less than 5 years after the most 
recent published update of the relevant AUC:
    (A) Direct or indirect financial relationships that exist between 
individuals or the spouse or minor child of individuals who have 
substantively participated in the development of AUC and companies or 
organizations including the PLE and any other party participating in AUC 
development or modification that may financially benefit from the AUC. 
These financial relationships may include, for example, compensation 
arrangements such as salary, grant, speaking or consulting fees, 
contract, or collaboration agreements.
    (B) Ownership or investment interests between individuals or the 
spouse or minor child of individuals who have substantively participated 
in the development of AUC and companies or organizations including the 
PLE or any other party participating in AUC development or modification 
that may financially benefit from the AUC.
    (iv) Publish each individual criterion on the PLE's Web site and 
include an identifying title, authors (at a minimum, all members of the 
multidisciplinary AUC development team must be listed as authors), and 
key references used to establish the evidence.
    (v) Identify each appropriate use criterion or AUC subset that are 
relevant to a priority clinical area with a statement on the PLE's Web 
site. To be identified as being relevant to a priority clinical area, 
the criterion or AUC subset must reasonably address the entire clinical 
scope of the corresponding priority clinical area.
    (vi) Identify key points in an individual criterion as evidence-
based or consensus-based, and grade such key points in terms of strength 
of evidence using a formal, published and widely recognized methodology.
    (vii) Utilize a transparent process for the timely and continual 
updating of each criterion. Each criterion must be reviewed and, when 
appropriate, updated at least annually.
    (viii) Publicly post the process for developing or modifying the AUC 
on the PLE's Web site.
    (ix) Disclose parties external to the PLE when such parties have 
involvement in the AUC development process.
    (2) Process to identify qualifying PLEs. PLEs must meet all of the 
following criteria:
    (i) PLEs must submit an application to CMS for review that documents 
adherence to each of the AUC development requirements outlined in 
paragraph (c)(1) of this section;
    (ii) Applications will be accepted by CMS only from PLEs that meet 
the definition of PLE in paragraph (b) of this section;
    (iii) Applications must be received by CMS annually by January 1;
    (iv) All approved qualified PLEs in each year will be included on 
the list of qualified PLEs posted to the CMS Web site by June 30 of that 
year; and
    (v) Approved PLEs are qualified for a period of 5 years.
    (vi) Qualified PLEs are required to re-apply. The application must 
be received by CMS by January 1 of the 5th year after the PLE's most 
recent approval date.
    (d) Endorsement. Qualified PLEs may endorse the AUC set or 
individual criteria of other qualified PLEs, under agreement by the 
respective parties, in order to enhance an AUC set.
    (e) Identifying priority clinical areas. (1) CMS identifies priority 
clinical areas through annual rulemaking and in consultation with 
stakeholders.
    (2) CMS will consider incidence and prevalence of disease, the 
volume and variability of use of particular imaging services, and 
strength of evidence supporting particular imaging services. We will 
also consider applicability of the clinical area to a variety of care 
settings and to the Medicare population.
    (3) The Medicare Evidence Development & Coverage Advisory Committee 
(MEDCAC) may make recommendations to CMS.
    (4) Priority clinical areas will be used by CMS to identify outlier 
ordering professionals (section 1834(q)(5) of the Act).
    (5) Priority clinical areas include the following:
    (i) Coronary artery disease (suspected or diagnosed).
    (ii) Suspected pulmonary embolism.

[[Page 55]]

    (iii) Headache (traumatic and non-traumatic).
    (iv) Hip pain.
    (v) Low back pain.
    (vi) Shoulder pain (to include suspected rotator cuff injury).
    (vii) Cancer of the lung (primary or metastatic, suspected or 
diagnosed).
    (viii) Cervical or neck pain.
    (f) Identification of non-evidence-based AUC or other non-adherence 
to requirements for qualified PLEs. (1) CMS will accept public comment 
to facilitate identification of AUC sets, subsets or individual 
criterion that are not evidence-based, giving priority to AUC associated 
with priority clinical areas and to AUC that conflict with one another. 
CMS may also independently identify AUC of concern.
    (2) The evidentiary basis of the identified AUC may be reviewed by 
the MEDCAC.
    (3) If a qualified PLE is found non-adherent to the requirements in 
paragraph (c) of this section, CMS may terminate its qualified status or 
may consider this information during re-qualification.
    (g) Qualified clinical decision support mechanisms (CDSMs). 
Qualified CDSMs are those specified as such by CMS. Qualified CDSMs must 
adhere to the requirements described in paragraph (g)(1) of this 
section.
    (1) Requirements for qualification of CDSMs. A CDSM must meet all of 
the following requirements:
    (i) Make available specified applicable AUC and its related 
supporting documentation.
    (ii) Identify the appropriate use criterion consulted if the CDSM 
makes available more than one criterion relevant to a consultation for a 
patient's specific clinical scenario.
    (iii) Make available, at a minimum, specified applicable AUC that 
reasonably address common and important clinical scenarios within all 
priority clinical areas identified in paragraph (e)(5) of this section.
    (iv) Be able to incorporate specified applicable AUC from more than 
one qualified PLE.
    (v) Determines, for each consultation, the extent to which the 
applicable imaging service is consistent with specified applicable AUC.
    (vi) Generate and provide a certification or documentation at the 
time of order that documents which qualified CDSM was consulted; the 
name and national provider identifier (NPI) of the ordering professional 
that consulted the CDSM; whether the service ordered would adhere to 
specified applicable AUC; whether the service ordered would not adhere 
to specified applicable AUC; or whether the specified applicable AUC 
consulted was not applicable to the service ordered. Certification or 
documentation must:
    (A) Be generated each time an ordering professional consults a 
qualified CDSM.
    (B) Include a unique consultation identifier generated by the CDSM.
    (vii) Modifications to AUC within the CDSM must comply with the 
following timeline requirements:
    (A) Make available updated AUC content within 12 months from the 
date the qualified PLE updates AUC.
    (B) A protocol must be in place to expeditiously remove AUC 
determined by the qualified PLE to be potentially dangerous to patients 
and/or harmful if followed.
    (C) Specified applicable AUC that reasonably address common and 
important clinical scenarios within any new priority clinical area must 
be made available for consultation through the qualified CDSM within 12 
months of the priority clinical area being finalized by CMS.
    (viii) Meet privacy and security standards under applicable 
provisions of law.
    (ix) Provide to the ordering professional aggregate feedback 
regarding their consultations with specified applicable AUC in the form 
of an electronic report on at least an annual basis.
    (x) Maintain electronic storage of clinical, administrative, and 
demographic information of each unique consultation for a minimum of 6 
years.
    (xi) Comply with modification(s) to any requirements under paragraph 
(g)(1) of this section made through rulemaking within 12 months of the 
effective date of the modification.
    (xii) Notify ordering professionals upon de-qualification.

[[Page 56]]

    (2) Process to specify qualified CDSMs. (i) The CDSM developer must 
submit an application to CMS for review that documents adherence to each 
of the CDSM requirements outlined in paragraph (g)(1) of this section;
    (ii) Receipt of applications. (A) Applications must be received by 
CMS annually by January 1 (except as stated in paragraph (g)(2)(ii)(B) 
of this section).
    (B) For CDSM applicants seeking qualification in CY 2017, 
applications must be submitted by March 1, 2017; and
    (1) Applications that document current adherence to qualified CDSM 
requirements will receive full qualification.
    (2) Applications that do not document current adherence to each 
qualified CDSM requirement, but that document how and when each 
requirement is reasonably expected to be met, will receive preliminary 
qualification.
    (3) A preliminary qualification period begins under paragraph (2) on 
June 30, 2017 and ends on the effective date of the requirements under 
sections 1834(q)(4)(A) and 1834(q)(4)(B) of the Act.
    (4) A CDSM with preliminary qualification will become fully 
qualified by the end of the preliminary qualification period, or earlier 
if CMS determines that the CDSM has demonstrated adherence to each 
qualified CDSM requirement, unless we determine that the CDSM fails to 
meet all requirements (including those requirements they expected to 
meet in paragraph (g)(2)(ii)(B)(2) of this section) by the end of the 
preliminary qualification period.
    (iii) All qualified CDSMs specified by CMS in each year will be 
included on the list of specified qualified CDSMs posted to the CMS Web 
site by June 30 of that year; and
    (iv) Qualified CDSMs are specified by CMS as such for a period of 5 
years.
    (v) Qualified CDSMs are required to re-apply during the fifth year 
after they are specified by CMS in order to maintain their status as 
qualified CDSMs. This application must be received by CMS by January 1 
of the 5th year after the most recent approval date.
    (h) Identification of non-adherence to requirements for qualified 
CDSMs. (1) If a qualified CDSM is found non-adherent to the requirements 
in paragraph (g)(1) of this section, CMS may terminate its qualified 
status or may consider this information during requalification.
    (i) Exceptions. Consulting and reporting requirements are not 
required for orders for applicable imaging services made by ordering 
professionals under the following circumstances:
    (1) Emergency services when provided to individuals with emergency 
medical conditions as defined in section 1867(e)(1) of the Act.
    (2) For an inpatient and for which payment is made under Medicare 
Part A.
    (3) Ordering professionals who are granted a significant hardship 
exception to the Medicare EHR Incentive Program payment adjustment for 
that year under Sec. 495.102(d)(4) of this chapter, except for those 
granted such an exception under Sec. 495.102(d)(4)(iv)(C) of this 
chapter.

[80 FR 71380, Nov. 16, 2015, as amended at 80 FR 80554, Nov. 15, 2016]



   Subpart C_Fee Schedules for Parenteral and Enteral Nutrition (PEN) 
     Nutrients, Equipment and Supplies, Splints, Casts, and Certain 
                        Intraocular Lenses (IOLs)

    Source: 66 FR 45176, Aug. 28, 2001, unless otherwise noted.



Sec. 414.100  Purpose.

    This subpart implements fee schedules for PEN items and services, 
splints and casts, and IOLs inserted in a physician's office as 
authorized by section 1842(s) of the Act.

[78 FR 72252, Dec. 2, 2013]



Sec. 414.102  General payment rules.

    (a) General rule. For PEN items and services furnished on or after 
January 1, 2002, and for splints and casts and IOLs inserted in a 
physician's office on or after April 1, 2014, Medicare pays for the 
items and services as described in paragraph (b) of this section on the 
basis of 80 percent of the lesser of---

[[Page 57]]

    (1) The actual charge for the item or service; or
    (2) The fee schedule amount for the item or service, as determined 
in accordance with Secs. 414.104 thru 414.108.
    (b) Payment classification. (1) CMS or the carrier determines fee 
schedules for parenteral and enteral nutrition (PEN) nutrients, 
equipment, and supplies, splints and casts, and IOLs inserted in a 
physician's office, as specified in Secs. 414.104 thru 414.108.
    (2) CMS designates the specific items and services in each category 
through program instructions.
    (c) Updating the fee schedule amounts. For the years 2003 through 
2010 for PEN items and services, the fee schedule amounts of the 
preceding year are updated by the percentage increase in the CPI-U for 
the 12-month period ending with June of the preceding year. For each 
year subsequent to 2010 for PEN items and services and for each year 
subsequent to 2014 for splints and casts, and IOLs inserted in a 
physician's office, the fee schedule amounts of the preceding year are 
updated by the percentage increase in the CPI-U for the 12-month period 
ending with June of the preceding year, reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.

[66 FR 45176, Aug. 28, 2001, as amended at 78 FR 72252, Dec. 2, 2013]



Sec. 414.104  PEN Items and Services.

    (a) Payment rules. Payment for PEN items and services is made in a 
lump sum for nutrients and supplies that are purchased and on a monthly 
basis for equipment that is rented.
    (b) Fee schedule amount. The fee schedule amount for payment for an 
item or service furnished in 2002 is the lesser of--
    (i) The reasonable charge from 1995; or
    (ii) The reasonable charge that would have been used in determining 
payment for 2002.



Sec. 414.105  Application of competitive bidding information.

    For enteral nutrients, equipment and supplies furnished on or after 
January 1, 2011, the fee schedule amounts may be adjusted based on 
information on the payment determined as part of implementation of the 
programs under subpart F using the methodologies set forth at 
Sec. 414.210(g).

[79 FR 66262, Nov. 6, 2014]



Sec. 414.106  Splints and casts.

    (a) Payment rules. Payment is made in a lump sum for splints and 
casts.
    (b) Fee schedule amount. The fee schedule amount for payment for an 
item or service furnished in 2014 is the reasonable charge amount for 
2013, updated by the percentage increase in the CPI-U for the 12-month 
period ending with June of 2013.

[78 FR 72253, Dec. 2, 2013]



Sec. 414.108  IOLs inserted in a physician's office.

    (a) Payment rules. Payment is made in a lump sum for IOLs inserted 
in a physician's office.
    (b) Fee schedule amount. The fee schedule amount for payment for an 
IOL furnished in 2014 is the national average allowed charge for the IOL 
furnished from in calendar year 2012, updated by the percentage increase 
in the CPI-U for the 24-month period ending with June of 2013.

[78 FR 72253, Dec. 2, 2013]



   Subpart D_Payment for Durable Medical Equipment and Prosthetic and 
                            Orthotic Devices



Sec. 414.200  Purpose.

    This subpart implements sections 1834(a), (h) and (i) of the Act by 
specifying how payments are made for the purchase or rental of new and 
used durable medical equipment, prosthetic and orthotic devices, and 
surgical dressings for Medicare beneficiaries.

[78 FR 72253, Dec. 2, 2013]



Sec. 414.202  Definitions.

    For purposes of this subpart, the following definitions apply:
    Complex rehabilitative power-driven wheelchair means a power-driven 
wheelchair that is classified as--
    (1) Group 2 power wheelchair with power options that can accommodate 
rehabilitative features (for example, tilt in space); or
    (2) Group 3 power wheelchair.

[[Page 58]]

    Covered item update means the percentage increase in the consumer 
price index for all urban consumers (U.S. city average) (CPI-U) for the 
12-month period ending with June of the previous year.
    Durable medical equipment means equipment, furnished by a supplier 
or a home health agency that meets the following conditions:
    (1) Can withstand repeated use.
    (2) Effective with respect to items classified as DME after January 
1, 2012, has an expected life of at least 3 years.
    (3) Is primarily and customarily used to serve a medical purpose.
    (4) Generally is not useful to an individual in the absence of an 
illness or injury.
    (5) Is appropriate for use in the home.
    Prosthetic and orthotic devices means--
    (1) Devices that replace all or part of an internal body organ, 
including ostomy bags and supplies directly related to ostomy care, and 
replacement of such devices and supplies;
    (2) One pair of conventional eyeglasses or contact lenses furnished 
subsequent to each cataract surgery with insertion of an intraocular 
lens; and
    (3) Leg, arm, back, and neck braces, and artificial legs, arms, and 
eyes, including replacements if required because of a change in the 
beneficiary's physical condition.

The following are neither prosthetic nor orthotic devices--
    (1) Parenteral and enteral nutrients, supplies, and equipment;
    (2) Intraocular lenses;
    (3) Medical supplies such as catheters, catheter supplies, ostomy 
bags, and supplies related to ostomy care that are furnished by an HHA 
as part of home health services under Sec. 409.40(e) of this chapter;
    (4) Dental prostheses.
    Region means, for the purpose of implementing Sec. 414.210(g), 
geographic areas defined by the Bureau of Economic Analysis in the 
United States Department of Commerce for economic analysis purposes, 
and, for the purpose of implementing Sec. 414.228, those contractor 
service areas administered by CMS regional offices.
    Rural area means, for the purpose of implementing Sec. 414.210(g), a 
geographic area represented by a postal zip code if at least 50 percent 
of the total geographic area of the area included in the zip code is 
estimated to be outside any metropolitan area (MSA). A rural area also 
includes a geographic area represented by a postal zip code that is a 
low population density area excluded from a competitive bidding area in 
accordance with the authority provided by section 1847(a)(3)(A) of the 
Act at the time the rules at Sec. 414.210(g) are applied.

[57 FR 57689, Dec. 7, 1992, as amended at 75 FR 73622, Nov. 29, 2010; 76 
FR 70314, Nov. 10, 2011; 79 FR 66262, Nov. 6, 2014]



Sec. 414.210  General payment rules.

    (a) General rule. For items furnished on or after January 1, 1989, 
except as provided in paragraphs (c), (d), and (g) of this section, 
Medicare pays for durable medical equipment, prosthetics and orthotics, 
including a separate payment for maintenance and servicing of the items 
as described in paragraph (e) of this section, on the basis of 80 
percent of the lesser of--
    (1) The actual charge for the item;
    (2) The fee schedule amount for the item, as determined in 
accordance with the provisions of Secs. 414.220 through 414.232
    (b) Payment classification. (1) The carrier determines fee schedules 
for the following classes of equipment and devices:
    (i) Inexpensive or routinely purchased items, as specified in 
Sec. 414.220.
    (ii) Items requiring frequent and substantial servicing, as 
specified in Sec. 414.222.
    (iii) Certain customized items, as specified in Sec. 414.224.
    (iv) Oxygen and oxygen equipment, as specified in Sec. 414.226.
    (v) Prosthetic and orthotic devices, as specified in Sec. 414.228.
    (vi) Other durable medical equipment (capped rental items), as 
specified in Sec. 414.229.
    (vii) Transcutaneous electrical nerve stimulators (TENS), as 
specified in Sec. 414.232.
    (2) CMS designates the items in each class of equipment or device 
through its program instructions.
    (c) Exception for certain HHAs. Public HHAs and HHAs that furnish 
services or items free-of-charge or at nominal

[[Page 59]]

prices to a significant number of low-income patients, as defined in 
Sec. 413.13(a) of this chapter, are paid on the basis of 80 percent of 
the fee schedule amount determined in accordance with the provision of 
Secs. 414.220 through 414.230.
    (d) Prohibition on special limits. For items furnished on or after 
January 1, 1989 and before January 1, 1991, neither CMS nor a carrier 
may establish a special reasonable charge for items covered under this 
subpart on the basis of inherent reasonableness as described in 
Sec. 405.502(g) of this chapter.
    (e) Maintenance and servicing--(1) General rule. Except as provided 
in paragraph (e)(3) of this section, the carrier pays the reasonable and 
necessary charges for maintenance and servicing of beneficiary-owned 
equipment. Reasonable and necessary charges are those made for parts and 
labor not otherwise covered under a manufacturer's or supplier's 
warranty. Payment is made for replacement parts in a lump sum based on 
the carrier's consideration of the item. The carrier establishes a 
reasonable fee for labor associated with repairing, maintaining, and 
servicing the item. Payment is not made for maintenance and servicing of 
a rented item other than the maintenance and servicing fee for oxygen 
equipment described in paragraph (e)(2) of this section or for other 
durable medical equipment as described in Sec. 414.229(e).
    (2) Maintenance and servicing payment for certain oxygen equipment 
furnished after the 36-month rental period from January 1, 2009 through 
June 30, 2010. The carrier makes a maintenance and servicing payment for 
oxygen equipment other than liquid and gaseous equipment (stationary and 
portable) as follows:
    (i) For the first 6-month period following the date on which the 36-
month rental period ends in accordance with Sec. 414.226(a)(1) of this 
subpart, no payments are made.
    (ii) For each succeeding 6-month period, payment may be made during 
the first month of that period for 30 minutes of labor for routine 
maintenance and servicing of the equipment in the beneficiary's home 
(including an institution used as the beneficiary's home).
    (iii) The supplier must visit the beneficiary's home (including an 
institution used as the beneficiary's home) to inspect the equipment 
during the first month of the 6-month period.
    (3) Exception to maintenance and servicing payments. For items 
purchased on or after June 1, 1989, no payment is made under the 
provisions of paragraph (e)(1) of this section for the maintenance and 
servicing of:
    (i) Items requiring frequent and substantial servicing, as defined 
in Sec. 414.222(a);
    (ii) Capped rental items, as defined in Sec. 414.229(a), that are 
not beneficiary-owned in accordance with Sec. 414.229(d), 
Sec. 414.229(f)(2), or Sec. 414.229(h); and
    (iii) Capped rental items, as defined in Sec. 414.229(a), that are 
not beneficiary-owned in Sec. 414.229(d), Sec. 414.229(f)(2), or 
Sec. 414.229(h); and
    (iv) Oxygen equipment, as described in Sec. 414.226.
    (4) Supplier replacement of beneficiary-owned equipment based on 
accumulated repair costs. A supplier that transfers title to a capped 
rental item to a beneficiary in accordance with Sec. 414.229(f)(2) is 
responsible for furnishing replacement equipment at no cost to the 
beneficiary or to the Medicare program if the carrier determines that 
the item furnished by the supplier will not last for the entire 
reasonable useful lifetime established for the equipment in accordance 
with Sec. 414.210(f)(1). In making this determination, the carrier may 
consider whether the accumulated costs of repair exceed 60 percent of 
the cost to replace the item.
    (5) Maintenance and servicing payment for certain oxygen equipment 
furnished after the 36-month rental period and on or after July 1, 2010. 
For oxygen equipment other than liquid and gaseous equipment (stationary 
and portable), the carrier makes payment as follows:
    (i) For the first 6-month period following the date on which the 36-
month rental period ends in accordance with Sec. 414.226(a)(1) of this 
subpart, no payments are made.
    (ii) For each succeeding 6-month period, payment may be made during 
the first month of that period for routine maintenance and servicing of 
the equipment in the beneficiary's home

[[Page 60]]

(including an institution used as the beneficiary's home).
    (iii) Payment for maintenance and servicing is made based on a 
reasonable fee not to exceed 10 percent of the purchase price for a 
stationary oxygen concentrator. This payment includes payment for 
maintenance and servicing of all oxygen equipment other than liquid or 
gaseous equipment (stationary or portable).
    (iv) The supplier must visit the beneficiary's home (including an 
institution used as the beneficiary's home) to inspect the equipment 
during the first month of the 6-month period.
    (f) Payment for replacement of equipment. If an item of DME or a 
prosthetic or orthotic device paid for under this subpart has been in 
continuous use by the patient for the equipment's reasonable useful 
lifetime or if the carrier determines that the item is lost, stolen, or 
irreparably damaged, the patient may elect to obtain a new piece of 
equipment.
    (1) The reasonable useful lifetime of DME or prosthetic and orthotic 
devices is determined through program instructions. In the absence of 
program instructions, carriers may determine the reasonable useful 
lifetime of equipment but in no case can it be less than 5 years. 
Computation is based on when the equipment is delivered to the 
beneficiary, not the age of the equipment.
    (2) If the beneficiary elects to obtain replacement oxygen 
equipment, payment is made in accordance with Sec. 414.226(a).
    (3) If the beneficiary elects to obtain a replacement capped rental 
item, payment is made in accordance with Sec. 414.229(a)(2) or (a)(3).
    (4) For all other beneficiary-owned items, if the beneficiary elects 
to obtain replacement equipment, payment is made on a purchase basis.
    (g) Application of Competitive Bidding Information and Limitation of 
Inherent Reasonableness Authority. For items furnished on or after 
January 1, 2011, the fee schedule amounts may be adjusted, and for DME 
items furnished on or after January 1, 2016, the fee schedule amounts 
shall be adjusted, based on information on the payment determined as 
part of implementation of the programs under subpart F, of this part, 
excluding information on the payment determined in accordance with the 
special payment rules at Sec. 414.409. In the case of such adjustments, 
the rules at Sec. 405.502(g) and (h) of this chapter shall not be 
applied. The methodologies for adjusting fee schedule amounts are 
provided below. In any case where application of these methodologies 
results in an increase in the fee schedule amount, the adjustment to the 
fee schedule amount is not made.
    (1) Payment adjustments for areas within the contiguous United 
States using information from competitive bidding programs. For an item 
or service subject to the programs under subpart F of this part, the fee 
schedule amounts for such item or service for areas within the 
contiguous United States shall be adjusted as follows:
    (i) CMS determines a regional price for each state in the contiguous 
United States and the District of Columbia equal to the un-weighted 
average of the single payment amounts for an item or service established 
in accordance with Sec. 414.416 for competitive bidding areas that are 
fully or partially located in the same region that contains the state or 
District of Columbia.
    (ii) CMS determines a national average price equal to the un-
weighted average of the regional prices determined under paragraph 
(g)(1)(i) of this section.
    (iii) A regional price determined under paragraph (g)(1)(i) of this 
section cannot be greater than 110 percent of the national average price 
determined under paragraph (g)(1)(ii) of this section nor less than 90 
percent of the national average price determined under paragraph 
(g)(1)(ii) of this section.
    (iv) The fee schedule amount for all areas within a state that are 
not defined as rural areas for purposes of this subpart is adjusted to 
the regional price determined under paragraphs (g)(1)(i) and (iii) of 
this section.
    (v) The fee schedule amount for all areas within a state that are 
defined as rural areas for the purposes of this subpart is adjusted to 
110 percent of the national average price determined under paragraph 
(g)(1)(ii) of this section.
    (2) Payment adjustments for areas outside the contiguous United 
States using

[[Page 61]]

information from competitive bidding programs. For an item or service 
subject to the programs under subpart F, the fee schedule amounts for 
areas outside the contiguous United States are reduced to the greater 
of--
    (i) The average of the single payment amounts for the item or 
service for CBAs outside the contiguous United States.
    (ii) 110 percent of the national average price for the item or 
service determined under paragraph (g)(1)(ii) of this section.
    (3) Payment adjustments for items and services included in no more 
than ten competitive bidding programs. Notwithstanding paragraph (g)(1) 
of this section, for an item or service that is included in ten or fewer 
competitive bidding programs as defined at Sec. 414.402, the fee 
schedule amounts applied for all areas within and outside the contiguous 
United States are reduced to 110 percent of the un-weighted average of 
the single payment amounts from the ten or fewer competitive bidding 
programs for the item or service in the areas where the ten or fewer 
competitive bidding programs are in place.
    (4) Payment adjustments using data on items and services included in 
competitive bidding programs no longer in effect. In the case where 
adjustments to fee schedule amounts are made using any of the 
methodologies described, if the adjustments are based solely on single 
payment amounts from competitive bidding programs that are no longer in 
effect, the single payment amounts are updated before being used to 
adjust the fee schedule amounts. The single payment amounts are updated 
based on the percentage change in the Consumer Price Index for all Urban 
Consumers (CPI-U) from the mid-point of the last year the single payment 
amounts were in effect to the month ending 6 months prior to the date 
the initial fee schedule reductions go into effect. Following the 
initial adjustments to the fee schedule amounts, if the adjustments 
continue to be based solely on single payment amounts from competitive 
bidding programs that are no longer in effect, the single payment 
amounts used to reduce the fee schedule amounts are updated every 12 
months using the percentage change in the CPI-U for the 12-month period 
ending 6 months prior to the date the updated payment adjustments would 
go into effect.
    (5) Adjusted payment amounts for accessories used with different 
types of base equipment. In situations where a HCPCS code that describes 
an item used with different types of base equipment is included in more 
than one product category in a CBA under competitive bidding, a weighted 
average of the single payment amounts for the code is computed for each 
CBA based on the total number of allowed services for the item on a 
national basis for the code from each product category prior to applying 
the payment adjustment methodologies in this section.
    (6) Adjustments of single payment amounts resulting from price 
inversions under the DMEPOS Competitive Bidding Program. (i) In 
situations where a price inversion defined in Sec. 414.402 occurs under 
the DMEPOS Competitive Bidding Program in a competitive bidding area 
(CBA) following a competition for a grouping of similar items identified 
in paragraph (g)(6)(ii) of this section, prior to adjusting the fee 
schedule amounts under paragraph (g) of this section the single payment 
amount for each item in the grouping of similar items in the CBA is 
adjusted to be equal to the weighted average of the single payment 
amounts for the items in the grouping of similar items in the CBA.
    (ii) The groupings of similar items subject to this rule include--
    (A) Hospital beds (HCPCS codes E0250, E0251, E0255, E0256, E0260, 
E0261, E0290, E0291, E0292, E0293, E0294, E0295, E0301, E0302, E0303, 
and E0304).
    (B) Mattresses and overlays (HCPCS codes E0277, E0371, E0372, and 
E0373)
    (C) Power wheelchairs (HCPCS codes K0813, K0814, K0815, K0816, 
K0820, K0821, K0822, and K0823).
    (D) Seat lift mechanisms (HCPCS codes E0627 and E0629).
    (E) TENS devices (HCPCS codes E0720 and E0730).
    (F) Walkers (HCPCS codes E0130, E0135, E0141, and E0143).
    (iii) The weight for each item (HCPCS code) used in calculating the 
weighted average described in paragraph (g)(6)(ii) of this section is 
equal

[[Page 62]]

to the proportion of total nationwide allowed services furnished in 
calendar year 2012 for the item (HCPCS code) in the grouping of similar 
items, relative to the total nationwide allowed services furnished in 
calendar year 2012 for each of the other items (HCPCS codes) in the 
grouping of similar items.
    (7) Payment adjustments for mail order items furnished in the 
Northern Mariana Islands. The fee schedule amounts for mail order items 
furnished to beneficiaries in the Northern Mariana Islands are adjusted 
so that they are equal to 100 percent of the single payment amounts 
established under a national mail order competitive bidding program.
    (8) Updating adjusted fee schedule amounts. The adjusted fee 
schedule amounts are revised each time a single payment amount for an 
item or service is updated following one or more new competitions and as 
other items are added to programs established under Subpart F of this 
part.
    (9) Transition rules. The payment adjustments described above are 
phased in as follows:
    (i) For applicable items and services furnished with dates of 
service from January 1, 2016, through June 30, 2016, based on the fee 
schedule amount for the area is equal to 50 percent of the adjusted 
payment amount established under this section and 50 percent of the 
unadjusted fee schedule amount.
    (ii) For items and services furnished with dates of service on or 
after July 1, 2016, the fee schedule amount for the area is equal to 100 
percent of the adjusted payment amount established under this section.

[57 FR 57689, Dec. 7, 1992, as amended at 71 FR 65932, Nov. 9, 2006; 73 
FR 69936, Nov. 19, 2008; 73 FR 80304, Dec. 31, 2008; 74 FR 62009, Nov. 
25, 2009; 79 FR 66262, Nov. 6, 2013; 81 FR 77965, Nov. 4, 2016]



Sec. 414.220  Inexpensive or routinely purchased items.

    (a) Definitions. (1) Inexpensive equipment means equipment the 
average purchase price of which did not exceed $150 during the period 
July 1986 through June 1987.
    (2) Routinely purchased equipment means equipment that was acquired 
by purchase on a national basis at least 75 percent of the time during 
the period July 1986 through June 1987.
    (3) Accessories. Effective January 1, 1994, accessories used in 
conjunction with a nebulizer, aspirator, or ventilator excluded from 
Sec. 414.222 meet the definitions of ``inexpensive equipment'' and 
``routinely purchased equipment'' in paragraphs (a)(1) and (a)(2) of 
this section, respectively.
    (b) Payment rules. (1) Subject to the limitation in paragraph (b)(3) 
of this section, payment for inexpensive and routinely purchased items 
is made on a rental basis or in a lump sum amount for purchase of the 
item based on the applicable fee schedule amount.
    (2) Effective January 1, 1994, payment for ostomy supplies, 
tracheostomy supplies, urologicals, and surgical dressings not furnished 
as incident to a physician's professional service or furnished by an HHA 
is made using the methodology for the inexpensive and routinely 
purchased class.
    (3) The total amount of payments made for an item may not exceed the 
fee schedule amount recognized for the purchase of that item.
    (c) Fee schedule amount for 1989 and 1990. The fee schedule amount 
for payment of purchase or rental of inexpensive or routinely purchased 
items furnished in 1989 and 1990 is the local payment amount determined 
as follows:
    (1) The carrier determines the average reasonable charge for 
inexpensive or routinely purchased items that were furnished during the 
period July 1, 1986 through June 30, 1987 based on the mean of the 
carrier's allowed charges for the item. A separate determination of an 
average reasonable charge is made for rental equipment, new purchased 
equipment, and used purchased equipment.
    (2) The carrier adjusts the amount determined under paragraph (c)(1) 
of this section by the change in the level of the CPI-U for the 6-month 
period ending December 1987.
    (d) Updating the local payment amounts for years after 1990. For 
each year subsequent to 1990, the local payment amounts of the preceding 
year are increased or decreased by the covered item update. For 1991 and 
1992, the covered item update is reduced by 1 percentage point.

[[Page 63]]

    (e) Calculating the fee schedule amounts for years after 1990. For 
years after 1990, the fee schedule amounts are equal to the national 
limited payment amount.
    (f) Calculating the national limited payment amount. The national 
limited payment amount is computed as follows:
    (1) The 1991 national limited payment amount is equal to:
    (i) 100 percent of the local payment amount if the local payment 
amount is neither greater than the weighted average nor less than 85 
percent of the weighted average of all local payment amounts;
    (ii) The sum of 67 percent of the local payment amount plus 33 
percent of the weighted average of all local payment amounts if the 
local payment amount exceeds the weighted average of all local payment 
amounts; or
    (iii) The sum of 67 percent of the local payment amount plus 33 
percent of 85 percent of the weighted average of all local payment 
amounts if the local payment amount is less than 85 percent of the 
weighted average of all local payment amounts.
    (2) The 1992 national limited payment amount is equal to:
    (i) 100 percent of the local payment amount if the local payment 
amount is neither greater than the weighted average nor less than 85 
percent of the weighted average of all local payment amounts;
    (ii) The sum of 33 percent of the local payment amount plus 67 
percent of the weighted average of all local payment amounts if the 
local payment amount exceeds the weighted average; or
    (iii) The sum of 33 percent of the local payment amount plus 67 
percent of 85 percent of the weighted average of all local payment 
amounts if the local payment amount is less than 85 percent of the 
weighted average.
    (3) For 1993, the national limited payment amount is equal to one of 
the following:
    (i) 100 percent of the local payment amount if the local payment 
amount is neither greater than the weighted average nor less than 85 
percent of the weighted average of all local payment amounts.
    (ii) 100 percent of the weighted average of all local payment 
amounts if the local payment amount exceeds the weighted average of all 
local payment amounts.
    (iii) 85 percent of the weighted average of all local payment 
amounts if the local payment amount is less than 85 percent of the 
weighted average of all local payment amounts.
    (4) For 1994 and subsequent years, the national limited payment 
amount is equal to one of the following:
    (i) If the local payment amount is not in excess of the median, nor 
less than 85 percent of the median, of all local payment amounts--100 
percent of the local payment amount.
    (ii) If the local payment amount exceeds the median--100 percent of 
the median of all local payment amounts.
    (iii) If the local payment amount is less than 85 percent of the 
median--85 percent of the median of all local payment amounts.
    (g) Payment for surgical dressings. For surgical dressings furnished 
after December 31, 1993, the national limited payment amount is computed 
based on local payment amounts using average reasonable charges for the 
12-month period ending December 31, 1992, increased by the covered item 
updates for 1993 and 1994.

[57 FR 57689, Dec. 7, 1992, as amended at 60 FR 35497, July 10, 1995]



Sec. 414.222  Items requiring frequent and substantial servicing.

    (a) Definition. Items requiring frequent and substantial servicing 
in order to avoid risk to the beneficiary's health are the following:
    (1) Ventilators (except those that are either continuous airway 
pressure devices or respiratory assist devices with bi-level pressure 
capability with or without a backup rate, previously referred to as 
``intermittent assist devices with continuous airway pressure 
devices'').
    (2) Continuous and intermittent positive pressure breathing 
machines.
    (3) Continuous passive motion machines.
    (4) Other items specified in CMS program instructions.
    (5) Other items identified by the carrier.

[[Page 64]]

    (b) Payment rule. Rental payments for items requiring frequent and 
substantial servicing are made on a monthly basis, and continue until 
medical necessity ends.
    (c) Fee schedule amount for 1989 and 1990. The fee schedule amount 
for items requiring frequent and substantial servicing is the local 
payment amount determined as follows:
    (1) The carrier determines the average reasonable charge for rental 
of items requiring frequent and substantial servicing that were 
furnished during the period July 1, 1986 through June 30, 1987 based on 
the mean of the carrier's allowed charges for the item.
    (2) The carrier adjusts the amounts determined under paragraph 
(c)(1) of this section by the change in the level of the CPI-U for the 
6-month period ending December 1987.
    (d) Updating the fee schedule amounts for years after 1990. For 
years after 1990, the fee schedules are determined using the methodology 
contained in paragraphs (d), (e), and (f) of Sec. 414.220.
    (e) Transition to other payment classes. For purposes of calculating 
the 15-month rental period, beginning January 1, 1994, if an item has 
been paid for under the frequent and substantial servicing class and is 
subsequently paid for under another payment class, the rental period 
begins with the first month of continuous rental, even if that period 
began before January 1, 1994. For example, if the rental period began on 
July 1, 1993, the carrier must use this date as beginning the first 
month of rental. Likewise, for purposes of calculating the 10-month 
purchase option, the rental period begins with the first month of 
continuous rental without regard to when that period started. For 
example, if the rental period began in August 1993, the 10-month 
purchase option must be offered to the beneficiary in May 1994, the 
tenth month of continuous rental.

[57 FR 57690, Dec. 7, 1992, as amended at 60 FR 35497, July 10, 1995; 71 
FR 4525, Jan. 27, 2006]



Sec. 414.224  Customized items.

    (a) Criteria for a customized item. To be considered a customized 
item for payment purposes under paragraph (b) of this section, a covered 
item (including a wheelchair) must be uniquely constructed or 
substantially modified for a specific beneficiary according to the 
description and orders of a physician and be so different from another 
item used for the same purpose that the two items cannot be grouped 
together for pricing purposes.
    (b) Payment rule. Payment is made on a lump sum basis for the 
purchase of a customized item based on the carrier's individual 
consideration and judgment of a reasonable payment amount for each 
customized item. The carrier's individual consideration takes into 
account written documentation on the costs of the item including at 
least the cost of labor and materials used in customizing an item.

[56 FR 65998, Dec. 20, 1991, as amended at 58 FR 34919, June 30, 1993]



Sec. 414.226  Oxygen and oxygen equipment.

    (a) Payment rules--(1) Oxygen equipment. Payment for rental of 
oxygen equipment is made based on a monthly fee schedule amount during 
the period of medical need, but for no longer than a period of 
continuous use of 36 months. A period of continuous use is determined 
under the provisions in Sec. 414.230.
    (2) Oxygen contents. Payment for purchase of oxygen contents is made 
based on a monthly fee schedule amount until medical necessity ends.
    (b) Monthly fee schedule amount for items furnished prior to 2007. 
(1) Monthly fee schedule amounts are separately calculated for the 
following items:
    (i) Stationary oxygen equipment and oxygen contents (stationary and 
portable oxygen contents).
    (ii) Portable oxygen equipment only.
    (iii) Stationary and portable oxygen contents only.
    (iv) Portable oxygen contents only.
    (2) For 1989 and 1990, the monthly fee schedule amounts are the 
local payment amounts determined as follows:
    (i) The carrier determines the base local average monthly payment 
rate equal to the total reasonable charges for the item for the 12-month 
period ending December 1986 divided by the total number of months for 
all beneficiaries receiving the item for the same period. In determining 
the local

[[Page 65]]

average monthly payment rate, the following limitations apply:
    (A) Purchase charges for oxygen systems are not included as items 
classified under paragraph (b)(1)(i) of this section.
    (B) Purchase charges for portable equipment are not included as 
items classified under paragraph (b)(1)(ii) of this section.
    (ii) The carrier determines the local monthly payment amount equal 
to 0.95 times the base local average monthly payment amount adjusted by 
the change in the CPI-U for the six-month period ending December 1987.
    (3) For 1991 through 2006, the fee schedule amounts for items 
described in paragraphs (b)(1)(iii) and (iv) of this section are 
determined using the methodology contained in Sec. 414.220(d), (e), and 
(f).
    (4) For 1991 through 2006, the fee schedule amounts for items 
described in paragraphs (b)(1)(i) and (ii) of this section are 
determined using the methodology contained in Sec. 414.220(d), (e), and 
(f).
    (5) For 2005 and 2006, the fee schedule amounts determined under 
paragraph (b)(4) of this section are reduced using the methodology 
described in section 1834(a)(21)(A) of the Act.
    (c) Monthly fee schedule amount for items furnished for years after 
2006. (1) For 2007, national limited monthly payment rates are 
calculated and paid as the monthly fee schedule amounts for the 
following classes of items:
    (i) Stationary oxygen equipment (including stationary concentrators) 
and oxygen contents (stationary and portable).
    (ii) Portable equipment only (gaseous or liquid tanks).
    (iii) Oxygen generating portable equipment only.
    (iv) Stationary oxygen contents only.
    (v) Portable oxygen contents only.
    (2) The national limited monthly payment rate for items described in 
paragraph (c)(1)(i) of this section is equal to the weighted average fee 
schedule amount established under paragraph (b)(5) of this section 
reduced by $1.44.
    (3) The national limited monthly payment rate for items described in 
paragraph (c)(1)(ii) of this section is equal to the weighted average of 
the fee schedule amounts established under paragraph (b)(5) of this 
section.
    (4) The national limited monthly payment rate for items described in 
paragraph (c)(1)(iii) of this section is equal to the national limited 
monthly payment rate established under paragraph (c)(5) of this section, 
multiplied by 24, and divided by 36.
    (5) The national limited monthly payment rate for items described in 
paragraphs (c)(1)(iv) and (c)(1)(v) of this section is equal to 50 
percent of the weighted average fee schedule amounts established under 
paragraph (b)(3) of this section for items described in paragraph 
(b)(1)(iii) of this section.
    (6) Beginning in 2008, CMS makes an annual adjustment to the 
national limited monthly payment rate for items described in paragraph 
(c)(1)(i) of this section to ensure that such payment rates do not 
result in expenditures for any year that are more or less than the 
expenditures that would have been made if such classes had not been 
established.
    (d) Application of monthly fee schedule amounts. (1) The fee 
schedule amount for items described in paragraph (c)(1)(i) of this 
section is paid when the beneficiary rents stationary oxygen equipment.
    (2) Subject to the limitation set forth in paragraph (e)(2) of this 
section, the fee schedule amount for items described in paragraphs 
(c)(1)(ii) and (c)(1)(iii) of this section is paid when the beneficiary 
rents portable oxygen equipment.
    (3) The fee schedule amount for items described in paragraph 
(c)(1)(iv) of this section is paid when the beneficiary--
    (i) Owns stationary oxygen equipment that requires delivery of 
gaseous or liquid oxygen contents; or
    (ii) Rents stationary oxygen equipment that requires delivery of 
gaseous or liquid oxygen contents after the period of continuous use of 
36 months described in paragraph (a)(1) of this section.
    (4) The fee schedule amount for items described in paragraph 
(c)(1)(v) of this section is paid when the beneficiary--
    (i) Owns portable oxygen equipment described in (c)(1)(ii) of this 
section;

[[Page 66]]

    (ii) Rents portable oxygen equipment described in paragraph 
(c)(1)(ii) of this section during the period of continuous use of 36 
months described in paragraph (a)(1) of this section and does not rent 
stationary oxygen equipment; or
    (iii) Rents portable oxygen equipment described in paragraph 
(c)(1)(ii) of this section after the period of continuous use of 36 
months described in paragraph (a)(1) of this section.
    (e) Volume adjustments. (1) The fee schedule amount for an item 
described in paragraph (c)(1)(i) of this section is adjusted as follows:
    (i) If the attending physician prescribes an oxygen flow rate 
exceeding four liters per minute, the fee schedule amount is increased 
by 50 percent, subject to the limit in paragraph (e)(2) of this section.
    (ii) If the attending physician prescribes an oxygen flow rate of 
less than one liter per minute, the fee schedule amount is decreased by 
50 percent.
    (2) If portable oxygen equipment is used and the prescribed oxygen 
flow rate exceeds four liters per minute, the total fee schedule amount 
recognized for payment is limited to the higher of--
    (i) The sum of the monthly fee schedule amount for the items 
described in paragraphs (c)(1)(i) and (c)(1)(ii) or (c)(1)(iii) of this 
section; or
    (ii) The adjusted fee schedule amount described in paragraph 
(e)(1)(i) of this section.
    (3) In establishing the volume adjustment for those beneficiaries 
whose physicians prescribe varying flow rates, the following rules 
apply:
    (i) If the prescribed flow rate is different for stationary oxygen 
equipment than for portable oxygen equipment, the flow rate for the 
stationary equipment is used.
    (ii) If the prescribed flow rate is different for the patient at 
rest than for the patient at exercise, the flow rate for the patient at 
rest is used.
    (iii) If the prescribed flow rate is different for nighttime use and 
daytime use, the average of the two flow rates is used.
    (f) Furnishing oxygen and oxygen equipment after the 36-month rental 
cap. (1) The supplier that furnishes oxygen equipment for the 36th 
continuous month during which payment is made under this section must--
    (i) Continue to furnish the equipment during any period of medical 
need for the remainder of the reasonable useful lifetime established for 
the equipment in accordance with Sec. 414.210(f)(1); or
    (ii) Arrange for furnishing the oxygen equipment with another 
supplier if the beneficiary relocates to an area that is outside the 
normal service area of the supplier that initially furnished the 
equipment.
    (2) The supplier that furnishes liquid or gaseous oxygen equipment 
(stationary or portable) for the 36th continuous month during which 
payment is made under this section must--
    (i) Continue to furnish the oxygen contents necessary for the 
effective use of the liquid or gaseous equipment during any period of 
medical need for the remainder of the reasonable useful lifetime 
established for the equipment in accordance with Sec. 414.210(f)(1); or
    (ii) Arrange for furnishing the oxygen contents with another 
supplier if the beneficiary relocates to an area that is outside the 
normal service area of the supplier that initially furnished the 
equipment.
    (g) Additional supplier requirements for rentals that begin on or 
after January 1, 2007. (1) The supplier that furnishes oxygen equipment 
for the first month during which payment is made under this section must 
continue to furnish the equipment for the entire 36-month period of 
continuous use, unless medical necessity ends or--
    (i) The item becomes subject to a competitive acquisition program 
implemented in accordance with section 1847(a) of the Act;
    (ii) The beneficiary relocates to an area that is outside the normal 
service area of the supplier that initially furnished the equipment;
    (iii) The beneficiary elects to obtain oxygen equipment from a 
different supplier prior to the expiration of the 36-month rental 
period; or
    (iv) CMS or the carrier determines that an exception should apply in 
an individual case based on the circumstances.
    (2) Oxygen equipment furnished under this section may not be 
replaced by the supplier prior to the expiration

[[Page 67]]

of the reasonable useful lifetime established for the equipment in 
accordance with Sec. 414.210(f)(1) unless:
    (i) The supplier replaces an item with the same, or equivalent, make 
and model of equipment because the item initially furnished was lost, 
stolen, irreparably damaged, is being repaired, or no longer functions;
    (ii) A physician orders different equipment for the beneficiary. If 
the order is based on medical necessity, then the order must indicate 
why the equipment initially furnished is no longer medically necessary 
and the supplier must retain this order in the beneficiary's medical 
record;
    (iii) The beneficiary chooses to obtain a newer technology item or 
upgraded item and signs an advanced beneficiary notice (ABN); or
    (iv) CMS or the carrier determines that a change in equipment is 
warranted.
    (3) Before furnishing oxygen equipment, the supplier must disclose 
to the beneficiary its intentions regarding whether it will accept 
assignment of all monthly rental claims for the duration of the rental 
period. A supplier's intentions could be expressed in the form of a 
written agreement between the supplier and the beneficiary.

[57 FR 57690, Dec. 7, 1992, as amended at 71 FR 65933, Nov. 9, 2006; 73 
FR 69936, Nov. 19, 2008; 78 FR 72253, Dec. 2, 2013]



Sec. 414.228  Prosthetic and orthotic devices.

    (a) Payment rule. Payment is made on a lump-sum basis for prosthetic 
and orthotic devices subject to this subpart.
    (b) Fee schedule amounts. The fee schedule amount for prosthetic and 
orthotic devices is determined as follows:
    (1) The carrier determines a base local purchase price equal to the 
average reasonable charge for items purchased during the period July 1, 
1986 through June 30, 1987 based on the mean of the carrier's allowed 
charges for the item.
    (2) The carrier determines a local purchase price equal to the 
following:
    (i) For 1989 and 1990, the base local purchase price is adjusted by 
the change in the level of the CPI-U for the 6-month period ending 
December 1987.
    (ii) For 1991 through 1993, the local purchase price for the 
preceding year is adjusted by the applicable percentage increase for the 
year. The applicable percentage increase is equal to 0 percent for 1991. 
For 1992 and 1993, the applicable percentage increase is equal to the 
percentage increase in the CPI-U for the 12-month period ending with 
June of the previous year.
    (iii) For 1994 and 1995, the applicable percentage increase is 0 
percent.
    (iv) For all subsequent years the applicable percentage increase is 
equal to the percentage increase in the CPI-U for the 12-month period 
ending with June of the previous year.
    (3) CMS determines the regional purchase price equal to the 
following:
    (i) For 1992, the average (weighted by the relative volume of all 
claims among carriers) of the local purchase prices for the carriers in 
the region.
    (ii) For 1993 and subsequent years, the regional purchase price for 
the preceding year adjusted by the applicable percentage increase for 
the year.
    (4) CMS determines a purchase price equal to the following:
    (i) For 1989, 1990 and 1991, 100 percent of the local purchase 
price.
    (ii) For 1992, 75 percent of the local purchase price plus 25 
percent of the regional purchase price.
    (iii) For 1993, 50 percent of the local purchase price plus 50 
percent of the regional purchase price.
    (iv) For 1994 and subsequent years, 100 percent of the regional 
purchase price.
    (5) For 1992 and subsequent years, CMS determines a national average 
purchase price equal to the unweighted average of the purchase prices 
determined under paragraph (b)(4) of this section for all carriers.
    (6) CMS determines the fee schedule amount equal to 100 percent of 
the purchase price determined under paragraph (b)(4) of this section, 
subject to the following limitations:
    (i) For 1992, the amount cannot be greater than 125 percent nor less 
than 85 percent of the national average purchase price determined under 
paragraph (b)(5) of this section.

[[Page 68]]

    (ii) For 1993 and subsequent years, the amount cannot be greater 
than 120 percent of the national average nor less than 90 percent of the 
national average purchase price determined under paragraph (b)(5) of 
this section.
    (c) Payment for therapeutic shoes. The payment rules specified in 
paragraphs (a) and (b) of this section are applicable to custom molded 
and extra depth shoes, modifications, and inserts (therapeutic shoes) 
furnished after December 31, 2004.

[57 FR 57691, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995; 73 
FR 69937, Nov. 19, 2008]



Sec. 414.229  Other durable medical equipment--capped rental items.

    (a) General payment rule. Payment is made for other durable medical 
equipment that is not subject to the payment provisions set forth in 
Sec. 414.220 through Sec. 414.228 as follows:
    (1) For items furnished prior to January 1, 2006, payment is made on 
a rental or purchase option basis in accordance with the rules set forth 
in paragraphs (b) through (e) of this section.
    (2) For items other than power-driven wheelchairs furnished on or 
after January 1, 2006, payment is made in accordance with the rules set 
forth in paragraph (f) of this section.
    (3) For power-driven wheelchairs furnished on or after January 1, 
2006 through December 31, 2010, payment is made in accordance with the 
rules set forth in paragraphs (f) or (h) of this section.
    (4) For power-driven wheelchairs that are not classified as complex 
rehabilitative power-driven wheelchairs, furnished on or after January 
1, 2011, payment is made in accordance with the rules set forth in 
paragraph (f) of this section.
    (5) For power-driven wheelchairs classified as complex 
rehabilitative power-driven wheelchairs, furnished on or after January 
1, 2011, payment is made in accordance with the rules set forth in 
paragraphs (f) or (h) of this section.
    (b) Fee schedule amounts for rental. (1) For 1989 and 1990, the 
monthly fee schedule amount for rental of other covered durable medical 
equipment equals 10 percent of the purchase price recognized as 
determined under paragraph (c) of this section subject to the following 
limitation: For 1989 and 1990, the fee schedule amount cannot be greater 
than 115 percent nor less than 85 percent of the prevailing charge, as 
determined under Sec. 405.504 of this chapter, established for rental of 
the item in January 1987, as adjusted by the change in the level of the 
CPI-U for the 6-month period ending December 1987.
    (2) For 1991 and subsequent years, the monthly fee schedule amount 
for rental of other covered durable medical equipment equals 10 percent 
of the purchase price recognized as determined under paragraph (c) of 
this section for each of the first 3 months and 7.5 percent of the 
purchase price for each of the remaining months.
    (3) For power-driven wheelchairs furnished on or after January 1, 
2011, the monthly fee schedule amount for rental equipment equals 15 
percent of the purchase price recognized as determined under paragraph 
(c) of this section for each of the first 3 months and 6 percent of the 
purchase price for each of the remaining months.
    (c) Determination of purchase price. The purchase price of other 
covered durable medical equipment is determined as follows:
    (1) For 1989 and 1990. (i) The carrier determines a base local 
purchase price amount equal to the average of the purchase prices 
submitted on an assignment-related basis of new items supplied during 
the 6-month period ending December 1986.
    (ii) The purchase price is equal to the base local purchase price 
adjusted by the change in the level of the CPI-U for the 6-month period 
ending December 1987.
    (2) For 1991. (i) The local payment amount is the purchase price for 
the preceding year adjusted by the covered item update for 1991 and 
decreased by the percentage by which the average of the reasonable 
charges for claims paid for all other items described in Sec. 414.229, 
is lower than the average of the purchase prices submitted for such 
items during the final 9 months of 1988.
    (ii) The purchase price for 1991 is the national limited payment 
amount as determined using the methodology contained in Sec. 414.220(f).

[[Page 69]]

    (3) For years after 1991. The purchase price is determined using the 
methodology contained in paragraphs (d) through (f) of Sec. 414.220.
    (d) Purchase option. Suppliers must offer a purchase option to 
beneficiaries during the 10th continuous rental month and, for power-
driven wheelchairs, the purchase option must also be made available at 
the time the equipment is initially furnished.
    (1) Suppliers must offer beneficiaries the option of purchasing 
power-driven wheelchairs at the time the supplier first furnishes the 
item. On or after January 1, 2011, this option is available only for 
complex rehabilitative power-driven wheelchairs. Payment must be on a 
lump-sum fee schedule purchase basis if the beneficiary chooses the 
purchase option. The purchase fee is the amount established in paragraph 
(c) of this section.
    (2) Suppliers must offer beneficiaries the option of converting 
capped rental items (including power-driven wheelchairs not purchased 
when initially furnished) to purchased equipment during their 10th 
continuous rental month. Beneficiaries have one month from the date the 
supplier makes the offer to accept the purchase option.
    (i) If the beneficiary does not accept the purchase option, payment 
continues on a rental basis not to exceed a period of continuous use of 
longer than 15 months. After 15 months of rental payments have been 
paid, the supplier must continue to provide the item without charge, 
other than a charge for maintenance and servicing fees, until medical 
necessity ends or Medicare coverage ceases. A period of continuous use 
is determined under the provisions in Sec. 414.230.
    (ii) If the beneficiary accepts the purchase option, payment 
continues on a rental basis not to exceed a period of continuous use of 
longer than 13 months. On the first day after 13 continuous rental 
months during which payment is made, the supplier must transfer title to 
the equipment to the beneficiary.
    (e) Payment for maintenance and servicing. (1) The carrier 
establishes a reasonable fee for maintenance and servicing for each 
rented item of other durable medical equipment. The fee may not exceed 
10 percent of the purchase price recognized as determined under 
paragraph (c) of this section.
    (2) Payment of the fee for maintenance and servicing of other 
durable medical equipment that is rented is made only for equipment that 
continues to be used after 15 months of rental payments have been made 
and is limited to the following:
    (i) For the first 6-month period, no payments are to be made.
    (ii) For each succeeding 6-month period, payment may be made during 
the first month of that period.
    (3) Payment for maintenance and servicing DME purchased in 
accordance with paragraphs (d)(1) and (d)(2)(ii) of this section, is 
made on the basis of reasonable and necessary charges.
    (f) Rules for capped rental items furnished beginning on or after 
January 1, 2006. (1) For items furnished on or after January 1, 2006, 
payment is made based on a monthly rental fee schedule amount during the 
period of medical need, but for no longer than a period of continuous 
use of 13 months. A period of continuous use is determined under the 
provisions in Sec. 414.230.
    (2) The supplier must transfer title to the item to the beneficiary 
on the first day that begins after the 13th continuous month in which 
payments are made under paragraph (f)(1) of this section.
    (3) Payment for maintenance and servicing of beneficiary-owned 
equipment is made in accordance with Sec. 414.210(e).
    (g) Additional supplier requirements for capped rental items that 
are furnished beginning on or after January 1, 2007. (1) The supplier 
that furnishes an item for the first month during which payment is made 
using the methodology described in paragraph (f)(1) of this section must 
continue to furnish the equipment until medical necessity ends, or the 
13-month period of continuous use ends, whichever is earlier, unless--
    (i) The item becomes subject to a competitive acquisition program 
implemented in accordance with section 1847(a) of the Act;
    (ii) The beneficiary relocates to an area that is outside the normal 
service

[[Page 70]]

area of the supplier that initially furnished the equipment;
    (iii) The beneficiary elects to obtain the equipment from a 
different supplier prior to the expiration of the 13-month rental 
period; or
    (iv) CMS or the carrier determines that an exception should apply in 
an individual case based on the circumstances.
    (2) A capped rental item furnished under this section may not be 
replaced by the supplier prior to the expiration of the 13-month rental 
period unless:
    (i) The supplier replaces an item with the same, or equivalent, make 
and model of equipment because the item initially furnished was lost, 
stolen, irreparably damaged, is being repaired, or no longer functions;
    (ii) A physician orders different equipment for the beneficiary. If 
the need for different equipment is based on medical necessity, then the 
order must indicate why the equipment initially furnished is no longer 
medically necessary and the supplier must retain this order in the 
beneficiary's medical record;
    (iii) The beneficiary chooses to obtain a newer technology item or 
upgraded item and signs an advanced beneficiary notice (ABN); or
    (iv) CMS or the carrier determines that a change in equipment is 
warranted.
    (3) Before furnishing a capped rental item, the supplier must 
disclose to the beneficiary its intentions regarding whether it will 
accept assignment of all monthly rental claims for the duration of the 
rental period. A supplier's intentions could be expressed in the form of 
a written agreement between the supplier and the beneficiary.
    (4) No later than two months before the date on which the supplier 
must transfer title to a capped rental item to the beneficiary, the 
supplier must disclose to the beneficiary whether it can maintain and 
service the item after the beneficiary acquires title to it. CMS or its 
carriers may make exceptions to this requirement on a case-by-case 
basis.
    (h) Purchase of power-driven wheelchairs furnished on or after 
January 1, 2006. (1) Suppliers must offer beneficiaries the option to 
purchase power-driven wheelchairs at the time the equipment is initially 
furnished.
    (2) Payment is made on a lump-sum purchase basis if the beneficiary 
chooses this option.
    (3) On or after January 1, 2011, this option is available only for 
complex rehabilitative power-driven wheelchairs.

[57 FR 57691, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995; 71 
FR 65934, Nov. 9, 2006; 75 FR 73622, Nov. 29, 2010]



Sec. 414.230  Determining a period of continuous use.

    (a) Scope. This section sets forth the rules that apply in 
determining a period of continuous use for rental of durable medical 
equipment.
    (b) Continuous use. (1) A period of continuous use begins with the 
first month of medical need and lasts until a beneficiary's medical need 
for a particular item of durable medical equipment ends.
    (2) In the case of a beneficiary receiving oxygen equipment on 
December 31, 2005, the period of continuous use for the equipment begins 
on January 1, 2006.
    (c) Temporary interruption. (1) A period of continuous use allows 
for temporary interruptions in the use of equipment.
    (2) An interruption of not longer than 60 consecutive days plus the 
days remaining in the rental month in which use ceases is temporary, 
regardless of the reason for the interruption.
    (3) Unless there is a break in medical necessity that lasts lnnger 
than 60 consecutive days plus the days remaining in the rental month in 
which use ceases, medical necessity is presumed to continue.
    (d) Criteria for a new rental period. If an interruption in the use 
of equipment continues for more than 60 consecutive days plus the days 
remaining in the rental month in which use ceases, a new rental period 
begins if the supplier submits all of the following information--
    (1) A new prescription.
    (2) New medical necessity documentation.
    (3) A statement describing the reason for the interruption and 
demonstrating that medical necessity in the prior episode ended.

[[Page 71]]

    (e) Beneficiary moves. A permanent or temporary move made by a 
beneficiary does not constitute an interruption in the period of 
continuous use.
    (f) New equipment. (1) If a beneficiary changes equipment or 
requires additional equipment based on a physician's prescription, and 
the new or additional equipment is found to be necessary, a new period 
of continuous use begins for the new or additional equipment. A new 
period of continuous use does not begin for base equipment that is 
modified by an addition.
    (2) A new period of continuous use does not begin when a beneficiary 
changes from one stationary oxygen equipment modality to another or from 
one portable oxygen equipment modality to another.
    (g) New supplier. If a beneficiary changes suppliers, a new period 
of continuous use does not begin.
    (h) Oxygen equipment furnished after the 36-month rental period. A 
new period of continuous use does not begin under any circumstance in 
the case of oxygen equipment furnished after the 36-month rental period 
in accordance with Sec. 414.226(f) until the end of the reasonable 
useful lifetime established for such equipment in accordance with 
Sec. 414.210(f).

[56 FR 50823, Oct. 9, 1991, as amended at 57 FR 57111, Dec. 3, 1992; 71 
FR 65935, Nov. 9, 2006; 73 FR 69937, Nov. 19, 2008]



Sec. 414.232  Special payment rules for transcutaneous electrical 
nerve stimulators (TENS).

    (a) General payment rule. Except as provided in paragraph (b) of 
this section, payment for TENS is made on a purchase basis with the 
purchase price determined using the methodology for purchase of 
inexpensive or routinely purchased items as described in Sec. 414.220. 
The payment amount for TENS computed under Sec. 414.220(c)(2) is reduced 
according to the following formula:
    (1) Effective April 1, 1990--the original payment amount is reduced 
by 15 percent.
    (2) Effective January 1, 1991--the reduced payment amount in 
paragraph (a)(1) is reduced by 15 percent.
    (3) Effective January 1, 1994--the reduced payment amount in 
paragraph (a)(1) is reduced by 45 percent.
    (b) Exception. In order to permit an attending physician time to 
determine whether the purchase of the TENS is medically appropriate for 
a particular patient, two months of rental payments may be made in 
addition to the purchase price. The rental payments are equal to 10 
percent of the purchase price.

[57 FR 57692, Dec. 7, 1992, as amended at 60 FR 35498, July 10, 1995]



Sec. 414.234  Prior authorization for items frequently subject to 
unnecessary utilization.

    (a) Definitions. For the purpose of this section, the following 
definitions apply:
    Prior authorization is a process through which a request for 
provisional affirmation of coverage is submitted to CMS or its 
contractors for review before the item is furnished to the beneficiary 
and before the claim is submitted for processing.
    Provisional affirmation is a preliminary finding that a future claim 
meets Medicare's coverage, coding, and payment rules.
    Unnecessary utilization means the furnishing of items that do not 
comply with one or more of Medicare's coverage, coding, and payment 
rules.
    (b) Master list of items frequently subject to unnecessary 
utilization. (1) The Master List of Items Frequently Subject to 
Unnecessary Utilization includes items listed on the Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies fee schedule with an 
average purchase fee of $1,000 (adjusted annually for inflation using 
consumer price index for all urban consumers (CPI-U)) or greater or an 
average rental fee schedule of $100 (adjusted annually for inflation 
using CPI-U) or greater that also meet one of the following two 
criteria:
    (i) The item has been identified as having a high rate of fraud or 
unnecessary utilization in a report that is national in scope from 2007 
or later published by any of the following:
    (A) The Office of Inspector General (OIG).

[[Page 72]]

    (B) The General Accountability Office (GAO).
    (ii) The item is listed in the 2011 or later Comprehensive Error 
Rate Testing (CERT) program's Annual Medicare Fee-For-Service (FFS) 
Improper Payment Rate Report DME and/or DMEPOS Service Specific 
Report(s).
    (2) The Master List of DMEPOS Items Frequently Subject to 
Unnecessary Utilization is self-updating annually and is published in 
the Federal Register.
    (3) DMEPOS items identified as having a high rate of fraud or 
unnecessary utilization in any of the following reports that are 
national in scope and meeting the payment threshold criteria set forth 
in paragraph (b)(1) of this section are added to the Master List:
    (i) OIG reports published after 2015.
    (ii) GAO reports published after 2015.
    (iii) CERT program's Annual Medicare FFS Improper Payment Rate 
Report DME and/or DMEPOS Service Specific Report(s) published after 
2015, also referred to as the Comprehensive Error Rate Testing (CERT) 
program's Annual Medicare FFS Improper Payment Rate Report DME Service 
Specific Report(s).
    (4) Items remain on the Master List for 10 years from the date the 
item was added to the Master List.
    (5) Items that are discontinued or are no longer covered by Medicare 
are removed from the Master List.
    (6) An item is removed from the list if the purchase amount drops 
below the payment threshold (an average purchase fee of $1,000 or 
greater or an average monthly rental fee schedule of $100 or greater).
    (7) An item is removed from the Master List and replaced by its 
equivalent when the Healthcare Common Procedure Coding System (HCPCS) 
code representing the item has been discontinued and cross-walked to an 
equivalent item.
    (c) Condition of payment--(1) Items requiring prior authorization. 
CMS publishes in the Federal Register and posts on the CMS Prior 
Authorization Web site a list of items, the Required Prior Authorization 
List, that require prior authorization as a condition of payment.
    (i) The Required Prior Authorization List specified in paragraph 
(c)(1) of this section is selected from the Master List of Items 
Frequently Subject to Unnecessary Utilization (as described in paragraph 
(b) of this section). CMS may consider factors such as geographic 
location, item utilization or cost, system capabilities, administrative 
burden, emerging trends, vulnerabilities identified in official agency 
reports, or other data analysis.
    (ii) CMS may elect to limit the prior authorization requirement to a 
particular region of the country if claims data analysis shows that 
unnecessary utilization of the selected item(s) is concentrated in a 
particular region.
    (iii) The Required Prior Authorization List is effective no less 
than 60 days after publication and posting.
    (2) Denial of claims. (i) CMS or its contractors denies a claim for 
an item that requires prior authorization if the claim has not received 
a provisional affirmation.
    (ii) Claims receiving a provisional affirmation may be denied based 
on either of the following:
    (A) Technical requirements that can only be evaluated after the 
claim has been submitted for formal processing.
    (B) Information not available at the time of a prior authorization 
request.
    (d) Submission of prior authorization requests. A prior 
authorization request must do the following:
    (1) Include all relevant documentation necessary to show that the 
item meets applicable Medicare coverage, coding, and payment rules, 
including all of the following:
    (i) Order.
    (ii) Relevant information from the beneficiary's medical record.
    (iii) Relevant supplier produced documentation.
    (2) Be submitted before the item is furnished to the beneficiary and 
before the claim is submitted for processing.
    (e) Review of prior authorization requests. (1) After receipt of a 
prior authorization request, CMS or its contractor reviews the prior 
authorization request for compliance with applicable Medicare coverage, 
coding, and payment rules.
    (2) If applicable Medicare coverage, coding, and payment rules are 
met,

[[Page 73]]

CMS or its contractor issues a provisional affirmation to the requester.
    (3)(i) If applicable Medicare coverage, coding, and payment rules 
are not met, CMS or its contractor issues a non-affirmation decision to 
the requester.
    (ii) If the requester receives a non-affirmation decision, the 
requester may resubmit a prior authorization request before the item is 
furnished to the beneficiary and before the claim is submitted for 
processing.
    (4) Expedited reviews. (i) A prior authorization request for an 
expedited review must include documentation that shows that processing a 
prior authorization request using a standard timeline for review could 
seriously jeopardize the life or health of the beneficiary or the 
beneficiary's ability to regain maximum function.
    (ii) If CMS or its contractor agrees that processing a prior 
authorization request using a standard timeline for review could 
seriously jeopardize the life or health of the beneficiary or the 
beneficiary's ability to regain maximum function, then CMS or its 
contractor expedites the review of the prior authorization request and 
communicates the decision following the receipt of all applicable 
Medicare required documentation.
    (f) Suspension of prior authorization requests. (1) CMS may suspend 
prior authorization requirements generally or for a particular item or 
items at any time and without undertaking rulemaking.
    (2) CMS provides notification of the suspension of the prior 
authorization requirements via--
    (i) Federal Register notice; and
    (ii) Posting on the CMS prior authorization Web site.

[80 FR 81706, Dec. 30, 2015]



  Subpart E_Determination of Reasonable Charges Under the ESRD Program



Sec. 414.300  Scope of subpart.

    This subpart sets forth criteria and procedures for payment of the 
following services furnished to ESRD patients:
    (a) Physician services related to renal dialysis.
    (b) Physician services related to renal transplantation.
    (c) Home dialysis equipment, supplies, and support services.
    (d) Epoetin (EPO) furnished by a supplier of home dialysis equipment 
and supplies to a home dialysis patient for use in the home.

[55 FR 23441, June 8, 1990, as amended at 56 FR 43710, Sept. 4, 1991; 59 
FR 1285, Jan. 10, 1994]



Sec. 414.310  Determination of reasonable charges for physician services 
furnished to renal dialysis patients.

    (a) Principle. Physician services furnished to renal dialysis 
patients are subject to payment if the services are otherwise covered by 
the Medicare program and if they are considered reasonable and medically 
necessary in accordance with section 1862(a)(1)(A) of the Act.
    (b) Scope and applicability--(1) Scope. This section pertains to 
physician services furnished to the following patients:
    (i) Outpatient maintenance dialysis patients who dialyze--
    (A) In an independent or hospital-based ESRD facility, or
    (B) At home.
    (ii) Hospital inpatients for which the physician elects to continue 
payment under the monthly capitation payment (MCP) method described in 
Sec. 414.314.
    (2) Applicability. These provisions apply to routine professional 
services of physicians. They do not apply to administrative services 
performed by physicians, which are paid for as part of a prospective 
payment for dialysis services made to the facility under Sec. 413.170 of 
this chapter.
    (c) Definitions. For purposes of this section, the following 
definitions apply:
    Administrative services are physician services that are 
differentiated from routine professional services and other physician 
services because they are supervision, as described in the definition of 
``supervision of staff'' of this section, or are not related directly to 
the care of an individual patient, but are supportive of the facility as 
a whole and of benefit to patients in general. Examples of 
administrative services include

[[Page 74]]

supervision of staff, staff training, participation in staff conferences 
and in the management of the facility, and advising staff on the 
procurement of supplies.
    Dialysis session is the period of time that begins when the patient 
arrives at the facility and ends when the patient departs from the 
facility. In the case of home dialysis, the period begins when the 
patient prepares for dialysis and generally ends when the patient is 
disconnected from the machine. In this context, a dialysis facility 
includes only those parts of the building used as a facility. It does 
not include any areas used as a physician's office.
    Medical direction, in contrast to supervision of staff, is a routine 
professional service that entails substantial direct involvement and the 
physical presence of the physician in the delivery of services directly 
to the patient.
    Routine professional services include all physicians' services 
furnished during a dialysis session and all services listed in paragraph 
(d) of this section that meet the following requirements:
    (1) They are personally furnished by a physician to an individual 
patient.
    (2) They contribute directly to the diagnosis or treatment of an 
individual patient.
    (3) They ordinarily must be performed by a physician.
    Supervision of staff, in contrast to medical direction, is an 
administrative service that does not necessarily require the physician 
to be present at the dialysis session. It is a general activity 
primarily concerned with monitoring performance of and giving guidance 
to other health care personnel (such as nurses and dialysis technicians) 
who deliver services to patients.
    (d) Types of routine professional services. Routine professional 
services include at least all of the following services when medically 
appropriate:
    (1) Visits to the patient during dialysis, and review of laboratory 
test results, nurses' notes and any other medical documentation, as a 
basis for--
    (i) Adjustment of the patient's medication or diet, or the dialysis 
procedure;
    (ii) Prescription of medical supplies; and
    (iii) Evaluation of the patient's psychosocial status and the 
appropriateness of the treatment modality.
    (2) Medical direction of staff in delivering services to a patient 
during a dialysis session.
    (3) Pre-dialysis and post-dialysis examinations, or examinations 
that could have been furnished on a pre-dialysis or post-dialysis basis.
    (4) Insertion of catheters for patients who are on peritoneal 
dialysis and do not have indwelling catheters.
    (e) Payment for routine professional services. Beginning August 7, 
1990, routine professional services furnished by physicians may be paid 
under either the ``initial method'' of payment described in 
Sec. 414.313, (if all of the physicians at the facility elect the 
initial method) or under the ``physician MCP method'' described in 
Sec. 414.314. Physician services furnished after July 31, 1983 and 
before August 6, 1990, are payable only under the MCP method described 
in Sec. 414.314.



Sec. 414.313  Initial method of payment.

    (a) Basic rule. Under this method, the intermediary pays the 
facility for routine professional services furnished by physicians. 
Payment is in the form of an add-on to the facility's composite rate 
payment, which is described in part 413, subpart H of this subchapter.
    (b) Services for which payment is not included in the add-on 
payment. (1) Physician administrative services are considered to be 
facility services and are paid for as part of the facility's composite 
rate.
    (2) The carrier pays the physician or the beneficiary (as 
appropriate) under the reasonable charge criteria set forth in subpart E 
of part 405 of this chapter for the following services:
    (i) Physician services that must be furnished at a time other than 
during the dialysis session (excluding pre-dialysis and post-dialysis 
examinations and examinations that could have been furnished on a pre-
dialysis or post-dialysis basis), such as monthly and semi-annual 
examinations to review health status and treatment.
    (ii) Physician surgical services other than insertion of catheters 
for patients who are on peritoneal dialysis and do not have indwelling 
catheters.

[[Page 75]]

    (iii) Physician services furnished to hospital inpatients who were 
not admitted solely to receive maintenance dialysis.
    (iv) Administration of hepatitis B vaccine.
    (c) Physician election of the initial method. (1) Each physician in 
a facility must submit to the appropriate carrier and intermediary that 
serve the facility a statement of election of the initial method of 
payment for all the ESRD facility patients that he or she attends.
    (2) The initial method of payment applies to dialysis services 
furnished beginning with the second calendar month after the month in 
which all physicians in the facility elect the initial method and 
continues until the effective date of a termination of the election 
described in paragraph (d) of this section.
    (d) Termination of the initial method. (1) Physicians may terminate 
the initial method of payment by written notice to the carrier(s) that 
serves each physician and to the intermediary that serves the facility.
    (2) If the notice terminating the initial method is received by the 
carrier(s) and intermediary--
    (i) On or before November 1, the effective date of the termination 
is January 1 of the year following the calendar year in which the 
termination notice is received by the carrier(s) and intermediary; or
    (ii) After November 1, the effective date of the termination is 
January 1 of the second year after the calendar year in which the notice 
is received by the carrier(s) and intermediary.
    (e) Determination of payment amount. The factors used in determining 
the add-on amount are related to program experience. They are re-
evaluated periodically and may be adjusted, as determined necessary by 
CMS, to maintain the payment at a level commensurate with the prevailing 
charges of other physicians for comparable services.
    (f) Publication of payment amount. Revisions to the add-on amounts 
are published in the Federal Register in accordance with the 
Department's established rulemaking procedures.

[55 FR 23441, June 8, 1990, as amended at 62 FR 43674, Aug. 15, 1997]



Sec. 414.314  Monthly capitation payment method.

    (a) Basic rules. (1) Under the monthly capitation payment (MCP) 
method, the carrier pays an MCP amount for each patient, to cover all 
professional services furnished by the physician, except those listed in 
paragraph (b) of this section.
    (2) The carrier pays the MCP amount, subject to the deductible and 
coinsurance provisions, either to the physician if the physician accepts 
assignment or to the beneficiary if the physician does not accept 
assignment.
    (3) The MCP method recognizes the need of maintenance dialysis 
patients for physician services furnished periodically over relatively 
long periods of time, and the capitation amounts are consistent with 
physicians' charging patterns in their localities.
    (4) Payment of the capitation amount for any particular month is 
contingent upon the physician furnishing to the patient all physician 
services required by the patient during the month, except those listed 
in paragraph (b) of this section.
    (5) Payment for physician administrative services (Sec. 414.310) is 
made to the dialysis facility as part of the facility's composite rate 
(part 413, subpart H of this subchapter) and not to the physician under 
the MCP.
    (b) Services not included in the MCP. (1) Services that are not 
included in the MCP and which may be paid in accordance with the 
reasonable charge rules set forth in subpart E of part 405 of this 
chapter are limited to the following:
    (i) Administration of hepatitis B vaccine.
    (ii) Covered physician services furnished by another physician when 
the patient is not available to receive, or the attending physician is 
not available to furnish, the outpatient services as usual (see 
paragraph (b)(3) of this section).
    (iii) Covered physician services furnished to hospital inpatients, 
including services related to inpatient dialysis, by a physician who 
elects not to continue to receive the MCP during the period of inpatient 
stay.

[[Page 76]]

    (iv) Surgical services, including declotting of shunts, other than 
the insertion of catheters for patients on maintenance peritoneal 
dialysis who do not have indwelling catheters.
    (v) Needed physician services that are--
    (A) Furnished by the physician furnishing renal care or by another 
physician;
    (B) Not related to the treatment of the patient's renal condition; 
and
    (C) Not furnished during a dialysis session or an office visit 
required because of the patient's renal condition.
    (2) For the services described in paragraph (b)(1)(v) of this 
section, the following rules apply:
    (i) The physician must provide documentation to show that the 
services are not related to the treatment of the patient's renal 
condition and that additional visits are required.
    (ii) The carrier's medical staff, acting on the basis of the 
documentation and appropriate medical consultation obtained by the 
carrier, determines whether additional payment for the additional 
services is warranted.
    (3) The MCP is reduced in proportion to the number of days the 
patient is--
    (i) Hospitalized and the physician elects to bill separately for 
services furnished during hospitalization; or
    (ii) Not attended by the physician or his or her substitute for any 
reason, including when the physician is not available to furnish patient 
care or when the patient is not available to receive care.
    (c) Determination of payment amount. The amount of payment for the 
MCP is determined under the Medicare physician fee schedule described in 
this part 414.

[55 FR 23441, June 8, 1990, as amended at 59 FR 63463, Dec. 8, 1994; 62 
FR 43674, Aug. 15, 1997]



Sec. 414.316  Payment for physician services to patients in training for 
self-dialysis and home dialysis.

    (a) For each patient, the carrier pays a flat amount that covers all 
physician services required to create the capacity for self-dialysis and 
home dialysis.
    (b) CMS determines the amount on the basis of program experience and 
reviews it periodically.
    (c) The payment is made at the end of the training course, is 
subject to the deductible and coinsurance provisions, and is in addition 
to any amounts payable under the initial or MCP methods set forth in 
Secs. 414.313 and 414.314, respectively.
    (d) If the training is not completed, the payment amount is 
proportionate to the time spent in training.



Sec. 414.320  Determination of reasonable charges for physician renal 
transplantation services.

    (a) Comprehensive payment for services furnished during a 60-day 
period. (1) The comprehensive payment is subject to the deductible and 
coinsurance provisions and is for all surgeon services furnished during 
a period of 60 days in connection with a renal transplantation, 
including the usual preoperative and postoperative care, and for 
immunosuppressant therapy if supervised by the transplant surgeon.
    (2) Additional sums, in amounts established on the basis of program 
experience, may be included in the comprehensive payment for other 
surgery performed concurrently with the transplant operation.
    (3) The amount of the comprehensive payment may not exceed the lower 
of the following:
    (i) The actual charges made for the services.
    (ii) Overall national payment levels established under the ESRD 
program and adjusted to give effect to variations in physician's charges 
throughout the nation. (These adjusted amounts are the maximum 
allowances in a carrier's service area for renal transplantation surgery 
and related services by surgeons.)
    (4) Maximum allowances computed under these instructions are revised 
at the beginning of each calendar year to the extent permitted by the 
lesser of the following:
    (i) Changes in the economic index as described in 
Sec. 405.504(a)(3)(i) of this chapter.
    (ii) Percentage changes in the weighted average of the carrier's 
prevailing charges (before adjustment by the economic index) for--
    (A) A unilateral nephrectomy; or

[[Page 77]]

    (B) Another medical or surgical service designated by CMS for this 
purpose.
    (b) Other payments. Payments for covered medical services furnished 
to the transplant beneficiary by other specialists, as well as for 
services by the transplant surgeon after the 60-day period covered by 
the comprehensive payment, are made under the reasonable charge criteria 
set forth in Sec. 405.502 (a) through (d) of this chapter. The payments 
for physicians' services in connection with renal transplantations are 
changed on the basis of program experience and the expected advances in 
the medical art for this operation.



Sec. 414.330  Payment for home dialysis equipment, supplies, and support 
services.

    (a) Equipment and supplies--(1) Basic rule. Except as provided in 
paragraph (a)(2) of this section, Medicare pays for home dialysis 
equipment and supplies only under the prospective payment rates 
established at Sec. 413.210.
    (2) Exception for equipment and supplies furnished prior to January 
1, 2011. If the conditions in subparagraphs (a)(2) (i) through (iv) of 
this section are met, Medicare pays for home analysis equipment and 
supplies on a reasonable charge basis in accordance with subpart E 
(Criteria for Determination of Reasonable Charges; Reimbursement for 
Services of Hospital Interns, Residents, and Supervising Physicians) of 
part 405, but the amount of payment may not exceed the limit for 
equipment and supplies in paragraph (c)(2) of this section.
    (i) The patient elects to obtain home dialysis equipment and 
supplies from a supplier that is not a Medicare approved dialysis 
facility.
    (ii) The patient certifies to CMS that he or she has only one 
supplier for all home dialysis equipment and supplies. This 
certification is made on CMS Form 382 (the ``ESRD Beneficiary 
Selection'' form).
    (iii) In writing, the supplier--
    (A) Agrees to receive Medicare payment for home dialysis supplies 
and equipment only on an assignment-related basis; and
    (B) Certifies to CMS that it has a written agreement with one 
Medicare approved dialysis facility or, if the beneficiary is also 
entitled to military or veteran's benefits, one military or Veterans 
Administration hospital, for each patient. (See part 494 of this chapter 
for the requirements for a Medicare approved dialysis facility.) Under 
the agreement, the facility or military or VA hospital agrees to the 
following:
    (1) To furnish all home dialysis support services for each patient 
in accordance with part 494 (Conditions for Coverage for End-Stage Renal 
Disease Facilities) of this chapter. (Sec. 410.52 sets forth the scope 
and conditions of Medicare Part B coverage of home dialysis services, 
supplies, and equipment.)
    (2) To furnish institutional dialysis services and supplies. 
(Sec. 410.50 sets forth the scope and conditions for Medicare Part B 
coverage of institutional dialysis services and supplies.)
    (3) To furnish dialysis-related emergency services.
    (4) To arrange for a Medicare approved laboratory to perform 
dialysis-related laboratory tests that are covered under the composite 
rate established at Sec. 413.170 and to arrange for the laboratory to 
seek payment from the facility. The facility then includes these 
laboratory services in its claim for payment for home dialysis support 
services.
    (5) To arrange for a Medicare approved laboratory to perform 
dialysis-related laboratory tests that are not covered under the 
composite rate established at Sec. 413.170 and for which the laboratory 
files a Medicare claim directly.
    (6) To furnish all other necessary dialysis services and supplies 
(that is, those which are not home dialysis equipment and supplies).
    (7) To satisfy all documentation, recordkeeping and reporting 
requirements in part 494 (Conditions for Coverage for End-Stage Renal 
Disease Facilities) of this chapter. This includes maintaining a 
complete medical record of ESRD related items and services furnished by 
other parties. The facility must report, on the forms required by CMS or 
the ESRD network, all data for each patient in accordance with subpart 
U.
    (iv) The facility with which the agreement is made must be located 
within a reasonable distance from the patient's home (that is, located 
so that

[[Page 78]]

the facility can actually furnish the needed services in a practical and 
timely manner, taking into account variables like the terrain, whether 
the patient's home is located in an urban or rural area, the 
availability of transportation, and the usual distances traveled by 
patients in the area to obtain health care services).
    (C) Agrees to report to the ESRD facility providing support 
services, at least every 45 days, all data (meaning information showing 
what supplies and services were provided to the patient and when each 
was provided) for each patient regarding services and items furnished to 
the patient in accordance with Sec. 494.100(c)(2) of this chapter.
    (b) Support services--(1) Basic rule. Except as provided in 
paragraph (b)(2) of this section, Medicare pays for support services 
only under the prospective payment rates established in Sec. 413.210 of 
this chapter.
    (2) Exception for home support services furnished prior to January 
1, 2011. If the patient elects to obtain home dialysis equipment and 
supplies from a supplier that is not an approved ESRD facility, Medicare 
pays for support services, other than support services furnished by 
military or VA hospitals referred to in paragraph (a)(2)(iii)(B) of this 
section, under paragraphs (b)(2) (i) and (ii) of this section but in no 
case may the amount of payment exceed the limit for support services in 
paragraph (c)(1) of this section:
    (i) For support services furnished by a hospital-based ESRD 
facility, Medicare pays on a reasonable cost basis in accordance with 
part 413 of this chapter.
    (ii) For support services furnished by an independent ESRD facility, 
Medicare pays on the basis of reasonable charges that are related to 
costs and allowances that are reasonable when the services are furnished 
in an effective and economical manner.
    (c) Payment limits for support services, equipment and supplies, and 
notification of changes to the payment limits apply prior to January 1, 
2011 as follows:
    (1) Support services. The amount of payment for home dialysis 
support services is limited to the national average Medicare-allowed 
charge per patient per month for home dialysis support services, as 
determined by CMS, plus the median cost per treatment for all dialysis 
facilities for laboratory tests included under the composite rate, as 
determined by CMS, multiplied by the national average number of 
treatments per month.
    (2) Equipment and supplies. Payment for home dialysis equipment and 
supplies is limited to an amount equal to the result obtained by 
subtracting the support services payment limit in paragraph (c)(1) of 
this section from the amount (or, in the case of continuous cycling 
peritoneal dialysis, 130 percent) of the national median payment as 
determined by CMS that would have been made under the prospective 
payment rates established in Sec. 413.170 of this chapter for hospital-
based facilities.
    (3) Notification of changes to the payment limits. Updated data are 
incorporated into the payment limits when the prospective payment rates 
established at Sec. 413.170 of this chapter are updated, and changes are 
announced by notice in the Federal Register without a public comment 
period. Revisions of the methodology for determining the limits are 
published in the Federal Register in accordance with the Department's 
established rulemaking procedures.

[57 FR 54187, Nov. 17, 1992, as amended at 73 FR 20474, Apr. 15, 2008; 
75 FR 49202, Aug. 12, 2010]



Sec. 414.335  Payment for EPO furnished to a home dialysis patient 
for use in the home.

    (a) Prior to January 1, 2011, payment for EPO used at home by a home 
dialysis patient is made only to either a Medicare approved ESRD 
facility or a supplier of home dialysis equipment and supplies. 
Effective January 1, 2011, payment for EPO used at home by a home 
dialysis patient is made only to a Medicare-approved ESRD facility in 
accordance with the per treatment payment as defined in Sec. 413.230.
    (b) After January 1, 2011, a home and self training amount is added 
to the per treatment base rate for adult and pediatric patients as 
defined in Sec. 413.230

[75 FR 49202, Aug. 12, 2010]

[[Page 79]]



  Subpart F_Competitive Bidding for Certain Durable Medical Equipment, 
              Prosthetics, Orthotics, and Supplies (DMEPOS)



Sec. 414.400  Purpose and basis.

    This subpart implements competitive bidding programs for certain 
DMEPOS items as required by sections 1847(a) and (b) of the Act.

[72 FR 18084, Apr. 10, 2007]



Sec. 414.402  Definitions.

    For purposes of this subpart, the following definitions apply:
    Affected party means a contract supplier that has been notified that 
their DMEPOS CBP contract will be terminated for a breach of contract.
    Bid means an offer to furnish an item for a particular price and 
time period that includes, where appropriate, any services that are 
directly related to the furnishing of the item.
    Bidding entity means the entity whose legal business name is 
identified in the ``Form A: Business Organization Information'' section 
of the bid.
    Breach of contract means any deviation from contract requirements, 
including a failure to comply with a governmental agency or licensing 
organization requirements, constitutes a breach of contract.
    Competitive bidding area (CBA) means an area established by the 
Secretary under this subpart.
    Competitive bidding program means a program established under this 
subpart within a designated CBA.
    Composite bid means the sum of a supplier's weighted bids for all 
items within a product category for purposes of allowing a comparison 
across bidding suppliers.
    Contract supplier means an entity that is awarded a contract by CMS 
to furnish items under a competitive bidding program.
    Corrective action plan (CAP) means a contract supplier's written 
document with supporting information that describes the actions the 
contract supplier will take within a specified timeframe to remedy a 
breach of contract.
    Covered document means a financial, tax, or other document required 
to be submitted by a bidder as part of an original bid submission under 
a competitive acquisition program in order to meet the required 
financial standards.
    Covered document review date means the later of--
    (1) The date that is 30 days before the final date for the closing 
of the bid window; or
    (2) The date that is 30 days after the opening of the bid window.
    DMEPOS stands for durable medical equipment, prosthetics, orthotics, 
and supplies.
    Grandfathered item means all rented items within a product category 
for which payment was made prior to the implementation of a competitive 
bidding program to a grandfathered supplier that chooses to continue to 
furnish the items in accordance with Sec. 414.408(j) of this subpart and 
that fall within the following payment categories for competitive 
bidding:
    (1) An inexpensive or routinely purchased item described in 
Sec. 414.220 of this part.
    (2) An item requiring frequent and substantial servicing, as 
described in Sec. 414.222 of this part.
    (3) Oxygen and oxygen equipment described in Sec. 414.226 of this 
part.
    (4) Other DME described in Sec. 414.229 of this part.
    Grandfathered supplier means a noncontract supplier that chooses to 
continue to furnish grandfathered items to a beneficiary in a CBA.
    Hearing officer means an individual, who was not involved with the 
CBIC recommendation to take action for a breach of a DMEPOS Competitive 
Bidding Program contract, who is designated by CMS to review and make an 
unbiased and independent recommendation when there is an appeal of CMS's 
initial determination to take action for a breach of a DMEPOS 
Competitive Bidding Program contract.
    Hospital has the same meaning as in section 1861(e) of the Act.
    Item means a product included in a competitive bidding program that 
is identified by a HCPCS code, which may be specified for competitive 
bidding (for example, a product when it is furnished through mail 
order), or a combination of codes and/or modifiers, and

[[Page 80]]

includes the services directly related to the furnishing of that product 
to the beneficiary. Items that may be included in a competitive bidding 
program are:
    (1) Durable medical equipment (DME) other than class III devices 
under the Federal Food, Drug and Cosmetic Act, as defined in 
Sec. 414.202 of this part and group 3 complex rehabilitative wheelchairs 
and further classified into the following categories:
    (i) Inexpensive or routinely purchased items, as specified in 
Sec. 414.220(a).
    (ii) Items requiring frequent and substantial servicing, as 
specified in Sec. 414.222(a).
    (iii) Oxygen and oxygen equipment, as specified in 
Sec. 414.226(c)(1).
    (iv) Other DME (capped rental items), as specified in Sec. 414.229.
    (2) Supplies necessary for the effective use of DME other than 
inhalation drugs.
    (3) Enteral nutrients, equipment, and supplies.
    (4) Off-the-shelf orthotics, which are orthotics described in 
section 1861(s)(9) of the Act that require minimal self-adjustment for 
appropriate use and do not require expertise in trimming, bending, 
molding, assembling or customizing to fit a beneficiary.
    Item weight is a number assigned to an item based on its beneficiary 
utilization rate using national data when compared to other items in the 
same product category.
    Mail order contract supplier is a contract supplier that furnishes 
items through the mail to beneficiaries who maintain a permanent 
residence in a competitive bidding area.
    Mail order item means any item (for example, diabetic testing 
supplies) shipped or delivered to the beneficiary's home, regardless of 
the method of delivery.
    Metropolitan Statistical Area (MSA) has the same meaning as that 
given by the Office of Management and Budget.
    Minimal self-adjustment means an adjustment that the beneficiary, 
caretaker for the beneficiary, or supplier of the device can perform and 
does not require the services of a certified orthotist (that is, an 
individual certified by either the American Board for Certification in 
Orthotics and Prosthetics, Inc., or the Board for Orthotist/Prosthetist 
Certification) or an individual who has specialized training.
    National mail order DMEPOS competitive bidding program means a 
program whereby contracts are awarded to suppliers for the furnishing of 
mail order items across the nation.
    Nationwide competitive bidding area means a CBA that includes the 
United States, its Territories, and the District of Columbia.
    Nationwide mail order contract supplier means a mail order contract 
supplier that furnishes items in a nationwide competitive bidding area.
    Network means a group of small suppliers that form a legal entity to 
provide competitively bid items throughout the entire CBA.
    Noncontract supplier means a supplier that is not awarded a contract 
by CMS to furnish items included in a competitive bidding program.
    Non-mail order item means any item (for example, diabetic testing 
supplies) that a beneficiary or caregiver picks up in person at a local 
pharmacy or supplier storefront.
    Parties to the hearing means the DMEPOS contract supplier and CMS.
    Physician has the same meaning as in section 1861(r) of the Act.
    Pivotal bid means the lowest composite bid based on bids submitted 
by suppliers for a product category that includes a sufficient number of 
suppliers to meet beneficiary demand for the items in that product 
category.
    Price inversion means any situation where the following occurs: One 
item (HCPCS code) in a grouping of similar items (e.g., walkers, enteral 
infusion pumps, or power wheelchairs) in a product category includes a 
feature that another, similar item in the same product category does not 
have (e.g., wheels, alarm, or Group 2 performance); the average of the 
2015 fee schedule amounts (or initial, unadjusted fee schedule amounts 
for subsequent years for new items) for the code with the feature is 
higher than the average of the 2015 fee schedule amounts for the code 
without the feature; and, following a competition, the SPA for the code 
with the feature is lower than the SPA for the code without that 
feature.

[[Page 81]]

    Product category means a grouping of related items that are used to 
treat a similar medical condition.
    Regional competitive bidding area means a CBA that consists of a 
region of the United States, its Territories, and the District of 
Columbia.
    Regional mail order contract supplier means a mail order contract 
supplier that furnishes items in a regional competitive bidding area.
    Single payment amount means the allowed payment for an item 
furnished under a competitive bidding program.
    Small supplier means, a supplier that generates gross revenue of 
$3.5 million or less in annual receipts including Medicare and non-
Medicare revenue.
    Supplier means an entity with a valid Medicare supplier number, 
including an entity that furnishes an item through the mail.
    Total nationwide allowed services means the total number of services 
allowed for an item furnished in all states, territories, and the 
District of Columbia where Medicare beneficiaries reside and can receive 
covered DMEPOS items and services.
    Treating practitioner means a physician assistant, nurse 
practitioner, or clinical nurse specialist, as those terms are defined 
in section 1861(aa)(5) of the Act.
    Weighted bid means the item weight multiplied by the bid price 
submitted for that item.

[72 FR 18084, Apr. 10, 2007, as amended at 74 FR 2880, Jan. 16, 2009; 74 
FR 62009, Nov. 25, 2009; 75 FR 73622, Nov. 29, 2010; 76 FR 70314, Nov. 
10, 2011; 81 FR 77966, Nov. 4, 2016]



Sec. 414.404  Scope and applicability.

    (a) Applicability. Except as specified in paragraph (b) of this 
section, this subpart applies to all suppliers that furnish the items 
defined in Sec. 414.402 to beneficiaries, including providers, 
physicians, treating practitioners, physical therapists, and 
occupational therapists that furnish such items under Medicare Part B.
    (b) Exceptions. (1) Physicians, treating practitioners, and 
hospitals may furnish certain types of competitively bid durable medical 
equipment without submitting a bid and being awarded a contract under 
this subpart, provided that all of the following conditions are 
satisfied:
    (i) The items furnished are limited to crutches, canes, walkers, 
folding manual wheelchairs, blood glucose monitors, and infusion pumps 
that are DME, and off-the-shelf (OTS) orthotics.
    (ii) The items are furnished by the physician or treating 
practitioner to his or her own patients as part of his or her 
professional service or by a hospital to its own patients during an 
admission or on the date of discharge.
    (iii) The items are billed under a billing number assigned to the 
hospital, physician, the treating practitioner (if possible), or a group 
practice to which the physician or treating practitioner has reassigned 
the right to receive Medicare payment.
    (2) A physical therapist in private practice (as defined in 
Sec. 410.60(c) of this chapter) or an occupational therapist in private 
practice (as defined in Sec. 410.59(c) of this chapter) may furnish 
competitively bid off-the-shelf orthotics without submitting a bid and 
being awarded a contract under this subpart, provided that the items are 
furnished only to the therapist's own patients as part of the physical 
or occupational therapy service.
    (3) Payment for items furnished in accordance with paragraphs (b)(1) 
and (b)(2) of this section will be paid in accordance with 
Sec. 414.408(a).

[72 FR 18084, Apr. 10, 2007, as amended at 74 FR 2880, Jan. 16, 2009; 75 
FR 73623, Nov. 29, 2010; 76 FR 70314, Nov. 10, 2011]



Sec. 414.406  Implementation of programs.

    (a) Implementation contractor. CMS designates one or more 
implementation contractors for the purpose of implementing this subpart.
    (b) Competitive bidding areas. CMS designates through program 
instructions or by other means, such as the request for bids, each CBA 
in which a competitive bidding program may be implemented under this 
subpart.
    (c) Revisions to competitive bidding areas. CMS may revise the CBAs 
designated under paragraph (b) of this section.
    (d) Competitively bid items. CMS designates the items that are 
included in a competitive bidding program through

[[Page 82]]

program instructions or by other means
    (e) Claims processing. The Durable Medical Equipment Medicare 
Administrative Contractor designated to process DMEPOS claims for a 
particular geographic region also processes claims for items furnished 
under a competitive bidding program in the same geographic region.

[71 FR 48409, Aug. 18, 2006, as amended at 72 FR 18085, Apr. 10, 2007]



Sec. 414.408  Payment rules.

    (a) Payment basis. (1) The payment basis for an item furnished under 
a competitive bidding program is 80 percent of the single payment amount 
calculated for the item under Sec. 414.416 for the CBA in which the 
beneficiary maintains a permanent residence.
    (2) If an item that is included in a competitive bidding program is 
furnished to a beneficiary who does not maintain a permanent residence 
in a CBA, the payment basis for the item is 80 percent of the lesser of 
the actual charge for the item, or the applicable fee schedule amount 
for the item, as determined under subpart C or subpart D.
    (b) No changes to the single payment amount. The single payment 
amount calculated for each item under each competitive bidding program 
is paid for the duration of the competitive bidding program and will not 
be adjusted by any update factor.
    (c) Payment on an assignment-related basis. Payment for an item 
furnished under this subpart is made on an assignment-related basis.
    (d) Applicability of advanced beneficiary notice. Implementation of 
a program in accordance with this subpart does not preclude the use of 
an advanced beneficiary notice.
    (e) Requirement to obtain competitively bid items from a contract 
supplier. (1) General rule. Except as provided in paragraph (e)(2) of 
this section, all items that are included in a competitive bidding 
program must be furnished by a contract supplier for that program.
    (2) Exceptions. (i) A grandfathered supplier may furnish a 
grandfathered item to a beneficiary in accordance with paragraph (j) of 
this section.
    (ii) Medicare may make a secondary payment for an item furnished by 
a noncontract supplier that the beneficiary is required to use under his 
or her primary insurance policy. The provisions of this paragraph do not 
supersede Medicare secondary payer statutory and regulatory provisions, 
including the Medicare secondary payment rules located in Secs. 411.32 
and 411.33 of this subchapter, and payment will be calculated in 
accordance with those rules.
    (iii) If a beneficiary is outside of the CBA in which he or she 
maintains a permanent residence, he or she may obtain an item from a--
    (A) Contract supplier, if the beneficiary obtains the item in 
another CBA and the item is included in the competitive bidding program 
for that CBA; or
    (B) Supplier with a valid Medicare billing number, if the 
beneficiary obtains the item in an area that is not a CBA, or if the 
beneficiary obtains the item in another CBA but the item is not included 
in the competitive bidding program for that CBA.
    (iv) A physician, treating practitioner, physical therapist in 
private practice, occupational therapist in private practice, or 
hospital may furnish an item in accordance with Sec. 414.404(b) of this 
subpart.
    (3) Unless paragraph (e)(2) of this section applies:
    (i) Medicare will not make payment for an item furnished in 
violation of paragraph (e)(1) of this section, and
    (ii) A beneficiary has no financial liability to a noncontract 
supplier that furnishes an item included in the competitive bidding 
program for a CBA in violation of paragraph (e)(1) of this section, 
unless the beneficiary has signed an advanced beneficiary notice.
    (4) CMS separately designates the Medicare billing number of all 
noncontract suppliers to monitor compliance with paragraphs (e)(1) and 
(e)(2) of this section.
    (f) Purchased equipment. (1) The single payment amounts for new 
purchased durable medical equipment, including power wheelchairs that 
are purchased when the equipment is initially furnished and enteral 
nutrition equipment

[[Page 83]]

are calculated based on the bids submitted and accepted for these items. 
For contracts entered into beginning on or after January 1, 2011, 
payment on a lump sum purchase basis is only available for power 
wheelchairs classified as complex rehabilitative power wheelchairs.
    (2) Payment for used purchased durable medical equipment and enteral 
nutrition equipment is made in an amount equal to 75 percent of the 
single payment amounts calculated for new purchased equipment under 
paragraph (f)(1) of this section.
    (g) Purchased supplies and orthotics. The single payment amounts for 
the following purchased items are calculated based on the bids submitted 
and accepted for the following items:
    (1) Supplies used in conjunction with durable medical equipment.
    (2) Enteral nutrients.
    (3) Enteral nutrition supplies.
    (4) OTS orthotics.
    (h) Rented equipment--(1) Capped rental DME. Subject to the 
provisions of paragraph (h)(2) of this section, payment for capped 
rental durable medical equipment is made in an amount equal to 10 
percent of the single payment amounts calculated for new durable medical 
equipment under paragraph (f)(1) of this section for each of the first 3 
months, and 7.5 percent of the single payment amounts calculated for 
these items for each of the remaining months 4 through 13.
    (2) For contracts entered into beginning on or after January 1, 
2011, the monthly fee schedule amount for rental of power wheelchairs 
equals 15 percent of the single payment amounts calculated for new 
durable medical equipment under paragraph (f)(1) of this section for 
each of the first 3 months, and 6 percent of the single payment amounts 
calculated for these items for each of the remaining months 4 through 
13.
    (3) Additional payment to certain contract suppliers for capped 
rental DME. (i) Except as specified in paragraph (h)(3)(ii) of this 
section, Medicare makes 13 monthly payments to a contract supplier that 
furnishes capped rental durable medical equipment to a beneficiary who 
would otherwise be entitled to obtain the item from a grandfathered 
supplier under paragraph (j) of this section. Payment is made using the 
methodology described in paragraph (h)(1) of this section. The contract 
supplier must transfer title to the item to the beneficiary on the first 
day that begins after the 13th continuous month in which payments are 
made in accordance with this paragraph.
    (ii) Medicare does not make payment to a contract supplier under 
paragraph (h)(3)(i) of this section if the contract supplier furnishes 
capped rental durable medical equipment to a beneficiary who previously 
rented the equipment from another contract supplier.
    (4) Maintenance and servicing of rented DME. Separate maintenance 
and servicing payments are not made for any rented durable medical 
equipment.
    (5) Payment for rented enteral nutrition equipment. Payment for 
rented enteral nutrition equipment is made in an amount equal to 10 
percent of the single payment amounts calculated for new enteral 
nutrition equipment under paragraph (f)(1) of this section for each of 
the first 3 months, and 7.5 percent of the single payment amount 
calculated for these items under paragraph (f)(1) of this section for 
each of the remaining months 4 through 15. The contract supplier to 
which payment is made in month 15 for furnishing enteral nutrition 
equipment on a rental basis must continue to furnish, maintain and 
service the equipment until a determination is made by the beneficiary's 
physician or treating practitioner that the equipment is no longer 
medically necessary.
    (6) Maintenance and servicing of rented enteral nutrition equipment. 
Payment for the maintenance and servicing of rented enteral nutrition 
equipment beginning 6 months after 15 months of rental payments is made 
in an amount equal to 5 percent of the single payment amounts calculated 
for these items under paragraph (f)(1) of this section.
    (7) Payment for inexpensive or routinely purchased durable medical 
equipment. Payment for inexpensive or routinely purchased durable 
medical equipment furnished on a rental basis is made in an amount equal 
to 10 percent of the

[[Page 84]]

single payment amount calculated for new purchased equipment.
    (8) Payment amounts for rented DME requiring frequent and 
substantial servicing--(i) General rule. Except as provided in paragraph 
(h)(7)(ii) of this section, the single payment amounts for rented 
durable medical equipment requiring frequent and substantial servicing 
are calculated based on the rental bids submitted and accepted for the 
furnishing of these items on a monthly basis.
    (ii) Exception. The single payment amounts for continuous passive 
motion exercise devices are calculated based on the bids submitted and 
accepted for the furnishing of these items on a daily basis.
    (i) Monthly payment amounts for oxygen and oxygen equipment--(1) 
Basic payment amount. Subject to the provisions of paragraph (i)(2) of 
this section, the single payment amounts for oxygen and oxygen equipment 
are calculated based on the bids submitted and accepted for the 
furnishing on a monthly basis of each of the five classes of oxygen and 
oxygen equipment described in Sec. 414.226(c)(1).
    (2) Additional payment to certain contract suppliers. (i) Except as 
specified in paragraph (i)(2)(iii) of this section, Medicare makes 
monthly payments to a contract supplier that furnishes oxygen equipment 
to a beneficiary who would otherwise be entitled to obtain the item from 
a grandfathered supplier under paragraph (j) of this section as follows:
    (A) If Medicare made 26 or less monthly payments to the former 
supplier, Medicare makes a monthly payment to the contract supplier for 
up to the number of months equal to the difference between 36 and the 
number of months for which payment was made to the former supplier.
    (B) If Medicare made 27 or more monthly payments to the former 
supplier, Medicare makes 10 monthly payments to the contract supplier.
    (ii) Payment is made using the methodology described in paragraph 
(i)(1) of this section. On the first day after the month in which the 
final rental payment is made under paragraph (i)(2)(i) of this section, 
the contract supplier must transfer title of the oxygen equipment to the 
beneficiary.
    (iii) Medicare does not make payment to a contract supplier under 
paragraph (i)(2) of this section if the contract supplier furnishes 
oxygen equipment to a beneficiary who previously rented the equipment 
from another contract supplier.
    (j) Special rules for certain rented durable medical equipment and 
oxygen and oxygen equipment--(1) Supplier election. (i) A supplier that 
is furnishing durable medical equipment or is furnishing oxygen or 
oxygen equipment on a rental basis to a beneficiary prior to the 
implementation of a competitive bidding program in the CBA where the 
beneficiary maintains a permanent residence may elect to continue 
furnishing the item as a grandfathered supplier.
    (ii) A supplier that elects to be a grandfathered supplier must 
continue to furnish the grandfathered items to all beneficiaries who 
elect to continue receiving the grandfathered items from that supplier 
for the remainder of the rental period for that item.
    (2) Payment for grandfathered items furnished during the first 
competitive bidding program implemented in a CBA. Payment for 
grandfathered items furnished during the first competitive bidding 
program implemented in a CBA is made as follows:
    (i) For inexpensive and routinely purchased items described in 
Sec. 414.220(a), payment is made in the amount determined under 
Sec. 414.220(b).
    (ii) For other durable medical equipment or capped rental items 
described in Sec. 414.229, payment is made in the amount determined 
under Sec. 414.229(b).
    (iii) For items requiring frequent and substantial servicing 
described in Sec. 414.222, payment is made in accordance with paragraph 
(a)(1) of this section.
    (iv) For oxygen and oxygen equipment described in 
Sec. 414.226(c)(1), payment is made in accordance with paragraph (a)(1) 
of this section.
    (3) Payment for grandfathered items furnished during all subsequent 
competitive bidding programs in a CBA. Beginning with the second 
competitive bidding program implemented in a CBA, payment is made for 
grandfathered

[[Page 85]]

items in accordance with paragraph (a)(1) of this section.
    (4) Choice of suppliers. (i) Beneficiaries who are renting an item 
that meets the definition of a grandfathered item in Sec. 414.402 of 
this subpart may elect to obtain the item from a grandfathered supplier.
    (ii) A beneficiary who is otherwise entitled to obtain a 
grandfathered item from a grandfathered supplier under paragraph (j) of 
this section may elect to obtain the same item from a contract supplier 
at any time after a competitive bidding program is implemented.
    (iii) If a beneficiary elects to obtain the same item from a 
contract supplier, payment is made for the item accordance with 
paragraph (a)(1) of this section.
    (5) Notification of beneficiaries and CMS by suppliers that choose 
to become grandfathered suppliers. (i) Notification of beneficiaries by 
suppliers. (A) Requirements of notification. A noncontract supplier that 
elects to become a grandfathered supplier must provide a 30-day written 
notification to each Medicare beneficiary that resides in a competitive 
bidding area and is currently renting a competitively bid item from that 
supplier. The 30-day notification to the beneficiary must meet the 
following requirements:
    (1) Be sent by the supplier to the beneficiary at least 30 business 
days before the start date of the implementation of the competitive 
bidding program for the CBA in which the beneficiary resides.
    (2) Identify the grandfathered items that the supplier is willing to 
continue to rent to the beneficiary.
    (3) Be in writing (for example, by letter or postcard) and the 
supplier must maintain proof of delivery.
    (4) State that the supplier is willing to continue to furnish 
certain rented Durable Medical Equipment (DME), oxygen and oxygen 
equipment, and supplies that the supplier is currently furnishing to the 
beneficiary (that is, before the start of the competitive bidding 
program) and is willing to continue to provide these items to the 
beneficiary for the remaining rental months.
    (5) State that the beneficiary has the choice to continue to receive 
a grandfathered item(s) from the grandfathered supplier or may elect to 
receive the item(s) from a contract supplier after the end of the last 
month for which a rental payment is made to the noncontract supplier.
    (6) Provide the supplier's telephone number and instruct the 
beneficiary to call the supplier with any questions and to notify the 
supplier of his or her decision to use or not use the supplier as a 
grandfathered supplier.
    (7) State that the beneficiary can obtain information about the 
competitive bidding program by calling 1-800-MEDICARE or on the Internet 
at http://www.Medicare.gov.
    (B) Record of beneficiary's choice. The supplier should obtain an 
election from the beneficiary regarding whether to use or not use the 
supplier as a grandfathered supplier. The supplier must maintain a 
record of its attempts to communicate with the beneficiary to obtain the 
beneficiary's election regarding grandfathering. When the supplier 
obtains such an election, the supplier must maintain a record of the 
beneficiary decision including the date the choice was made, and how the 
beneficiary communicated his or her choice to the supplier.
    (C) Notification. If the beneficiary chooses not to continue to 
receive a grandfathered item(s) from their current supplier, the 
supplier must provide the beneficiary with 2 more notices in addition to 
the 30-day notice prior to the supplier picking up its equipment.
    (1) 10-day notification: Ten business days prior to picking up the 
item, the supplier should have direct contact (for example, a phone 
call) with the beneficiary or the beneficiary's caregiver and receive 
acknowledgement that the beneficiary understands their equipment will be 
picked up. This should occur on the first anniversary date after the 
start of the CBP or on another date agreed to by the beneficiary or the 
beneficiary's caregiver. The beneficiary's anniversary date occurs every 
month and is the date of the month on which the item was first delivered 
to the beneficiary by the current supplier. When a date other than

[[Page 86]]

the anniversary date is chosen by the beneficiary or the beneficiary's 
caregiver, the noncontract supplier will still receive payment up to the 
anniversary date after the start of the CBP, and the new contract 
supplier may not bill for any period of time before the anniversary 
date.
    (2) 2-day notification: Two business days prior to picking up the 
item the supplier should contact the beneficiary or the beneficiary's 
caregiver by phone to notify the beneficiary of the date the supplier 
will pick up the item. This date should not be before the beneficiary's 
first anniversary date that occurs after the start of the competitive 
bidding program unless an alternative arrangement has been made with the 
beneficiary and the new contract supplier.
    (D) Pickup procedures. (1) The pickup of the noncontract supplier's 
equipment and the delivery of the new contract supplier's equipment 
should occur on the same date, that is, the first rental anniversary 
date of the equipment that occurs after the start of the competitive 
bidding program unless an alternative arrangement has been made with the 
beneficiary and the new contract supplier.
    (2) Under no circumstance should a supplier pick up a rented item 
prior to the supplier's receiving acknowledgement from the beneficiary 
that the beneficiary is aware of the date on which the supplier is 
picking up the item and the beneficiary has made arrangements to have 
the item replaced on that date by a contract supplier.
    (3) When a beneficiary chooses to switch to a new contract supplier, 
the current noncontract supplier and the new contract supplier must make 
arrangements that are suitable to the beneficiary.
    (4) The contract supplier may not submit a claim with a date of 
delivery for the new equipment that is prior to the first anniversary 
date that occurs after the beginning of the CBP, and the contract 
supplier may not begin billing until the first anniversary date that 
occurs after the beginning of the CBP.
    (5) The noncontract supplier must submit a claim to be paid up to 
the first anniversary date that occurs after the beginning of the CBP. 
Therefore, they should not pick up the equipment before that date unless 
an alternative arrangement has been made with the beneficiary and the 
new contract supplier.
    (ii) Notification to CMS by suppliers. A noncontract supplier that 
elects to become a grandfathered supplier must provide a written 
notification to CMS of this decision. This notification must meet the 
following requirements:
    (A) State that the supplier agrees to continue to furnish certain 
rented DME, oxygen and oxygen equipment that it is currently furnishing 
to beneficiaries (that is, before the start of the competitive bidding 
program) in a CBA and will continue to provide these items to these 
beneficiaries for the remaining months of the rental period.
    (B) Include the following information:
    (1) Name and address of the supplier.
    (2) The 6-digit NSC number of the supplier.
    (3) Product category(s) by CBA for which the supplier is willing to 
be a grandfathered supplier.
    (C) State that the supplier agrees to meet all the terms and 
conditions pertaining to grandfathered suppliers.
    (D) Be provided by the supplier to CMS in writing at least 30 
business days before the start date of the implementation of the 
Medicare DMEPOS Competitive Bidding Program.
    (6) Suppliers that choose not to become grandfathered suppliers. (i) 
Requirement for non-grandfathered supplier. A noncontract supplier that 
elects not to become a grandfathered supplier is required to pick up the 
item it is currently renting to the beneficiary from the beneficiary's 
home after proper notification.
    (ii) Notification. Proper notification includes a 30-day, a 10-day, 
and a 2-day notice of the supplier's decision not to become a 
grandfathered supplier to its Medicare beneficiaries who are currently 
renting certain DME competitively bid item(s) and who reside in a CBA.
    (iii) Requirements of notification. These notifications must meet 
all of the requirements listed in paragraph (j)(5)(i) of this section 
for the 30-day, 10-day and 2-day notices that must be sent by suppliers 
who decide to be

[[Page 87]]

grandfathered suppliers, with the following exceptions for the 30-day 
notice.
    (A) State that, for those items for which the supplier has decided 
not to be a grandfathered supplier, the supplier will only continue to 
rent these competitively bid item(s) to its beneficiaries up to the 
first anniversary date that occurs after the start of the Medicare 
DMEPOS Competitive Bidding Program.
    (B) State that the beneficiary must select a contract supplier for 
Medicare to continue to pay for these items.
    (C) Refer the beneficiary to the contract supplier locator tool on 
and to 1-800-MEDICARE to obtain information about the availability of 
contract suppliers for the beneficiary's area.
    (iv) Pickup procedures. (A) The pick-up of the noncontract 
supplier's equipment and the delivery of the new contract supplier's 
equipment should occur on the same date, that is, the first rental 
anniversary date of the equipment that occurs after the start of the 
competitive bidding program unless an alternative arrangement has been 
made with the beneficiary and the new contract supplier.
    (B) Under no circumstance should a supplier pick up a rented item 
prior to the supplier's receiving acknowledgement from the beneficiary 
that the beneficiary is aware of the date on which the supplier is 
picking up the item and the beneficiary has made arrangements to have 
the item replaced on that date by a contract supplier.
    (C) When a beneficiary chooses to switch to a new contract supplier, 
the current noncontract supplier and the new contract supplier must make 
arrangements that are agreeable to the beneficiary.
    (D) The contract supplier cannot submit a claim with a date of 
delivery for the new equipment that is prior to the first anniversary 
date that occurs after the beginning of the CBP.
    (7) Payment for accessories and supplies for grandfathered items. 
Accessories and supplies that are used in conjunction with and are 
necessary for the effective use of a grandfathered item may be furnished 
by the same grandfathered supplier that furnishes the grandfathered 
item. Payment is made in accordance with paragraph (a)(1) of this 
section.
    (k) Payment for maintenance, servicing and replacement of 
beneficiary-owned items. (1) Payment is made for the maintenance and 
servicing of beneficiary-owned items, provided the maintenance and 
servicing is performed by a contract supplier or a noncontract supplier 
having a valid Medicare billing number, as follows:
    (i) Payment for labor is made in accordance with Sec. 414.210(e)(1) 
of subpart D.
    (ii) Payment for parts that are not items (as defined in 
Sec. 414.402) is made in accordance with Sec. 414.210(e)(1) of subpart 
D.
    (iii) Payment for parts that are items (as defined in Sec. 414.402) 
is made in accordance with paragraph (a)(1) of this section.
    (2) Additional payments are made in accordance with 
Sec. 414.210(e)(2), (e)(3) and (e)(5) of this part for the maintenance 
and servicing of oxygen equipment if performed by a contract supplier or 
a noncontract supplier having a valid Medicare billing number.
    (3) Beneficiaries must obtain a replacement of a beneficiary-owned 
item, other than parts needed for the repair of beneficiary-owned 
equipment from a contract supplier. Payment is made for the replacement 
item in accordance with paragraph (a)(1) of this section.
    (l) Exceptions for certain items and services paid in accordance 
with special payment rules. The payment rules in paragraphs (f) thru 
(h), (j)(2), (j)(3), and (j)(7), and (k) of this section do not apply to 
items and services paid in accordance with the special payment rules at 
Sec. 414.409.

[72 FR 18085, Apr. 10, 2007, as amended at 74 FR 2880, Jan. 16, 2009; 74 
FR 62009, Nov. 25, 2009; 75 FR 73623, Nov. 29, 2010; 76 FR 70315, Nov. 
10, 2011; 79 FR 66264, Nov. 6, 2014]



Sec. 414.409  Special payment rules.

    (a) Payment on a bundled, continuous rental basis. In no more than 
12 CBAs, in conjunction with competitions that begin after January 1, 
2015, payment is made on a bundled, continuous monthly rental basis for 
standard power wheelchairs and continuous positive airway pressure 
(CPAP) devices. The CBAs and competitions where these payment rules 
apply are announced in advance of each competition, with the

[[Page 88]]

payment rules in this section used in lieu of the payment rules at 
Sec. 414.408(f) thru (h), (j)(2), (j)(3), and (j)(7), and (k). The 
single payment amounts are established based on bids submitted and 
accepted for furnishing rented standard power wheelchairs and CPAP 
devices on a monthly basis for each month of medical need during the 
contract period. The single payment amount for the monthly rental of the 
DME includes payment for the rented equipment, maintenance and servicing 
of the rented equipment, and replacement of supplies and accessories 
necessary for the effective use of the rented equipment. Separate 
payment for replacement of equipment, repair or maintenance and 
servicing of equipment, or for replacement of accessories and supplies 
necessary for the effective use of equipment is not allowed under any 
circumstance.
    (b) Payment for grandfathered DME items paid on a bundled, 
continuous rental basis. Payment to a supplier that elects to be a 
grandfathered supplier of DME furnished in CBPs where these special 
payment rules apply is made in accordance with Sec. 414.408(a)(1).
    (c) Supplier transitions for DME paid on a bundled, continuous 
rental basis. Changes from a non-contract supplier to a contract 
supplier at the beginning of a CBP where payment is made on a bundled, 
continuous monthly rental basis results in the contract supplier taking 
on responsibility for meeting all of the monthly needs for furnishing 
the covered DME. In the event that a beneficiary relocates from a CBA 
where these special payment rules apply to an area where rental cap 
rules apply, a new period of continuous use begins for the capped rental 
item as long as the item is determined to be medically necessary.
    (d) Responsibility for repair and maintenance and servicing of power 
wheelchairs. In no more than 12 CBAs where payment for power wheelchairs 
is made on a capped rental basis, for power wheelchairs furnished in 
conjunction with competitions that begin after January 1, 2015, contract 
suppliers that furnish power wheelchairs under contracts awarded based 
on these competitions shall continue to repair power wheelchairs they 
furnish following transfer of title to the equipment to the beneficiary. 
The responsibility of the contract supplier to repair, maintain and 
service beneficiary-owned power wheelchairs does not apply to power 
wheelchairs that the contract supplier did not furnish to the 
beneficiary. For power wheelchairs that the contract supplier furnishes 
during the contract period, the responsibility of the contract supplier 
to repair, maintain and service the power wheelchair once it is owned by 
the beneficiary continues until the reasonable useful lifetime of the 
equipment expires, coverage for the power wheelchair ends, or the 
beneficiary relocates outside the CBA where the item was furnished. The 
contract supplier may not charge the beneficiary or the program for any 
necessary repairs or maintenance and servicing of a beneficiary-owned 
power wheelchair it furnished during the contract period.

[79 FR 66264, Nov. 6, 2014]



Sec. 414.410  Phased-in implementation of competitive bidding programs.

    (a) Phase-in of competitive bidding programs. CMS phases in 
competitive bidding programs so that competition under the programs 
occurs--
    (1) In CY 2009, in Cincinnati--Middletown (Ohio, Kentucky and 
Indiana), Cleveland--Elyria--Mentor (Ohio), Charlotte--Gastonia--Concord 
(North Carolina and South Carolina), Dallas--Fort Worth--Arlington 
(Texas), Kansas City (Missouri and Kansas), Miami--Fort Lauderdale--
Miami Beach (Florida), Orlando (Florida), Pittsburgh (Pennsylvania), and 
Riverside--San Bernardino--Ontario (California).
    (2) In CY 2011, in an additional 91 MSAs (the additional 70 MSAs 
selected by CMS as of June 1, 2008, and the next 21 largest MSAs by 
total population based on 2009 population estimates, and not already 
phased in as of June 1, 2008). CMS may subdivide any of the 91 MSAs with 
a population of greater than 8,000,000 into separate CBAs, thereby 
resulting in more than 91 CBAs.
    (3) After CY 2011, additional CBAs (or, in the case of national mail 
order for items and services, after CY 2010).
    (4) For competitions (other than for national mail order items and 
services)

[[Page 89]]

after CY 2011 and prior to CY 2015, the following areas are excluded:
    (i) Rural areas.
    (ii) MSAs not selected under paragraphs (a)(1) or (a)(2) of this 
section with a population of less than 250,000.
    (iii) An area with low population density within an MSA not selected 
under paragraphs (a)(1) or (a)(2) of this section.
    (b) Selection of MSAs for CY 2007 and CY 2009. CMS selects the MSAs 
for purposes of designating CBAs in CY 2007 and CY 2009 by considering 
the following variables:
    (1) The total population of an MSA.
    (2) The Medicare allowed charges for DMEPOS items per fee-for-
service beneficiary in an MSA.
    (3) The total number of DMEPOS suppliers per fee-for-service 
beneficiary who received DMEPOS items in an MSA.
    (4) An MSA's geographic location.
    (c) Exclusions from a CBA. CMS may exclude from a CBA a rural area 
(as defined in Sec. 412.64(b)(1)(ii)(C) of this subchapter), or an area 
with low population density based on one or more of the following 
factors--
    (1) Low utilization of DMEPOS items by Medicare beneficiaries 
receiving fee-for-service benefits relative to similar geographic areas;
    (2) Low number of DMEPOS suppliers relative to similar geographic 
areas; or
    (3) Low number of Medicare fee-for-service beneficiaries relative to 
similar geographic areas.
    (d) Selection of additional CBAs after CY 2009. (1) Beginning after 
CY 2009, CMS designates through program instructions or by other means 
additional CBAs based on CMS' determination that the implementation of a 
competitive bidding program in a particular area would be likely to 
result in significant savings to the Medicare program.
    (2) Beginning after CY 2009, CMS may designate through program 
instructions or by other means a nationwide CBA or one or more regional 
CBAs for purposes of implementing competitive bidding programs for items 
that are furnished through the mail by nationwide or regional mail order 
contract suppliers.

[72 FR 18085, Apr. 10, 2007, as amended at 74 FR 2880, Jan. 16, 2009; 75 
FR 73623, Nov. 29, 2010; 76 FR 70315, Nov. 10, 2011]



Sec. 414.411  Special rule in case of competitions for diabetic testing 
strips conducted on or after January 1, 2011.

    (a) National mail order competitions. A supplier must demonstrate 
that their bid submitted as part of a national mail order competition 
for diabetic testing strips covers the furnishing of a sufficient number 
of different types of diabetic testing strip products that, in the 
aggregate, and taking into account volume for the different products, 
includes at least 50 percent of all the different types of products on 
the market. A type of diabetic testing strip means a specific brand and 
model of testing strips.
    (b) Other competitions. CMS may apply this special rule to non-mail 
order or local competitions for diabetic testing strips.

[75 FR 73623, Nov. 29, 2010]



Sec. 414.412  Submission of bids under a competitive bidding program.

    (a) Requirement to submit a bid. Except as provided under 
Sec. 414.404(b), in order for a supplier to receive payment for items 
furnished to beneficiaries under a competitive bidding program, the 
supplier must submit a bid to furnish those items and be awarded a 
contract under this subpart.
    (b) Grouping of items into product categories. (1) Bids are 
submitted for items grouped into product categories.
    (2) The bids submitted for each item in a product category cannot 
exceed the payment amount that would otherwise apply to the item under 
subpart C of this part, without the application of Sec. 414.210(g), or 
subpart D of this part, without the application of Sec. 414.105, or 
subpart I of this part. The bids submitted for items in accordance with 
paragraph (d)(2) of this section cannot exceed the weighted average, 
weighted by total nationwide allowed services, as defined in 
Sec. 414.202, of the payment amounts that would otherwise apply to the 
grouping of similar items under

[[Page 90]]

subpart C of this part, without the application of Sec. 414.210(g), or 
subpart D of this part, without the application of Sec. 414.105.
    (3) The bids submitted for standard power wheelchairs paid in 
accordance with the special payment rules at Sec. 414.409(a) cannot 
exceed the average monthly payment for the bundle of items and services 
that would otherwise apply to the item under subpart D of this part.
    (4) The bids submitted for continuous positive airway pressure 
(CPAP) devices paid in accordance with the special payment rules at 
Sec. 414.409(a) cannot exceed the 1993 fee schedule amounts for these 
items, increased by the covered item update factors provided for these 
items in section 1834(a)(14) of the Act.
    (5) Suppliers shall take into consideration the special payment 
rules at Sec. 414.409(d) when submitting bids for furnishing power 
wheelchairs under competitions where these rules apply.
    (c) Furnishing of items. A bid must include all costs related to 
furnishing an item, including all services directly related to the 
furnishing of the item.
    (d) Separate bids. (1) Except as provided in paragraph (d)(2) of 
this section, for each product category that a supplier is seeking to 
furnish under a Competitive Bidding Program, the supplier must submit a 
separate bid for each item in that product category.
    (2) An exception to paragraph (d)(1) of this section can be made in 
situations where price inversions defined in Sec. 414.402 have occurred 
in past competitions for items within groupings of similar items within 
a product category. In these situations, an alternative method for 
submitting bids for these combinations of codes may be announced at the 
time the competition begins. Under this alternative method, the 
combination of codes for the similar items is the item for bidding 
purposes, as defined under Sec. 414.402. Suppliers submit bids for the 
code with the highest total nationwide allowed services for calendar 
year 2012 (the ``lead item'') within the grouping of codes for similar 
items, and the bids for this code are used to calculate the single 
payment amounts for this code in accordance with Sec. 414.416(b)(1). The 
bids for this code would also be used to calculate the single payment 
amounts for the other codes within the grouping of similar items in 
accordance with Sec. 414.416(b)(3). For subsequent competitions, the 
lead item is identified as the code with the highest total nationwide 
allowed services for the most recent and complete calendar year that 
precedes the competition. The groupings of similar items subject to this 
rule include--
    (i) Hospital beds (HCPCS codes E0250, E0251, E0255, E0256, E0260, 
E0261, E0266, E0265, E0290, E0291, E0292, E0293, E0294, E0295, E0296, 
E0297, E0301, E0302, E0303, and E0304).
    (ii) Mattresses and overlays (HCPCS codes E0277, E0371, E0372, and 
E0373).
    (iii) Power wheelchairs (HCPCS codes K0813, K0814, K0815, K0816, 
K0820, K0821, K0822, K0823, K0824, K0825, K0826, K0827, K0828, and 
K0829).
    (iv) Seat lift mechanisms (HCPCS codes E0627 and E0629).
    (v) TENS devices (HCPCS codes E0720 and E0730).
    (vi) Walkers (HCPCS codes E0130, E0135, E0140, E0141, E0143, E0144, 
E0147, E0148, and E0149).
    (e) Commonly-owned or controlled suppliers. (1) For purposes of this 
paragraph--
    (i) An ownership interest is the possession of equity in the 
capital, stock or profits of another supplier;
    (ii) A controlling interest exists if one or more of owners of a 
supplier is an officer, director or partner in another supplier; and
    (iii) Two or more suppliers are commonly-owned if one or more of 
them has an ownership interest totaling at least 5 percent in the 
other(s).
    (2) A supplier must disclose in its bid each supplier in which it 
has an ownership or controlling interest and each supplier which has an 
ownership or controlling interest in it.
    (3) Commonly-owned or controlled suppliers must submit a single bid 
to furnish a product category in a CBA. Each commonly-owned or 
controlled supplier that is located in the CBA for which the bid is 
being submitted must be included in the bid. The bid must also include 
any commonly-owned or controlled supplier that is located outside of the 
CBA but would furnish the

[[Page 91]]

product category to the beneficiaries who maintain a permanent residence 
in the CBA.
    (f) Mail order suppliers. (1) Suppliers that furnish items through 
the mail must submit a bid to furnish these items in a CBA in which a 
mail order competitive bidding program that includes the items is 
implemented.
    (2) Suppliers that submit one or more bids under paragraph (f)(1) of 
this section may submit the same bid amount for each item under each 
competitive bidding program for which it submits a bid.
    (g) Applicability of the mail order competitive bidding program. 
Suppliers that do not furnish items through the mail are not required to 
participate in a nationwide or regional mail order competitive bidding 
program that includes the same items. Suppliers may continue to furnish 
these items in--
    (1) A CBA, if the supplier is awarded a contract under this subpart; 
or
    (2) An area not designated as a CBA.
    (h) Requiring bid surety bonds for bidding entities--(1) Bidding 
requirements. For competitions beginning on or after January 1, 2017, 
and no later than January 1, 2019, a bidding entity may not submit a 
bid(s) for a CBA unless it obtains a bid surety bond for the CBA from an 
authorized surety on the Department of the Treasury's Listing of 
Certified Companies and provides proof of having obtained the bond by 
submitting a copy to CMS by the deadline for bid submission.
    (2) Bid surety bond requirements. (i) The bid surety bond issued 
must include at a minimum:
    (A) The name of the bidding entity as the principal/obligor;
    (B) The name and National Association of Insurance Commissioners 
number of the authorized surety;
    (C) CMS as the named obligee;
    (D) The conditions of the bond as specified in paragraph (h)(3) of 
this section;
    (E) The CBA covered by the bond;
    (F) The bond number;
    (G) The date of issuance; and
    (H) The bid bond value of $50,000.00.
    (ii) The bid surety bond must be maintained until it is either 
collected upon due to forfeiture or the liability is returned for not 
meeting bid forfeiture conditions.
    (3) Forfeiture of bid surety bond. (i) When a bidding entity is 
offered a contract for a CBA/product category (``competition'') and its 
composite bid for the competition is at or below the median composite 
bid rate for all bidding entities included in the calculation of the 
single payment amounts within the competition and the bidding entity 
does not accept the contract offer, its bid surety bond submitted for 
that CBA will be forfeited and CMS will collect on the bond via 
Electronic Funds Transfer (EFT) from the respective bonding company. As 
one bid surety bond is required for each CBA in which the bidding entity 
is submitting a bid, the failure to accept a contract offer for any 
product category within the CBA when the entity's bid is at or below the 
median composite bid rate will result in forfeiture of the bid surety 
bond for that CBA.
    (ii) Where the bid(s) does not meet the specified forfeiture 
conditions in paragraph (h)(3)(i) of this section, the bid surety bond 
liability will be returned within 90 days of the public announcement of 
contract suppliers for the CBA. CMS will notify the bidding entity that 
it did not meet the specified forfeiture requirements and the bid surety 
bond will not be collected by CMS.
    (4) Penalties. (i) A bidding entity that has been determined to have 
falsified its bid surety bond may be prohibited from participation in 
the DMEPOS Competitive Bidding Program for the current round of the 
Competitive Bidding Program in which it submitted a bid and also from 
participating in the next round of the Competitive Bidding Program. 
Offending suppliers will also be referred to the Office of Inspector 
General and Department of Justice for further investigation.
    (ii) A bidding entity, whose composite bid is at or below the median 
composite bid rate, that--
    (A) Accepts a contract award; and
    (B) Is found to be in breach of contract for nonperformance of the 
contract to avoid forfeiture of the bid surety bond will have its 
contract terminated and will be precluded from participation in the in 
the next round of

[[Page 92]]

the DMEPOS Competitive Bidding Program.

[72 FR 18085, Apr. 10, 2007, as amended at 79 FR 66264, Nov. 6, 2014; 81 
FR 77966, Nov. 4, 2016]



Sec. 414.414  Conditions for awarding contracts.

    (a) General rule. The rules set forth in this section govern the 
evaluation and selection of suppliers for contract award purposes under 
a competitive bidding program.
    (b) Basic supplier eligibility. (1) Each supplier must meet the 
enrollment standards specified in Sec. 424.57(c) of this chapter.
    (2) Each supplier must disclose information about any prior or 
current legal actions, sanctions, revocations from the Medicare program, 
program-related convictions as defined in section 1128(a)(1) through 
(a)(4) of the Act, exclusions or debarments imposed against it, or 
against any members of the board of directors, chief corporate officers, 
high-level employees, affiliated companies, or subcontractors, by any 
Federal, State, or local agency. The supplier must certify in its bid 
that this information is completed and accurate.
    (3) Each supplier must have all State and local licenses required to 
perform the services identified in the request for bids. CMS may not 
award a contract to any entity in a CBA unless the entity meets 
applicable State licensure requirements.
    (4) Each supplier must submit a bona fide bid that complies with all 
the terms and conditions contained in the request for bids.
    (5) Each network must meet the requirements specified in 
Sec. 414.418.
    (c) Quality standards and accreditation. Each supplier furnishing 
items and services directly or as a subcontractor must meet applicable 
quality standards developed by CMS in accordance with section 
1834(a)(20) of the Act and be accredited by a CMS-approved organization 
that meets the requirements of Sec. 424.58 of this subchapter, unless a 
grace period is specified by CMS.
    (d) Financial standards--(1) General rule. Each supplier must submit 
along with its bid the applicable covered documents (as defined in 
Sec. 414.402) specified in the request for bids.
    (2) Process for reviewing covered documents--(i) Submission of 
covered documents for CMS review. To receive notification of whether 
there are missing covered documents, the supplier must submit its 
applicable covered documents by the later of the following covered 
document review dates:
    (A) The date that is 30 days before the final date for the closing 
of the bid window; or
    (B) The date that is 30 days after the opening of the bid window.
    (ii) CMS feedback to a supplier with missing covered documents. (A) 
For Round 1 bids. CMS has up to 45 days after the covered document 
review date to review the covered documents and to notify suppliers of 
any missing documents.
    (B) For subsequent Round bids. CMS has 90 days after the covered 
document review date to notify suppliers of any missing covered 
documents.
    (iii) Submission of missing covered documents. Suppliers notified by 
CMS of missing covered documents have 10 business days after the date of 
such notice to submit the missing documents. CMS does not reject the 
supplier's bid on the basis that the covered documents are late or 
missing if all the applicable missing covered documents identified in 
the notice are submitted to CMS not later than 10 business days after 
the date of such notice.
    (e) Evaluation of bids. CMS evaluates bids submitted for items 
within a product category by--
    (1) Calculating the expected beneficiary demand in the CBA for the 
items in the product category;
    (2) Calculating the total supplier capacity that would be sufficient 
to meet the expected beneficiary demand in the CBA for the items in the 
product category;
    (3) Establishing a composite bid for each supplier and network that 
submitted a bid for the product category.
    (4) Arraying the composite bids from the lowest composite bid price 
to the highest composite bid price;
    (5) Calculating the pivotal bid for the product category;
    (6) Selecting all suppliers and networks whose composite bids are 
less

[[Page 93]]

than or equal to the pivotal bid for that product category, and that 
meet the requirements in paragraphs (b) through (d) of this section.
    (f) Expected savings. A contract is not awarded under this subpart 
unless CMS determines that the amounts to be paid to contract suppliers 
for an item or drug under a competitive bidding program are expected to 
be less than the amounts that would otherwise be paid for the same item 
under subpart C or subpart D or the same drug under subpart I.
    (g) Special rules for small suppliers--(1) Target for small supplier 
participation. CMS ensures that small suppliers have the opportunity to 
participate in a competitive bidding program by taking the following 
steps:
    (i) Setting a target number for small supplier participation by 
multiplying 30 percent by the number of suppliers that meet the 
requirements in paragraphs (b) through (d) of this section and whose 
composite bids are equal to or lower than the pivotal bid calculated for 
the product category;
    (ii) Identifying the number of qualified small suppliers whose 
composite bids are at or below the pivotal bid for the product category;
    (iii) Selecting additional small suppliers whose composite bids are 
above the pivotal bid for the product category in ascending order based 
on the proximity of each small supplier's composite bid to the pivotal 
bid, until the number calculated in paragraph (g)(1)(i) of this section 
is reached or there are no more composite bids submitted by small 
suppliers for the product category.
    (2) The bids by small suppliers that are selected under paragraph 
(g)(1)(iii) of this section are not used to calculate the single payment 
amounts for any items under Sec. 414.416 of this subpart.
    (h) Sufficient number of suppliers. (1) Except as provided in 
paragraph (h)(3) of this section. CMS will award at least five 
contracts, if there are five suppliers satisfying the requirements in 
paragraphs (b) through (f) of this section; or
    (2) CMS will award at least two contracts, if there are less than 
five suppliers meeting these requirements and the suppliers satisfying 
these requirements have sufficient capacity to satisfy beneficiary 
demand for the product category calculated under paragraph (e)(1) of 
this section.
    (3) The provisions of paragraph (h)(1) of this section do not apply 
to regional or nationwide mail order CBAs under Sec. 414.410(d)(2) of 
this subpart.
    (i) Selection of new suppliers after bidding. (1) Subsequent to the 
awarding of contracts under this subpart, CMS may award additional 
contracts if it determines that additional contract suppliers are needed 
to meet beneficiary demand for items under a competitive bidding 
program. CMS selects additional contract suppliers by--
    (i) Referring to the arrayed list of suppliers that submitted bids 
for the product category included in the competitive bidding program for 
which beneficiary demand is not being met; and
    (ii) Beginning with the supplier whose composite bid is the first 
composite bid above the pivotal bid for that product category, 
determining if that supplier is willing to become a contract supplier 
under the same terms and conditions that apply to other contract 
suppliers in the CBA.
    (2) Before CMS awards additional contracts under paragraph (i)(1) of 
this section, a supplier must submit updated information demonstrating 
that the supplier meets the requirements under paragraphs (b) through 
(d) of this section.

[72 FR 18085, Apr. 10, 2007, as amended at 74 FR 2880, Jan. 16, 2009; 76 
FR 70315, Nov. 10, 2011; 79 FR 66264, Nov. 6, 2014; 81 FR 77967, Nov. 4, 
2016]



Sec. 414.416  Determination of competitive bidding payment amounts.

    (a) General rule. CMS establishes a single payment amount for each 
item furnished under a competitive bidding program.
    (b) Methodology for setting payment amount. (1) The single payment 
amount for an item furnished under a competitive bidding program is 
equal to the median of the bids submitted for that item by suppliers 
whose composite bids for the product category that includes the item are 
equal to or below the pivotal bid for that product category. If there is 
an even number of bids, the

[[Page 94]]

single payment amount for the item is equal to the average of the two 
middle bids.
    (2) The single payment amount for an item must be less than or equal 
to the amount that would otherwise be paid for the same item under 
subpart C or subpart D.
    (3) In the case of competitions where bids are submitted for an item 
that is a combination of codes for similar items within a product 
category as identified under Sec. 414.412(d)(2), the single payment 
amount for each code within the combination of codes is equal to the 
single payment amount for the lead item or code with the highest total 
nationwide allowed services multiplied by the ratio of the average of 
the 2015 fee schedule amounts for all areas (i.e., all states, the 
District of Columbia, Puerto Rico, and the United States Virgin Islands) 
for the code to the average of the 2015 fee schedule amounts for all 
areas for the lead item.

[72 FR 18085, Apr. 10, 2007, as amended at 81 FR 77967, Nov. 4, 2016]



Sec. 414.418  Opportunity for networks.

    (a) A network may be comprised of at least 2 but not more than 20 
small suppliers.
    (b) The following rules apply to networks that seek contracts under 
this subpart:
    (1) Each network must form a single legal entity that acts as the 
bidder and submits the bid. Any agreement entered into for purposes of 
forming a network must be submitted to CMS. The network must identify 
itself as a network and identify all of its members.
    (2) Each member of the network must satisfy the requirements in 
Sec. 414.414(b) through (d).
    (3) A small supplier may join one or more networks but cannot submit 
an individual bid to furnish the same product category in the same CBA 
as any network in which it is a member. A small supplier may not be a 
member of more than one network if those networks submit bids to furnish 
the same product category in the same CBA.
    (4) The network cannot be anticompetitive, and this section does not 
supersede any Federal law or regulation that regulates anticompetitive 
behavior.
    (5) A bid submitted by a network must include a statement from each 
network member certifying that the network member joined the network 
because it is unable independently to furnish all of the items in the 
product category for which the network is submitting a bid to 
beneficiaries throughout the entire geographic area of the CBA.
    (6) At the time that a network submits a bid, the network's total 
market share for each product category that is the subject of the 
network's bid cannot exceed 20 percent of the Medicare demand for that 
product category in the CBA.
    (c) If the network is awarded a contract, each supplier must submit 
its own claims and will receive payment directly from Medicare for the 
items that it furnishes under the competitive bidding program.

[72 FR 18085, Apr. 10, 2007]



Sec. 414.420  Physician or treating practitioner authorization and 
consideration of clinical efficiency and value of items.

    (a) Prescription for a particular brand item or mode of delivery. 
(1) A physician or treating practitioner may prescribe, in writing, a 
particular brand of an item for which payment is made under a 
competitive bidding program, or a particular mode of delivery for an 
item, if he or she determines that the particular brand or mode of 
delivery would avoid an adverse medical outcome for the beneficiary.
    (2) When a physician or treating practitioner prescribes a 
particular brand or mode of delivery of an item under paragraph (a)(1) 
of this section, the physician or treating practitioner must document 
the reason in the beneficiary's medical record why the particular brand 
or mode of delivery is medically necessary to avoid an adverse medical 
outcome.
    (b) Furnishing of a prescribed particular brand item or mode of 
delivery. If a physician or treating practitioner prescribes a 
particular brand of an item or mode of delivery, the contract supplier 
must--

[[Page 95]]

    (1) Furnish the particular brand or mode of delivery as prescribed 
by the physician or treating practitioner;
    (2) Consult with the physician or treating practitioner to find an 
appropriate alternative brand of item or mode of delivery for the 
beneficiary and obtain a revised written prescription from the physician 
or treating practitioner; or
    (3) Assist the beneficiary in locating a contract supplier that can 
furnish the particular brand of item or mode of delivery prescribed by 
the physician or treating practitioner.
    (c) Payment for a particular brand of item or mode of delivery. 
Medicare does not make an additional payment to a contract supplier that 
furnishes a particular brand or mode of delivery for an item, as 
directed by a prescription written by the beneficiary's physician or 
treating practitioner.
    (d) Prohibition on billing for an item different from the particular 
brand of item or mode of delivery prescribed. A contract supplier is 
prohibited from submitting a claim to Medicare if it furnishes an item 
different from that specified in the written prescription received from 
the beneficiary's physician or treating practitioner. Payment will not 
be made to a contract supplier that submits a claim prohibited by this 
paragraph.

[72 FR 18085, Apr. 10, 2007]



Sec. 414.422  Terms of contracts.

    (a) Basic rule. CMS specifies the terms and conditions of the 
contracts entered into with contract suppliers under this subpart. A 
contract supplier must comply with all terms of its contract, including 
any option exercised by CMS, for the full duration of the contract 
period.
    (b) Recompeting competitive bidding contracts. CMS recompetes 
competitive bidding contracts at least once every 3 years.
    (c) Nondiscrimination. The items furnished by a contract supplier 
under this subpart must be the same items that the contract supplier 
makes available to other customers.
    (d) Change of ownership. (1) A contract supplier must notify CMS if 
it is negotiating a change in ownership no later than 60 days before the 
anticipated date of the change.
    (2) CMS may transfer a contract to an entity that merges with, or 
acquires, a contract supplier if the entity meets the following 
requirements:
    (i) A successor entity--
    (A) Meets all requirements applicable to contract suppliers for the 
applicable competitive bidding program;
    (B) Submits to CMS the documentation described under Sec. 414.414(b) 
through (d) if documentation has not previously been submitted by the 
successor entity or if the documentation is no longer sufficient for CMS 
to make a financial determination. A successor entity is not required to 
duplicate previously submitted information if the previously submitted 
information is not needed to make a financial determination. This 
documentation must be submitted no later than 30 days prior to the 
anticipated effective date of the change of ownership; and
    (C) Submits to CMS, at least 30 days before the anticipated 
effective date of the change of ownership, a signed novation agreement 
acceptable to CMS stating that it will assume all obligations under the 
contract; or
    (ii) A new entity--
    (A) Meets the requirements of (d)(2)(i)(A) and (B) of this section; 
and
    (B) Contract supplier submits to CMS, at least 30 days before the 
anticipated effective date of the change of ownership, its final draft 
of a novation agreement as described in paragraph (d)(2)(C) of this 
section for CMS review. The new entity submits to CMS, within 30 days 
after the effective date of the change of ownership, an executed 
novation agreement acceptable to CMS.
    (3) Except as specified in paragraph (d) (4) of this section, CMS 
transfers the entire contract, including all product categories and 
competitive bidding areas, to a new qualified entity.
    (4) For contracts issued in the Round 2 Recompete and subsequent 
rounds in the case of a CHOW where a contract supplier sells a distinct 
company, (e.g., an affiliate, subsidiary, sole proprietor, corporation, 
or partnership) that furnishes a specific product category or services a 
specific CBA, CMS may transfer the portion of the contract performed by 
that company to a new

[[Page 96]]

qualified entity, if the following conditions are met:
    (i) Every CBA, product category, and location of the company being 
sold must be transferred to the new qualified owner who meets all 
competitive bidding requirements; i.e. financial, accreditation and 
licensure;
    (iii) All CBAs and product categories in the original contract that 
are not explicitly transferred by CMS remain unchanged in that original 
contract for the duration of the contract period unless transferred by 
CMS pursuant to a subsequent CHOW;
    (iv) All requirements of paragraph (d)(2) of this section are met; 
and
    (v) The sale of the distinct company includes all of the contract 
supplier's assets associated with the CBA and/or product category(s); 
and
    (vi) CMS determines that transfer of part of the original contract 
will not result in disruption of service or harm to beneficiaries.
    (e) Furnishing of items. Except as otherwise prohibited under 
section 1877 of the Act, or any other applicable law or regulation:
    (1) A contract supplier must agree to furnish items under its 
contract to any beneficiary who maintains a permanent residence in, or 
who visits, the CBA and who requests those items from that contract 
supplier.
    (2) A skilled nursing facility defined under section 1819(a) of the 
Act or a nursing facility defined under section 1919(a) of the Act that 
has elected to furnish items only to its own residents and that is also 
a contract supplier may furnish items under a competitive bidding 
program to its own patients to whom it would otherwise furnish Part B 
services.
    (3) Contract suppliers for diabetic testing supplies must furnish 
the brand of diabetic testing supplies that work with the home blood 
glucose monitor selected by the beneficiary. The contract supplier is 
prohibited from influencing or incentivizing the beneficiary by 
persuading, pressuring, or advising them to switch from their current 
brand or for new beneficiaries from their preferred brand of glucose 
monitor and testing supplies. The contract supplier may not furnish 
information about alternative brands to the beneficiary unless the 
beneficiary requests such information.
    (f) Disclosure of subcontracting arrangements. (1) Initial 
disclosure. Not later than 10 days after the date a supplier enters into 
a contract under this section the supplier must disclose information on 
both of the following:
    (i) Each subcontracting arrangement that the supplier has in 
furnishing items and services under the contract.
    (ii) Whether each subcontractor meets the requirement of section 
1834(a)(20)(F)(i) of the Act if applicable to such subcontractor.
    (2) Subsequent disclosure. Not later than 10 days after the date a 
supplier enters into a subcontracting arrangement subsequent to contract 
award with CMS, the supplier must disclose information on both of the 
following:
    (i) The subcontracting arrangement that the supplier has in 
furnishing items and services under the contract.
    (ii) Whether the subcontractor meets the requirement of section 
1834(a)(20)(F)(i) of the Act, if applicable to such subcontractor.
    (g) Breach of contract. (1) Any deviation from contract 
requirements, including a failure to comply with governmental agency or 
licensing organization requirements, constitutes a breach of contract.
    (2) In the event a contract supplier breaches its contract, CMS may 
take one or more of the following actions, which will be specified in 
the notice of breach of contract:
    (i) Suspend the contract supplier's contract;
    (ii) Terminate the contract;
    (iii) Preclude the contract supplier from participating in the 
competitive bidding program; or
    (iv) Avail itself of other remedies allowed by law.

[72 FR 18085, Apr. 10, 2007, as amended at 74 FR 2881, Jan. 16, 2009; 75 
FR 73623, Nov. 29, 2010; 76 FR 70315, Nov. 10, 2011; 79 FR 66264, Nov. 
6, 2014; 81 FR 77967, Nov. 4, 2016]



Sec. 414.423  Appeals process for breach of a DMEPOS competitive 
bidding program contract actions.

    This section implements an appeals process for suppliers that CMS 
has determined are in breach of their Medicare DMEPOS Competitive 
Bidding

[[Page 97]]

Program contract and where CMS has issued a notice of breach of contract 
indicating its intent to take action(s) pursuant to Sec. 414.422(g)(2).
    (a) Breach of contract. CMS may take one or more of the actions 
specified in Sec. 414.422(g)(2) as a result of a supplier's breach of 
their DMEPOS Competitive Bidding Program contract.
    (b) Notice of breach of contract--(1) CMS notification. If CMS 
determines a supplier to be in breach of its contract, it will notify 
the supplier of the breach of contract in a notice of breach of 
contract.
    (2) Content of the notice of breach of contract. The CMS notice of 
breach of contract will include the following:
    (i) The details of the breach of contract.
    (ii) The action(s) that CMS is taking as a result of the breach of 
the contract pursuant to Sec. 414.422(g)(2), and the duration of or 
timeframe(s) associated with the action(s), if applicable.
    (iii) The right to request a hearing by a CBIC hearing officer and, 
depending on the nature of the breach, the supplier may also be allowed 
to submit a corrective action plan (CAP) in lieu of requesting a hearing 
by a CBIC hearing officer, as specified in paragraph (c)(1)(i) of this 
section.
    (iv) The address to which the written request for a hearing must be 
submitted.
    (v) The address to which the CAP must be submitted, if applicable.
    (vi) The effective date of the action(s) that CMS is taking is the 
date specified by CMS in the notice of breach of contract, or 45 days 
from the date of the notice of breach of contract unless:
    (A) A timely hearing request has been filed; or
    (B) A CAP has been submitted within 30 days of the date of the 
notice of breach of contract where CMS allows a supplier to submit a 
CAP.
    (c) Corrective action plan (CAP)--(1) Option for a CAP. (i) CMS has 
the option to allow a supplier to submit a written CAP to remedy the 
deficiencies identified in the notice at its sole discretion, including 
where CMS determines that the delay in the effective date of the breach 
of contract action(s) caused by allowing a CAP will not cause harm to 
beneficiaries. CMS will not allow a CAP if the supplier has been 
excluded from any Federal program, debarred by a Federal agency, or 
convicted of a healthcare-related crime, or for any other reason 
determined by CMS.
    (ii) If a supplier chooses not to submit a CAP, if CMS determines 
that a supplier's CAP is insufficient, or if CMS does not allow the 
supplier the option to submit a CAP, the supplier may request a hearing 
on the breach of contract action(s).
    (2) Submission of a CAP. (i) If allowed by CMS, a CAP must be 
submitted within 30 days from the date on the notice of breach of 
contract. If the supplier decides not to submit a CAP the supplier may, 
within 30 days of the date on the notice, request a hearing by a CBIC 
hearing officer.
    (ii) Suppliers will have the opportunity to submit a CAP when they 
are first notified that they have been determined to be in breach of 
contract. If the CAP is not acceptable to CMS or is not properly 
implemented, suppliers will receive a subsequent notice of breach of 
contract. The subsequent notice of breach of contract may, at CMS' 
discretion, allow the supplier to submit another written CAP pursuant to 
paragraph (c)(1)(i) of this section.
    (d) The purpose of the CAP. The purpose of the CAP is:
    (1) For the supplier to remedy all of the deficiencies that were 
identified in the notice of breach of contract.
    (2) To identify the timeframes by which the supplier will implement 
each of the components of the CAP.
    (e) Review of the CAP. (1) The CBIC will review the CAP. Suppliers 
may only revise their CAP one time during the review process based on 
the deficiencies identified by the CBIC. The CBIC will submit a 
recommendation to CMS for each applicable breach of contract action 
concerning whether the CAP includes the steps necessary to remedy the 
contract deficiencies as identified in the notice of breach of contract.
    (2) If CMS accepts the CAP, including the supplier's designated 
timeframe for its completion, the supplier must provide a follow-up 
report within 5 days

[[Page 98]]

after the supplier has fully implemented the CAP that verifies that all 
of the deficiencies identified in the CAP have been corrected in 
accordance with the timeframes accepted by CMS.
    (3) If the supplier does not implement a CAP that was accepted by 
CMS, or if CMS does not accept the CAP submitted by the supplier, then 
the supplier will receive a subsequent notice of breach of contract, as 
specified in paragraph (b) of this section.
    (f) Right to request a hearing by the CBIC Hearing Officer. (1) A 
supplier who receives a notice of breach of contract (whether an initial 
notice of breach of contract or a subsequent notice of breach of 
contract under Sec. 414.422(e)(3)) has the right to request a hearing 
before a CBIC hearing officer who was not involved with the original 
breach of contract determination.
    (2) A supplier that wishes to appeal the breach of contract 
action(s) specified in the notice of breach of contract must submit a 
written request to the CBIC. The request for a hearing must be received 
by the CBIC within 30 days from the date of the notice of breach of 
contract.
    (3) A request for hearing must be in writing and submitted by an 
authorized official of the supplier.
    (4) The appeals process for the Medicare DMEPOS Competitive Bidding 
Program is not to be used in place of other existing appeals processes 
that apply to other parts of Medicare.
    (5) If the supplier is given the opportunity to submit a CAP and a 
CAP is not submitted and the supplier fails to timely request a hearing, 
the breach of contract action(s) will take effect 45 days from the date 
of the notice of breach of contract.
    (g) The CBIC Hearing Officer schedules and conducts the hearing. (1) 
Within 30 days from the receipt of the supplier's timely request for a 
hearing the hearing officer will contact the parties to schedule the 
hearing.
    (2) The hearing may be held in person or by telephone at the 
parties' request.
    (3) The scheduling notice to the parties must indicate the time and 
place for the hearing and must be sent to the parties at least 30 days 
before the date of the hearing.
    (4) The hearing officer may, on his or her own motion, or at the 
request of a party, change the time and place for the hearing, but must 
give the parties to the hearing 30 days' notice of the change.
    (5) The hearing officer's scheduling notice must provide the parties 
to the hearing the following information:
    (i) A description of the hearing procedure.
    (ii) The specific issues to be resolved.
    (iii) The supplier has the burden to prove it is not in violation of 
the contract or that the breach of contract action(s) is not 
appropriate.
    (iv) The opportunity for parties to the hearing to submit additional 
evidence to support their positions, if requested by the hearing 
officer.
    (v) A notification that all evidence submitted, both from the 
supplier and CMS, will be provided in preparation for the hearing to all 
affected parties at least 15 days prior to the scheduled date of the 
hearing.
    (h) Burden of proof and evidence submission. (1) The burden of proof 
is on the Competitive Bidding Program contract supplier to demonstrate 
to the hearing officer with convincing evidence that it has not breached 
its contract or that the breach of contract action(s) is not 
appropriate.
    (2) The supplier's evidence must be submitted with its request for a 
hearing.
    (3) If the supplier fails to submit the evidence at the time of its 
submission, the Medicare DMEPOS supplier is precluded from introducing 
new evidence later during the hearing process, unless permitted by the 
hearing officer.
    (4) CMS also has the opportunity to submit evidence to the hearing 
officer within 10 days of receiving the scheduling notice.
    (5) The hearing officer will share all evidence submitted by the 
supplier and/or CMS, with all parties to the hearing at least 15 days 
prior to the scheduled date of the hearing.
    (i) Role of the hearing officer. The hearing officer will conduct a 
thorough and independent review of the evidence including the 
information and documentation submitted for the hearing and other 
information that the hearing

[[Page 99]]

officer considers pertinent for the hearing. The role of the hearing 
officer includes, at a minimum, the following:
    (1) Conduct the hearing and decide the order in which the evidence 
and the arguments of the parties are presented;
    (2) Determine the rules on admissibility of the evidence;
    (3) Examine the witnesses, in addition to the examinations conducted 
by CMS and the contract supplier;
    (4) The CBIC may assist CMS in the appeals process including being 
present at the hearing, testifying as a witness, or performing other, 
related ministerial duties;
    (5) Determine the rules for requesting documents and other evidence 
from other parties;
    (6) Ensure a complete record of the hearing is made available to all 
parties to the hearing;
    (7) Prepare a file of the record of the hearing which includes all 
evidence submitted as well as any relevant documents identified by the 
hearing officer and considered as part of the hearing; and
    (8) Comply with all applicable provisions of 42 U.S.C. Title 18 and 
related provisions of the Act, the applicable regulations issued by the 
Secretary, and manual instructions issued by CMS.
    (j) Hearing officer recommendation. (1) The hearing officer will 
issue a written recommendation(s) to CMS within 30 days of the close of 
the hearing unless an extension has been granted by CMS because the 
hearing officer has demonstrated that an extension is needed due to the 
complexity of the matter or heavy workload. In situations where there is 
more than one breach of contract action presented at the hearing, the 
hearing officer will issue separate recommendations for each breach of 
contract action.
    (2) The recommendation(s) will explain the basis and the rationale 
for the hearing officer's recommendation(s).
    (3) The hearing officer must include the record of the hearing, 
along with all evidence and documents produced during the hearing along 
with its recommendation(s).
    (k) CMS' final determination. (1) CMS' review of the hearing 
officer's recommendation(s) will not allow the supplier to submit new 
information.
    (2) After reviewing the hearing officer's recommendation(s), CMS' 
decision(s) will be made within 30 days from the date of receipt of the 
hearing officer's recommendation(s). In situations where there is more 
than one breach of contract action presented at the hearing, and the 
hearing officer issues multiple recommendations, CMS will render 
separate decisions for each breach of contract action.
    (3) A notice of CMS' decision will be sent to the supplier and the 
hearing officer. The notice will indicate:
    (i) If any breach of contract action(s) included in the notice of 
breach of contract, specified in paragraph (b)(1) of this section, still 
apply and will be effectuated, and
    (ii) The effective date for any breach of contract action specified 
in paragraph (k)(3)(i) of this section.
    (4) This decision(s) is final and binding.
    (l) Effect of breach of contract action(s)--(1) Effect of contract 
suspension. (i) All locations included in the contract cannot furnish 
competitive bid items to beneficiaries within a CBA and the supplier 
cannot be reimbursed by Medicare for these items for the duration of the 
contract suspension.
    (ii) The supplier must notify all beneficiaries who are receiving 
rented competitive bid items or competitive bid items on a recurring 
basis of the suspension of their contract.
    (A) The notice to the beneficiary from the supplier must be provided 
within 15 days of receipt of the final notice.
    (B) The notice to the beneficiary must inform the beneficiary that 
they must select a new contract supplier to furnish these items in order 
for Medicare to pay for these items.
    (2) Effect of contract termination. (i) All locations included in 
the contract can no longer furnish competitive bid items to 
beneficiaries within a CBA and the supplier cannot be reimbursed by 
Medicare for these items after the effective date of the termination.
    (ii) The supplier must notify all beneficiaries, who are receiving 
rented competitive bid items or competitive bid

[[Page 100]]

items received on a recurring basis, of the termination of their 
contract.
    (A) The notice to the beneficiary from the supplier must be provided 
within 15 days of receipt of the final notice of termination.
    (B) The notice to the beneficiary must inform the beneficiary that 
they are going to have to select a new contract supplier to furnish 
these items in order for Medicare to pay for these items.
    (3) Effect of preclusion. A supplier who is precluded will not be 
allowed to participate in a specific round of the Competitive Bidding 
Program, which will be identified in the original notice of breach of 
contract, as specified in paragraph (b)(1) of this section.
    (4) Effect of other remedies allowed by law. If CMS decides to 
impose other remedies under Sec. 414.422(g)(2)(iv), the details of the 
remedies will be included in the notice of breach of contract, as 
specified in paragraph (b)(2) of this section.

[81 FR 77967, Nov. 4, 2016]



Sec. 414.424  Administrative or judicial review.

    (a) There is no administrative or judicial review under this subpart 
of the following:
    (1) Establishment of payment amounts.
    (2) Awarding of contracts.
    (3) Designation of CBAs.
    (4) Phase-in of the competitive bidding programs.
    (5) Selection of items for competitive bidding.
    (6) Bidding structure and number of contract suppliers selected for 
a competitive bidding program.
    (b) A denied claim is not appealable if the denial is based on a 
determination by CMS that a competitively bid item was furnished in a 
CBA in a manner not authorized by this subpart.

[72 FR 18085, Apr. 10, 2007]



Sec. 414.425  Claims for damages.

    (a) Eligibility for filing a claim for damages as a result of the 
termination of supplier contracts by the Medicare Improvements for 
Patients and Providers Act of 2008 (MIPPA). (1) Any aggrieved supplier, 
including a member of a network that was awarded a contract for the 
Round 1 Durable Medical Prosthetics, Orthotics, and Supplies Competitive 
Bidding Program (DMEPOS CBP) that believes it has been damaged by the 
termination of its competitive bid contract, may file a claim under this 
section.
    (2) A subcontractor of a contract supplier is not eligible to submit 
a claim under this section.
    (b) Timeframe for filing a claim. (1) A completed claim, including 
all documentation, must be filed within 90 days of January 1, 2010 (the 
effective date of these damages provisions), unless that day is a 
Federal holiday or Sunday in which case it will fall to the next 
business day.
    (2) The date of filing is the actual date of receipt by the CBIC of 
a completed claim that includes all the information required by this 
rule.
    (c) Information that must be included in a claim. (1) Supplier's 
name, name of authorized official, U.S. Post Office mailing address, 
phone number, email address and bidding number, and National Supplier 
Clearinghouse Number;
    (2) A copy of the signed contract entered into with CMS for the 
Round 1 DMEPOS Competitive Bidding Program;
    (3) A detailed explanation of the damages incurred by this supplier 
as a direct result of the termination of the Round 1 competitive bid 
contract by MIPPA. The explanation must include all of the following:
    (i) Documentation of the supplier's damages through receipts.
    (ii) Records that substantiate the supplier's damages and 
demonstrate that the damages are directly related to performance of the 
Round 1 contract and are consistent with information the supplier 
provided as part of their bid.
    (4) The supplier must explain how it would be damaged if not 
reimbursed.
    (5) The claim must document steps the supplier took to mitigate any 
damages they may have incurred due to the contract termination, 
including a detailed explanation of the steps of all attempts to use for 
other purposes, return or dispose of equipment or other assets purchased 
or rented for the use

[[Page 101]]

in the Round 1 DMEPOS CBP contract performance.
    (d) Items that will not be considered in a claim. The following 
items will not be considered in a claim:
    (1) The cost of submitting a bid.
    (2) Any fees or costs incurred for consulting or marketing.
    (3) Costs associated with accreditation or licensure.
    (4) Costs incurred before March 20, 2008.
    (5) Costs incurred for contract performance after July 14, 2008 
except for costs incurred to mitigate damages.
    (6) Any profits a supplier may have expected from the contract.
    (7) Costs that would have occurred without a contract having been 
awarded.
    (8) Costs for items such as inventory, delivery vehicles, office 
space and equipment, personnel, which the supplier did not purchase 
specifically to perform the contract.
    (9) Costs that the supplier has recouped by any means, and may 
include use of personnel, material, suppliers, or equipment in the 
supplier's business operations.
    (e) Filing a claim. (1) A claim, with all supporting documentation, 
must be filed with the CMS Competitive Bidding Implementation Contractor 
(CBIC).
    (2) Claims must include a statement from a supplier's authorized 
official certifying the accuracy of the information provided on the 
claim and all supporting documentation.
    (3) The CBIC does not accept electronic submissions of claims for 
damages.
    (f) Review of claim. (1) Role of the CBIC. (i) The CBIC will review 
the claim to ensure it is submitted timely, complete, and by an eligible 
claimant. When the CBIC identifies that a claim is incomplete or not 
filed timely, it will make a recommendation to the Determining Authority 
not to process the claim further. Incomplete or untimely claims may be 
dismissed by the Determining Authority without further processing.
    (ii) For complete, timely claims, the CBIC will review the claim on 
its merits to determine if damages are warranted and may seek further 
information from the claimant when making its recommendation to the 
Determining Authority. The CBIC may set a deadline for receipt of 
additional information. A claimant's failure to respond timely may 
result in a denial of the claim.
    (iii) The CBIC will make a recommendation to the Determining 
Authority for each claim filed and include an explanation that supports 
its recommendation.
    (iv) The recommendation must be either to award damages for a 
particular amount (which may not be the same amount requested by the 
claimant) or that no damages should be awarded.
    (A) If the CBIC recommends that damages are warranted, the CBIC will 
calculate a recommended reasonable amount of damages based on the claim 
submitted.
    (B) The reasonable amount will consider both costs incurred and the 
contractor's attempts and action to limit the damages;
    (v) The recommendation will be sent to the Determining Authority for 
a final determination.
    (2) CMS' role as the Determining Authority. (i) The Determining 
Authority shall review the recommendation of the CBIC.
    (ii) The Determining Authority may seek further information from the 
claimant or the CBIC in making a concurrence or non-concurrence 
determination.
    (iii) The Determining Authority may set a deadline for receipt of 
additional information. A claimant's failure to respond timely may 
result in a denial of the claim.
    (iv) If the Determining Authority concurs with the CBIC 
recommendation, the Determining Authority shall submit a final signed 
decision to the CBIC and direct the CBIC to notify the claimant of the 
decision and the reasons for the final decision.
    (v) If the Determining Authority non-concurs with the CBIC 
recommendation, the Determining Authority may return the claim for 
further processing or the Determining Authority may:
    (A) Write a determination granting (in whole or in part) a claim for 
damages or denying a claim in its entirety;

[[Page 102]]

    (B) Direct the CBIC to write said determination for the Determining 
Authority's signature; or
    (C) Return the claim to the CBIC with further instructions.
    (vi) The Determining Authority's determination is final and not 
subject to administrative or judicial review.
    (g) Timeframe for determinations. (1) Every effort will be made to 
make a determination within 120 days of initial receipt of the claim for 
damages by the CBIC or the receipt of additional information that was 
requested by the CBIC, whichever is later.
    (2) In the case of more complex cases, or in the event of a large 
workload, a decision will be issued as soon as practicable.
    (h) Notification to claimant of damage determination. The CBIC must 
mail the Determining Authority's determination to the claimant by 
certified mail return receipt requested, at the address provided in the 
claim.

[74 FR 62011, Nov. 25, 2009]



Sec. 414.426  Adjustments to competitively bid payment amounts to 
reflect changes in the HCPCS.

    If a HCPCS code for a competitively bid item is revised after the 
contract period for a competitive bidding program begins, CMS adjusts 
the single payment amount for that item as follows:
    (a) If a single HCPCS code for an item is divided into two or more 
HCPCS codes for the components of that item, the sum of single payment 
amounts for the new HCPCS codes equals the single payment amount for the 
original item. Contract suppliers must furnish the components of the 
item and submit claims using the new HCPCS codes.
    (b) If a single HCPCS code is divided into two or more separate 
HCPCS codes, the single payment amount for each of the new separate 
HCPCS codes is equal to the single payment amount applied to the single 
HCPCS code. Contract suppliers must furnish the items and submit claims 
using the new separate HCPCS codes.
    (c) If the HCPCS codes for components of an item are merged into a 
single HCPCS code for the item, the single payment amount for the new 
HCPCS code is equal to the total of the separate single payment amounts 
for the components. Contract suppliers must furnish the item and submit 
claims using the new HCPCS code.
    (d) If multiple HCPCS codes for similar items are merged into a 
single HCPCS code, the items to which the new HCPCS codes apply may be 
furnished by any supplier that has a valid Medicare billing number. 
Payment for these items will be made in accordance with Subpart C or 
Subpart D.

[72 FR 18085, Apr. 10, 2007]



       Subpart G_Payment for Clinical Diagnostic Laboratory Tests

    Source: 71 FR 69786, Dec. 1, 2006, unless otherwise noted.



Sec. 414.500  Basis and scope.

    This subpart implements provisions of 1833(h)(8) of the Act and 
1834A of the Act--procedures for determining the basis for, and amount 
of, payment for a clinical diagnostic laboratory test (CDLT).

[81 FR 41098, June 23, 2016]



Sec. 414.502  Definitions.

    For purposes of this subpart--
    Actual list charge means the publicly available rate on the first 
day the new advanced diagnostic laboratory test (ADLT) is obtainable by 
a patient who is covered by private insurance, or marketed to the public 
as a test a patient can receive, even if the test has not yet been 
performed on that date.
    Advanced diagnostic laboratory test (ADLT) means a clinical 
diagnostic laboratory test (CDLT) covered under Medicare Part B that is 
offered and furnished only by a single laboratory and not sold for use 
by a laboratory other than the single laboratory that designed the test 
or a successor owner of that laboratory, and meets one of the following 
criteria:
    (1) The test--
    (i) Is an analysis of multiple biomarkers of deoxyribonucleic acid 
(DNA), ribonucleic acid (RNA), or proteins;
    (ii) When combined with an empirically derived algorithm, yields a 
result that predicts the probability a specific

[[Page 103]]

individual patient will develop a certain condition(s) or respond to a 
particular therapy(ies);
    (iii) Provides new clinical diagnostic information that cannot be 
obtained from any other test or combination of tests; and
    (iv) May include other assays.
    (2) The test is cleared or approved by the Food and Drug 
Administration.
    Applicable information, with respect to each CDLT for a data 
collection period:
    (1) Means--
    (i) Each private payor rate for which final payment has been made 
during the data collection period;
    (ii) The associated volume of tests performed corresponding to each 
private payor rate; and
    (iii) The specific Healthcare Common Procedure Coding System (HCPCS) 
code associated with the test.
    (2) Does not include information about a test for which payment is 
made on a capitated basis.
    Applicable laboratory means an entity that:
    (1) Is a laboratory, as defined in Sec. 493.2 of this chapter;
    (2) Bills Medicare Part B under its own National Provider Identifier 
(NPI);
    (3) In a data collection period, receives more than 50 percent of 
its Medicare revenues, which includes fee-for-service payments under 
Medicare Parts A and B, Medicare Advantage payments under Medicare Part 
C, prescription drug payments under Medicare Part D, and any associated 
Medicare beneficiary deductible or coinsurance for services furnished 
during the data collection period from one or a combination of the 
following sources:
    (i) This subpart G.
    (ii) Subpart B of this part.
    (4) Receives at least $12,500 of its Medicare revenues from this 
subpart G. Except, for a single laboratory that offers and furnishes an 
ADLT, this $12,500 threshold--
    (i) Does not apply with respect to the ADLTs it offers and 
furnishes; and
    (ii) Applies with respect to all the other CDLTs it furnishes.
    Data collection period is the 6 months from January 1 through June 
30 during which applicable information is collected and that precedes 
the data reporting period.
    Data reporting period is the 3-month period, January 1 through March 
31, during which a reporting entity reports applicable information to 
CMS and that follows the preceding data collection period.
    National Provider Identifier (NPI) means the standard unique health 
identifier used by health care providers for billing payors, assigned by 
the National Plan and Provider Enumeration System (NPPES) in 45 CFR part 
162.
    New advanced diagnostic laboratory test (ADLT) means an ADLT for 
which payment has not been made under the clinical laboratory fee 
schedule prior to January 1, 2018.
    New ADLT initial period means a period of 3 calendar quarters that 
begins on the first day of the first full calendar quarter following the 
later of the date a Medicare Part B coverage determination is made or 
ADLT status is granted by CMS.
    New clinical diagnostic laboratory test (CDLT) means a CDLT that is 
assigned a new or substantially revised Healthcare Common Procedure 
Coding System (HCPCS) code, and that does not meet the definition of an 
ADLT.
    New test means any clinical diagnostic laboratory test for which a 
new or substantially revised Healthcare Common Procedure Coding System 
Code is assigned on or after January 1, 2005.
    Private payor means:
    (1) A health insurance issuer, as defined in section 2791(b)(2) of 
the Public Health Service Act.
    (2) A group health plan, as defined in section 2791(a)(1) of the 
Public Health Service Act.
    (3) A Medicare Advantage plan under Medicare Part C, as defined in 
section 1859(b)(1) of the Act.
    (4) A Medicaid managed care organization, as defined in section 
1903(m)(1)(A) of the Act.
    Private payor rate, with respect to applicable information:
    (1) Is the final amount that is paid by a private payor for a CDLT 
after all private payor price concessions are applied and does not 
include price concessions applied by a laboratory.
    (2) Includes any patient cost sharing amounts, if applicable.

[[Page 104]]

    (3) Does not include information about denied payments.
    Publicly available rate means the lowest amount charged for an ADLT 
that is readily accessible in such forums as a company Web site, test 
registry, or price listing, to anyone seeking to know how much a patient 
who does not have the benefit of a negotiated rate would pay for the 
test.
    Reporting entity is the entity that reports tax-related information 
to the Internal Revenue Service (IRS) using its Taxpayer Identification 
Number (TIN) for its components that are applicable laboratories.
    Single laboratory, for purposes of an ADLT, means:
    (1) The laboratory, as defined in 42 CFR 493.2, which furnishes the 
test, and that may also design, offer, or sell the test; and
    (2) The following entities, which may design, offer, or sell the 
test:
    (i) The entity that owns the laboratory.
    (ii) The entity that is owned by the laboratory.
    Specific HCPCS code means a HCPCS code that does not include an 
unlisted CPT code, as established by the American Medical Association, 
or a Not Otherwise Classified (NOC) code, as established by the CMS 
HCPCS Workgroup.
    Substantially Revised Healthcare Common Procedure Coding System Code 
means a code for which there has been a substantive change to the 
definition of the test or procedure to which the code applies (such as a 
new analyte or a new methodology for measuring an existing analyte 
specific test).
    Successor owner, for purposes of an ADLT, means a single laboratory, 
that has assumed ownership of the single laboratory that designed the 
test or of the single laboratory that is a successor owner to the single 
laboratory that designed the test, through any of the following 
circumstances:
    (1) Partnership. The removal, addition, or substitution of a 
partner, unless the partners expressly agree otherwise, as permitted by 
applicable State law.
    (2) Unincorporated sole proprietorship. Transfer of title and 
property to another party.
    (3) Corporation. The merger of the single laboratory corporation 
into another corporation, or the consolidation of two or more 
corporations, including the single laboratory, resulting in the creation 
of a new corporation. Transfer of corporate stock or the merger of 
another corporation into the single laboratory corporation does not 
constitute change of ownership.
    Taxpayer Identification Number (TIN) means a Federal taxpayer 
identification number or employer identification number as defined by 
the IRS in 26 CFR 301.6109-1.

[71 FR 69786, Dec. 1, 2006, as amended at 72 FR 66401, Nov. 27, 2007; 81 
FR 41098, June 23, 2016]



Sec. 414.504  Data reporting requirements.

    (a) In a data reporting period, a reporting entity must report 
applicable information for each CDLT furnished by its component 
applicable laboratories during the corresponding data collection period, 
as follows--
    (1) For CDLTs that are not ADLTs, every 3 years beginning January 1, 
2017.
    (2) For ADLTs that are not new ADLTs, every year beginning January 
1, 2017.
    (3) For new ADLTs--
    (i) Initially, no later than the last day of the second quarter of 
the new ADLT initial period; and
    (ii) Thereafter, every year.
    (b) Applicable information must be reported in the form and manner 
specified by CMS.
    (c) A laboratory seeking new ADLT status for its test must, in its 
new ADLT application, attest to the actual list charge.
    (d) To certify data integrity, the President, CEO, or CFO of a 
reporting entity, or an individual who has been delegated authority to 
sign for, and who reports directly to, such an officer, must sign the 
certification statement and be responsible for assuring that the data 
provided are accurate, complete, and truthful, and meets all the 
reporting parameters described in this section.
    (e) If the Secretary determines that a reporting entity has failed 
to report

[[Page 105]]

applicable information for its applicable laboratories, or made a 
misrepresentation or omission in reporting applicable information for 
its applicable laboratories, the Secretary may apply a civil monetary 
penalty to a reporting entity in an amount of up to $10,000 per day, as 
amended by the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015 (Sec. 701 of the Bipartisan Budget Act of 2015, 
Pub. L. 114-74, November 2, 2015), for each failure to report or each 
such misrepresentation or omission. The provisions for civil monetary 
penalties that apply in general to the Medicare program under 42 U.S.C. 
1320a-7b apply in the same manner to the laboratory data reporting 
process under this section.
    (f) CMS or its contractors will not disclose applicable information 
reported to CMS under this section in a manner that would identify a 
specific payor or laboratory, or prices charged or payments made to a 
laboratory, except to permit the Comptroller General, the Director of 
the Congressional Budget Office, and the Medicare Payment Advisory 
Commission, to review the information, or as CMS determines is necessary 
to implement this subpart, such as disclosures to the HHS Office of 
Inspector General or the Department of Justice for oversight and 
enforcement activities.
    (g) Applicable information may not be reported for an entity that 
does not meet the definition of an applicable laboratory. For a single 
laboratory that offers and furnishes an ADLT that is not an applicable 
laboratory except with respect to its ADLTs, the applicable information 
of its CDLTs that are not ADLTs may not be reported.

[81 FR 41099, June 23, 2016]



Sec. 414.506  Procedures for public consultation for payment for a new 
clinical diagnostic laboratory test.

    For a new CDLT, CMS determines the basis for and amount of payment 
after performance of the following:
    (a) CMS makes available to the public (through CMS's Internet Web 
site) a list that includes codes for which establishment of a payment 
amount is being considered for the next calendar year.
    (b) CMS publishes a Federal Register notice of a meeting to receive 
public comments and recommendations (and data on which recommendations 
are based) on the appropriate basis, as specified in Sec. 414.508, for 
establishing payment amounts for the list of codes made available to the 
public.
    (c) Not fewer than 30 days after publication of the notice in the 
Federal Register, CMS convenes a meeting that includes representatives 
of CMS officials involved in determining payment amounts, to receive 
public comments and recommendations (and data on which the 
recommendations are based).
    (d) Considering the comments and recommendations (and accompanying 
data) received at the public meeting, CMS develops and makes available 
to the public (through an Internet Web site and other appropriate 
mechanisms) a list of--
    (1) Proposed determinations with respect to the appropriate basis 
for establishing a payment amount for each code, with an explanation of 
the reasons for each determination, the data on which the determinations 
are based, including recommendations from the Advisory Panel on CDLTs 
described in paragraph (e) of this section, and a request for written 
public comments within a specified time period on the proposed 
determination; and
    (2) Final determinations of the payment amounts for tests, with the 
rationale for each determination, the data on which the determinations 
are based, and responses to comments and suggestions from the public.
    (3) On or after January 1, 2018, in applying paragraphs (d)(1) and 
(2) of this section, CMS will provide an explanation of how it took into 
account the recommendations of the Advisory Panel on CDLTs described in 
paragraph (e) of this section.
    (4) On or after January 1, 2018, in applying paragraphs (d)(1) and 
(2) of this section and Sec. 414.509(b)(2)(i) and (iii) when CMS uses 
the gapfilling method described in Sec. 414.508(b)(2), CMS will make 
available to the public an explanation of the payment rate for the test.
    (e) CMS will consult with an expert outside advisory panel, called 
the Advisory Panel on CDLTs, composed of an

[[Page 106]]

appropriate selection of individuals with expertise, which may include 
molecular pathologists researchers, and individuals with expertise in 
laboratory science or health economics, in issues related to CDLTs. This 
advisory panel will provide input on the establishment of payment rates 
under Sec. 414.508 and provide recommendations to CMS under this 
subpart.

[71 FR 69786, Dec. 1, 2006, as amended at 72 FR 66401, Nov. 27, 2007; 81 
FR 41099, June 23, 2016]



Sec. 414.507  Payment for clinical diagnostic laboratory tests.

    (a) General rule. Except as provided in paragraph (d) of this 
section, and Secs. 414.508 and 414.522, the payment rate for a CDLT 
furnished on or after January 1, 2018, is equal to the weighted median 
for the test, as calculated under paragraph (b) of this section. Each 
payment rate will be in effect for a period of one calendar year for 
ADLTs and three calendar years for all other CDLTs, until the year 
following the next data collection period.
    (b) Methodology. For each test under paragraph (a) of this section 
for which applicable information is reported, the weighted median is 
calculated by arraying the distribution of all private payor rates, 
weighted by the volume for each payor and each laboratory.
    (c) The payment amounts established under this section are not 
subject to any adjustment, such as geographic, budget neutrality, annual 
update, or other adjustment.
    (d) Phase-in of payment reductions. For years 2018 through 2023, the 
payment rates established under this section for each CDLT that is not a 
new ADLT or new CDLT, may not be reduced by more than the following 
amounts for--
    (1) 2018--10 percent of the national limitation amount for the test 
in 2017.
    (2) 2019--10 percent of the payment rate established in 2018.
    (3) 2020--10 percent of the payment rate established in 2019.
    (4) 2021--15 percent of the payment rate established in 2020.
    (5) 2022--15 percent of the payment rate established in 2021.
    (6) 2023--15 percent of the payment rate established in 2022.
    (e) There is no administrative or judicial review under sections 
1869 and 1878 of the Social Security Act, or otherwise, of the payment 
rates established under this subpart.
    (f) Effective April 1, 2014, the nominal fee that would otherwise 
apply for a sample collected from an individual in a Skilled Nursing 
Facility (SNF) or by a laboratory on behalf of a Home Health Agency 
(HHA) is $5.
    (g) For a CDLT for which CMS receives no applicable information, 
payment is made based on the crosswalking or gapfilling methods 
described in Sec. 414.508(b)(1) and (2).
    (h) For ADLTs that are furnished between April 1, 2014 and December 
31, 2017, payment is based on the crosswalking or gapfilling methods 
described in Sec. 414.508(a).

[81 FR 41099, June 23, 2016]



Sec. 414.508  Payment for a new clinical diagnostic laboratory test.

    (a) For a new CDLT that is assigned a new or substantially revised 
code between January 1, 2005 and December 31, 2017, CMS determines the 
payment amount based on either of the following:
    (1) Crosswalking. Crosswalking is used if it is determined that a 
new CDLT is comparable to an existing test, multiple existing test 
codes, or a portion of an existing test code.
    (i) CMS assigns to the new CDLT code, the local fee schedule amounts 
and national limitation amount of the existing test.
    (ii) Payment for the new CDLT code is made at the lesser of the 
local fee schedule amount or the national limitation amount.
    (2) Gapfilling. Gapfilling is used when no comparable existing CDLT 
is available.
    (i) In the first year, Medicare Administrative Contractor-specific 
amounts are established for the new CDLT code using the following 
sources of information to determine gapfill amounts, if available:
    (A) Charges for the CDLT and routine discounts to charges;
    (B) Resources required to perform the CDLT;
    (C) Payment amounts determined by other payors; and

[[Page 107]]

    (D) Charges, payment amounts, and resources required for other tests 
that may be comparable or otherwise relevant.
    (ii) In the second year, the test code is paid at the national 
limitation amount, which is the median of the contractor-specific 
amounts.
    (iii) For a new CDLT for which a new or substantially revised HCPCS 
code was assigned on or before December 31, 2007, after the first year 
of gapfilling, CMS determines whether the contractor-specific amounts 
will pay for the test appropriately. If CMS determines that the 
contractor-specific amounts will not pay for the test appropriately, CMS 
may crosswalk the test.
    (b) For a new CDLT that is assigned a new or substantially revised 
HCPCS code on or after January 1, 2018, CMS determines the payment 
amount based on either of the following until applicable information is 
available to establish a payment amount under the methodology described 
in Sec. 414.507(b):
    (1) Crosswalking. Crosswalking is used if it is determined that a 
new CDLT is comparable to an existing test, multiple existing test 
codes, or a portion of an existing test code.
    (i) CMS assigns to the new CDLT code, the payment amount established 
under Sec. 414.507 of the comparable existing CDLT.
    (ii) Payment for the new CDLT code is made at the payment amount 
established under Sec. 414.507.
    (2) Gapfilling. Gapfilling is used when no comparable existing CDLT 
is available.
    (i) In the first year, Medicare Administrative Contractor-specific 
amounts are established for the new CDLT code using the following 
sources of information to determine gapfill amounts, if available:
    (A) Charges for the test and routine discounts to charges;
    (B) Resources required to perform the test;
    (C) Payment amounts determined by other payors;
    (D) Charges, payment amounts, and resources required for other tests 
that may be comparable or otherwise relevant; and
    (E) Other criteria CMS determines appropriate.
    (ii) In the second year, the CDLT code is paid at the median of the 
Medicare Administrative Contractor-specific amounts.

[81 FR 41100, June 23, 2016]



Sec. 414.509  Reconsideration of basis for and amount of payment 
for a new clinical diagnostic laboratory test.

    For a new CDLT, the following reconsideration procedures apply:
    (a) Reconsideration of basis for payment. (1) CMS will receive 
reconsideration requests in written format for 60 days after making a 
determination of the basis for payment under Sec. 414.506(d)(2) 
regarding whether CMS should reconsider the basis for payment and why a 
different basis for payment would be more appropriate. If a requestor 
recommends that the basis for payment should be changed from gapfilling 
to crosswalking, the requestor may also recommend the code or codes to 
which to crosswalk the new test.
    (2)(i) A requestor that submitted a request under paragraph (a)(1) 
of this section may also present its reconsideration request at the 
public meeting convened under Sec. 414.506(c), provided that the 
requestor requests an opportunity to present at the public meeting as 
part of its written submission under paragraph (a)(1) of this section.
    (ii) If the requestor presents its reconsideration request at the 
public meeting convened under Sec. 414.506(c), members of the public may 
comment on the reconsideration request verbally at the public meeting 
and may submit written comments after the public meeting (within the 
timeframe for public comments established by CMS).
    (3) Considering reconsideration requests and other comments 
received, CMS may reconsider its determination of the basis for payment. 
As the result of such a reconsideration, CMS may change the basis for 
payment from crosswalking to gapfilling or from gapfilling to 
crosswalking.
    (4) If the basis for payment is revised as the result of a 
reconsideration, the new basis for payment is final and is not subject 
to further reconsideration.

[[Page 108]]

    (b) Reconsideration of amount of payment--(1) Crosswalking. (i) For 
60 days after making a determination under Sec. 414.506(d)(2) of the 
code or codes to which a new test will be crosswalked, CMS receives 
reconsideration requests in written format regarding whether CMS should 
reconsider its determination and the recommended code or codes to which 
to crosswalk the new test.
    (ii)(A) A requestor that submitted a request under paragraph 
(b)(1)(i) of this section may also present its reconsideration request 
at the public meeting convened under Sec. 414.506(c), provided that the 
requestor requests an opportunity to present at the public meeting as 
part of its written submission under paragraph (b)(1)(i) of this 
section.
    (B) If a requestor presents its reconsideration request at the 
public meeting convened under Sec. 414.506(c), members of the public may 
comment on the reconsideration request verbally at the public meeting 
and may submit written comments after the public meeting (within the 
timeframe for public comments established by CMS).
    (iii) Considering comments received, CMS may reconsider its 
determination of the amount of payment. As the result of such a 
reconsideration, CMS may change the code or codes to which the new test 
is crosswalked.
    (iv) If CMS changes the basis for payment from gapfilling to 
crosswalking as a result of a reconsideration, the crosswalked amount of 
payment is not subject to reconsideration.
    (2) Gapfilling. (i) By April 30 of the year after CMS makes a 
determination under Sec. 414.506(d)(2) or paragraph (a)(3) of this 
section that the basis for payment for a CDLT will be gapfilling, CMS 
posts interim Medicare Administrative Contractor-specific amounts on the 
CMS Web site.
    (ii) For 60 days after CMS posts interim Medicare Administrative 
Contractor-specific amounts on the CMS Web site, CMS will receive public 
comments in written format regarding the interim Medicare Administrative 
Contractor-specific amounts.
    (iii) After considering the public comments, CMS will post final 
Medicare Administrative Contractor-specific amounts on the CMS Web site.
    (iv) For 30 days after CMS posts final Medicare Administrative 
Contractor-specific payment amounts on the CMS Web site, CMS will 
receive reconsideration requests in written format regarding whether CMS 
should reconsider the final Medicare Administrative Contractor-specific 
payment amount and median of the Medicare Administrative Contractor-
specific payment amount for the CDLT.
    (v) Considering reconsideration requests received, CMS may 
reconsider its determination of the amount of payment. As the result of 
a reconsideration, CMS may revise the median of the Medicare 
Administrative Contractor-specific payment amount for the CDLT.
    (3) For both gapfilled and crosswalked new tests, if CMS revises the 
amount of payment as the result of a reconsideration, the new amount of 
payment is final and is not subject to further reconsideration.
    (c) Effective date. If CMS changes a determination as the result of 
a reconsideration, the new determination regarding the basis for or 
amount of payment is effective January 1 of the year following 
reconsideration. Claims for services with dates of service prior to the 
effective date will not be reopened or otherwise reprocessed.
    (d) Jurisdiction for reconsideration decisions. Jurisdiction for 
reconsidering a determination rests exclusively with the Secretary. A 
decision whether to reconsider a determination is committed to the 
discretion of the Secretary. A decision not to reconsider an initial 
determination is not subject to administrative or judicial review.

[72 FR 66401, Nov. 27, 2007, as amended at 73 FR 2432, Jan. 15, 2008; 81 
FR 41100, June 23, 2016]



Sec. 414.510  Laboratory date of service for clinical 
laboratory and pathology specimens.

    The date of service for either a clinical laboratory test or the 
technical component of physician pathology service is as follows:
    (a) Except as provided under paragraph (b) of this section, the date 
of service of the test must be the date the specimen was collected.

[[Page 109]]

    (b)(1) If a specimen was collected over a period that spans 2 
calendar days, then the date of service must be the date the collection 
ended.
    (2) In the case of a test performed on a stored specimen, if a 
specimen was stored for--
    (i) Less than or equal to 30 calendar days from the date it was 
collected, the date of service of the test must be the date the test was 
performed only if--
    (A) The test is ordered by the patient's physician at least 14 days 
following the date of the patient's discharge from the hospital;
    (B) The specimen was collected while the patient was undergoing a 
hospital surgical procedure;
    (C) It would be medically inappropriate to have collected the sample 
other than during the hospital procedure for which the patient was 
admitted;
    (D) The results of the test do not guide treatment provided during 
the hospital stay; and
    (E) The test was reasonable and medically necessary for the 
treatment of an illness.
    (ii) More than 30 calendar days before testing, the specimen is 
considered to have been archived and the date of service of the test 
must be the date the specimen was obtained from storage.
    (3) In the case of a chemotherapy sensitivity test performed on live 
tissue, the date of service of the test must be the date the test was 
performed only if--
    (i) The decision regarding the specific chemotherapeutic agents to 
test is made at least 14 days after discharge;
    (ii) The specimen was collected while the patient was undergoing a 
hospital surgical procedure;
    (iii) It would be medically inappropriate to have collected the 
sample other than during the hospital procedure for which the patient 
was admitted;
    (iv) The results of the test do not guide treatment provided during 
the hospital stay; and,
    (v) The test was reasonable and medically necessary for the 
treatment of an illness.
    (4) For purposes of this section, ``chemotherapy sensitivity test'' 
means a test identified by the Secretary as a test that requires a fresh 
tissue sample to test the sensitivity of tumor cells to various 
chemotherapeutic agents. The Secretary identifies such tests through 
program instructions.

[71 FR 69786, Dec. 1, 2006, as amended at 72 FR 66402, Nov. 27, 2007]



Sec. 414.522  Payment for new advanced diagnostic laboratory tests.

    (a) The payment rate for a new ADLT--
    (1) During the new ADLT initial period, is equal to its actual list 
charge.
    (2) Prior to the new ADLT initial period, is determined by the 
Medicare Administrative Contractor based on information provided by the 
laboratory seeking new ADLT status for its laboratory test.
    (b) After the new ADLT initial period, the payment rate for a new 
ADLT is equal to the weighted median established under the payment 
methodology described in Sec. 414.507(b).
    (c) If, after the new ADLT initial period, the actual list charge of 
a new ADLT is greater than 130 percent of the weighted median 
established under the payment methodology described in Sec. 414.507, CMS 
will recoup the difference between the ADLT actual list charge and 130 
percent of the weighted median.
    (d) If CMS does not receive any applicable information for a new 
ADLT by the last day of the second quarter of the new ADLT initial 
period, the payment rate for the test is determined either by the 
gapfilling or crosswalking method as described in Sec. 414.508(b)(1) and 
(2).

[81 FR 41100, June 23, 2016]



              Subpart H_Fee Schedule for Ambulance Services

    Source: 67 FR 9132, Feb. 27, 2002, unless otherwise noted.



Sec. 414.601  Purpose.

    This subpart implements section 1834(l) of the Act by establishing a 
fee schedule for the payment of ambulance services. Section 1834(l) of 
the Act requires that, except for services furnished by certain critical 
access hospitals (see Sec. 413.70(b)(5) of this chapter),

[[Page 110]]

payment for all ambulance services, otherwise previously payable on a 
reasonable charge basis or retrospective reasonable cost basis, be made 
under a fee schedule.



Sec. 414.605  Definitions.

    As used in this subpart, the following definitions apply to both 
land and water (hereafter collectively referred to as ``ground'') 
ambulance services and to air ambulance services unless otherwise 
specified:
    Advanced life support (ALS) assessment is an assessment performed by 
an ALS crew as part of an emergency response that was necessary because 
the patient's reported condition at the time of dispatch was such that 
only an ALS crew was qualified to perform the assessment. An ALS 
assessment does not necessarily result in a determination that the 
patient requires an ALS level of service.
    Advanced life support (ALS) intervention means a procedure that is, 
in accordance with State and local laws, required to be furnished by ALS 
personnel.
    Advanced life support, level 1 (ALS1) means transportation by ground 
ambulance vehicle, medically necessary supplies and services and either 
an ALS assessment by ALS personnel or the provision of at least one ALS 
intervention.
    Advanced life support, level 2 (ALS2) means either transportation by 
ground ambulance vehicle, medically necessary supplies and services, and 
the administration of at least three medications by intravenous push/
bolus or by continuous infusion, excluding crystalloid, hypotonic, 
isotonic, and hypertonic solutions (Dextrose, Normal Saline, Ringer's 
Lactate); or transportation, medically necessary supplies and services, 
and the provision of at least one of the following ALS procedures:
    (1) Manual defibrillation/cardioversion.
    (2) Endotracheal intubation.
    (3) Central venous line.
    (4) Cardiac pacing.
    (5) Chest decompression.
    (6) Surgical airway.
    (7) Intraosseous line.
    Advanced life support (ALS) personnel means an individual trained to 
the level of the emergency medical technician-intermediate (EMT-
Intermediate) or paramedic. The EMT-Intermediate is defined as an 
individual who is qualified, in accordance with State and local laws, as 
an EMT-Basic and who is also qualified in accordance with State and 
local laws to perform essential advanced techniques and to administer a 
limited number of medications. The EMT-Paramedic is defined as 
possessing the qualifications of the EMT-Intermediate and also, in 
accordance with State and local laws, as having enhanced skills that 
include being able to administer additional interventions and 
medications.
    Basic life support (BLS) means transportation by ground ambulance 
vehicle and medically necessary supplies and services, plus the 
provision of BLS ambulance services. The ambulance must be staffed by at 
least two people who meet the requirements of state and local laws where 
the services are being furnished. Also, at least one of the staff 
members must be certified, at a minimum, as an emergency medical 
technician-basic (EMT-Basic) by the State or local authority where the 
services are furnished and be legally authorized to operate all 
lifesaving and life-sustaining equipment on board the vehicle. These 
laws may vary from State to State.
    Conversion factor (CF) is the dollar amount established by CMS that 
is multiplied by relative value units to produce ground ambulance 
service base rates.
    Emergency response means responding immediately at the BLS or ALS1 
level of service to a 911 call or the equivalent in areas without a 911 
call system. An immediate response is one in which the ambulance entity 
begins as quickly as possible to take the steps necessary to respond to 
the call.
    Fixed wing air ambulance (FW) means transportation by a fixed wing 
aircraft that is certified as a fixed wing air ambulance and such 
services and supplies as may be medically necessary.
    Geographic adjustment factor (GAF) means the practice expense (PE) 
portion of the geographic practice cost index (GPCI) from the physician 
fee

[[Page 111]]

schedule as applied to a percentage of the base rate. For ground 
ambulance services, the PE portion of the GPCI is applied to 70 percent 
of the base rate for each level of service. For air ambulance services, 
the PE portion of the GPCI is applied to 50 percent of the applicable 
base rate.
    Loaded mileage means the number of miles the Medicare beneficiary is 
transported in the ambulance vehicle.
    Paramedic ALS intercept (PI) means EMT-Paramedic services furnished 
by an entity that does not furnish the ground ambulance transport, 
provided the services meet the requirements specified in Sec. 410.40(c) 
of this chapter.
    Point of pick-up means the location of the beneficiary at the time 
he or she is placed on board the ambulance.
    Relative value units (RVUs) means a value assigned to a ground 
ambulance service.
    Rotary wing air ambulance (RW) means transportation by a helicopter 
that is certified as an ambulance and such services and supplies as may 
be medically necessary.
    Rural adjustment factor (RAF) means an adjustment applied to the 
base payment rate when the point of pick-up is located in a rural area.
    Rural area means an area located outside an urban area, or a rural 
census tract within a Metropolitan Statistical Area as determined under 
the most recent version of the Goldsmith modification as determined by 
the Office of Rural Health Policy of the Health Resources and Services 
Administration.
    Specialty care transport (SCT) means interfacility transportation of 
a critically injured or ill beneficiary by a ground ambulance vehicle, 
including medically necessary supplies and services, at a level of 
service beyond the scope of the EMT-Paramedic. SCT is necessary when a 
beneficiary's condition requires ongoing care that must be furnished by 
one or more health professionals in an appropriate specialty area, for 
example, nursing, emergency medicine, respiratory care, cardiovascular 
care, or a paramedic with additional training.
    Urban area means a Metropolitan Statistical Area, as defined by the 
Executive Office of Management and Budget.

[67 FR 9132, Feb. 27, 2002, as amended at 68 FR 67693, Dec. 5, 2003; 71 
FR 69787, Dec. 1, 2006; 80 FR 71382, Nov. 16, 2015]



Sec. 414.610  Basis of payment.

    (a) Method of payment. Medicare payment for ambulance services is 
based on the lesser of the actual charge or the applicable fee schedule 
amount. The fee schedule payment for ambulance services equals a base 
rate for the level of service plus payment for mileage and applicable 
adjustment factors. Except for services furnished by certain critical 
access hospitals or entities owned and operated by them, as described in 
Sec. 413.70(b) of this chapter, all ambulance services are paid under 
the fee schedule specified in this subpart (regardless of the vehicle 
furnishing the service).
    (b) Mandatory assignment. Effective with implementation of the 
ambulance fee schedule described in Sec. 414.601 (that is, for services 
furnished on or after April 1, 2002), all payments made for ambulance 
services are made only on an assignment-related basis. Ambulance 
suppliers must accept the Medicare allowed charge as payment in full and 
may not bill or collect from the beneficiary any amount other than the 
unmet Part B deductible and Part B coinsurance amounts. Violations of 
this requirement may subject the provider or supplier to sanctions, as 
provided by law (part 402 of this chapter).
    (c) Formula for computation of payment amounts. The fee schedule 
payment amount for ambulance services is computed according to the 
following provisions:
    (1) Ground ambulance service levels. The CF is multiplied by the 
applicable RVUs for each level of service to produce a service-level 
base rate.
    (i) For services furnished during the period July 1, 2004 through 
December 31, 2006, ambulance services originating in--
    (A) Urban areas (both base rate and mileage) are paid based on a 
rate that is 1 percent higher than otherwise is applicable under this 
section; and
    (B) Rural areas (both base rate and mileage) are paid based on a 
rate that

[[Page 112]]

is 2 percent higher than otherwise is applicable under this section.
    (ii) For services furnished during the period July 1, 2008 through 
December 31, 2017, ambulance services originating in:
    (A) Urban areas (both base rate and mileage) are paid based on a 
rate that is 2 percent higher than otherwise is applicable under this 
section.
    (B) Rural areas (both base rate and mileage) are paid based on a 
rate that is 3 percent higher than otherwise is applicable under this 
section.
    (iii) The service-level base rate is then adjusted by the GAF. 
Compare this amount to the actual charge. The lesser of the actual 
charge or the GAF adjusted base rate amount is added to the lesser of 
the actual mileage charges or the payment rate per mile, multiplied by 
the number of miles that the beneficiary was transported. When 
applicable, the appropriate RAF is applied to the ground mileage rate to 
determine the appropriate payment rates. The RVU scale for the ambulance 
fee schedule is as follows:

------------------------------------------------------------------------
                                                               Relative
                                                                 value
                        Service level                            units
                                                                (RVUs)
------------------------------------------------------------------------
BLS.........................................................        1.00
BLS-Emergency...............................................        1.60
ALS1........................................................        1.20
ALS1-Emergency..............................................        1.90
ALS2........................................................        2.75
SCT.........................................................        3.25
PI..........................................................        1.75
------------------------------------------------------------------------

    (2) Air ambulance service levels. The base payment rate for the 
applicable type of air ambulance service is adjusted by the GAF and, 
when applicable, by the appropriate RAF to determine the amount of 
payment. Air ambulance services have no CF or RVUs. This amount is 
compared to the actual charge. The lesser of the charge or the adjusted 
GAF rate amount is added to the payment rate per mile, multiplied by the 
number of miles that the beneficiary was transported. When applicable, 
the appropriate RAF is also applied to the air mileage rate.
    (3) Loaded mileage. Payment is based on loaded miles. Payment for 
air mileage is based on loaded miles flown as expressed in statute 
miles. There are three mileage payment rates: a rate for FW services, a 
rate for RW services, and a rate for all levels of ground 
transportation.
    (4) Geographic adjustment factor (GAF). For ground ambulance 
services, the PE portion of the GPCI from the physician fee schedule is 
applied to 70 percent of the base rate for ground ambulance services. 
For air ambulance services, the PE portion of the physician fee schedule 
GPCI is applied to 50 percent of the base rate for air ambulance 
services.
    (5) Rural adjustment factor (RAF). (i) For ground ambulance services 
where the point of pickup is in a rural area, the mileage rate is 
increased by 50 percent for each of the first 17 miles and, for services 
furnished before January 1, 2004, by 25 percent for miles 18 through 50. 
The standard mileage rate applies to every mile over 50 miles and, for 
services furnished after December 31, 2003, to every mile over 17 miles. 
For air ambulance services where the point of pickup is in a rural area, 
the total payment is increased by 50 percent; that is, the rural 
adjustment factor applies to the sum of the base rate and the mileage 
rate.
    (ii) For services furnished during the period July 1, 2004 through 
December 31, 2017, the payment amount for the ground ambulance base rate 
is increased by 22.6 percent where the point of pickup is in a rural 
area determined to be in the lowest 25 percent of rural population 
arrayed by population density. The amount of this increase is based on 
CMS's estimate of the ratio of the average cost per trip for the rural 
areas in the lowest quartile of population compared to the average cost 
per trip for the rural areas in the highest quartile of population. In 
making this estimate, CMS may use data provided by the GAO.
    (6) Multiple patients. The allowable amount per beneficiary for a 
single ambulance transport when more than one patient is transported 
simultaneously is based on the total number of patients (both Medicare 
and non-Medicare) on board. If two patients are transported 
simultaneously, then the payment allowance for the beneficiary (or for 
each of them if both patients are beneficiaries) is equal to 75 percent 
of the service payment allowance applicable for the level of care 
furnished

[[Page 113]]

to the beneficiary, plus 50 percent of the applicable mileage payment 
allowance. If three or more patients are transported simultaneously, the 
payment allowance for the beneficiary (or each of them) is equal to 60 
percent of the service payment allowance applicable for the level of 
care furnished to the beneficiary, plus the applicable mileage payment 
allowance divided by the number of patients on board.
    (7) Payment rate for mileage greater than 50 miles. For services 
furnished during the period July 1, 2004 through December 31, 2008, each 
loaded ambulance mile greater than 50 (that is, miles 51 and greater) 
for ambulance transports originating in either urban areas or in rural 
areas are paid based on a rate that is 25 percent higher than otherwise 
is applicable under this section.
    (8) For ambulance services furnished on or after October 1, 2013 
consisting of non-emergency basic life support (BLS) services involving 
transport of an individual with end-stage renal disease for renal 
dialysis services (as described in section 1881(b)(14)(B)) furnished 
other than on an emergency basis by a provider of services or a renal 
dialysis facility, the fee schedule amount otherwise applicable (both 
base rate and mileage) is reduced by 10 percent.
    (d) Payment. Payment, in accordance with this subpart, represents 
payment in full (subject to applicable Medicare Part B deductible and 
coinsurance requirements as described in subpart G of part 409 of this 
chapter or in subpart I of part 410 of this chapter) for all services, 
supplies, and other costs for an ambulance service furnished to a 
Medicare beneficiary. No direct payment will be made under this subpart 
if billing for the ambulance service is required to be consolidated with 
billing for another benefit for which payment may be made under this 
chapter.
    (e) Point of pick-up. The zip code of the point of pick-up must be 
reported on each claim for ambulance services so that the correct GAF 
and RAF may be applied, as appropriate.
    (f) Updates. The CF, the air ambulance base rates, and the mileage 
rates are updated annually by an inflation factor established by law. 
The inflation factor is based on the consumer price index for all urban 
consumers (CPI-U) (U.S. city average) for the 12-month period ending 
with June of the previous year and, for 2011 and each subsequent year, 
is reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act.
    (g) Adjustments. The Secretary monitors payment and billing data on 
an ongoing basis and adjusts the CF and air ambulance rates as 
appropriate to reflect actual practices under the fee schedule. These 
rates are not adjusted solely because of changes in the total number of 
ambulance transports.
    (h) Treatment of certain areas for payment for air ambulance 
services. Any area that was designated as a rural area for purposes of 
making payments under the ambulance fee schedule for air ambulance 
services furnished on December 31, 2006, must be treated as a rural area 
for purposes of making payments under the ambulance fee schedule for air 
ambulance services furnished during the period July 1, 2008 through June 
30, 2013.

[67 FR 9132, Feb. 27, 2002, as amended at 68 FR 67693, Dec. 5, 2003; 69 
FR 40292, July 1, 2004; 71 FR 69787, Dec. 1, 2006; 73 FR 69937, Nov. 19, 
2008; 74 FR 62012, Nov. 25, 2009; 75 FR 73625, Nov. 29, 2010; 76 FR 
70315, Nov. 10, 2011; 77 FR 69368, Nov. 16, 2012; 78 FR 74820, Dec. 10, 
2013; 79 FR 68005, Nov. 13, 2014; 80 FR 71382, Nov. 16, 2015]



Sec. 414.615  Transition to the ambulance fee schedule.

    The fee schedule for ambulance services will be phased in over 5 
years beginning April 1, 2002. Subject to the first sentence in 
Sec. 414.610(a), payment for services furnished during the transition 
period is made based on a combination of the fee schedule payment for 
ambulance services and the amount the program would have paid absent the 
fee schedule for ambulance services, as follows:
    (a) 2002 Payment. For services furnished in 2002, the payment for 
the service component, the mileage component and, if applicable, the 
supply component is based on 80 percent of the reasonable charge for 
independent suppliers or on 80 percent of reasonable cost for providers, 
plus 20 percent of the ambulance fee schedule amount for the service and 
mileage components. The reasonable charge or reasonable

[[Page 114]]

cost portion of payment in CY 2002 is equal to the supplier's reasonable 
charge allowance or provider's reasonable cost allowance for CY 2001, 
multiplied by the statutory inflation factor for ambulance services.
    (b) 2003 Payment. For services furnished in CY 2003, payment is 
based on 60 percent of the reasonable charge or reasonable cost, as 
applicable, plus 40 percent of the ambulance fee schedule amount. The 
reasonable charge and reasonable cost portion in CY 2003 is equal to the 
supplier's reasonable charge or provider's reasonable cost for CY 2002, 
multiplied by the statutory inflation factor for ambulance services.
    (c) 2004 Payment. For services furnished in CY 2004, payment is 
based on 40 percent of the reasonable charge or reasonable cost, as 
applicable, plus 60 percent of the ambulance fee schedule amount. The 
reasonable charge and reasonable cost portion in CY 2004 is equal to the 
supplier's reasonable charge or provider's reasonable cost for CY 2003, 
multiplied by the statutory inflation factor for ambulance services.
    (d) 2005 Payment. For services furnished in CY 2005, payment is 
based on 20 percent of the reasonable charge or reasonable cost, as 
applicable, plus 80 percent of the ambulance fee schedule amount. The 
reasonable charge and reasonable cost portion in CY 2005 is equal to the 
supplier's reasonable charge or provider's reasonable cost for CY 2004, 
multiplied by the statutory inflation factor for ambulance services.
    (e) 2006 and Beyond Payment. For services furnished in CY 2006 and 
thereafter, the payment is based solely on the ambulance fee schedule 
amount.
    (f) Updates. The portion of the transition payment that is based on 
the existing payment methodology (that is, the non-fee-schedule portion) 
is updated annually for inflation by a factor equal to the percentage 
increase in the CPI-U (U.S. city average) for the 12-month period ending 
with June of the previous year. The CY 2002 inflation update factor used 
to update the 2001 payment amounts is applied to the annualized 
(average) payment amounts for CY 2001. For the period January 1, 2001 
through June 30, 2001, the inflation update factor is 2.7 percent. For 
the period July 1, 2001 through December 31, 2001, the inflation update 
factor is 4.7 percent. The average for the year is 3.7 percent. Thus, 
the annualized (average) CY 2001 payment amounts used to derive the CY 
2002 payment amounts are equivalent to the CY 2001 payment amounts that 
would have been determined had the inflation update factor for the 
entire CY 2001 been 3.7 percent. Both portions of the transition payment 
(that is, the portion that is based on reasonable charge or reasonable 
cost and the portion that is based on the ambulance fee schedule) are 
updated annually for inflation by the inflation factor described in 
Sec. 414.610(f).
    (g) Exception. There will be no blended payment allowance as 
described in paragraphs (a), (b), (c), and (d) of this section for 
ground mileage in those States where the Medicare carrier paid 
separately for all out-of-county ground ambulance mileage, but did not, 
before the implementation of the Medicare ambulance fee schedule, make a 
separate payment for any ground ambulance mileage within the county in 
which the beneficiary was transported. Payment for ground ambulance 
mileage in that State will be made based on the full ambulance fee 
schedule amount for ground mileage. This exception applies only to 
carrier-processed claims and only in those States in which the carrier 
paid separately for out-of-county ambulance mileage, but did not make 
separate payment for any in-county mileage throughout the entire State.



Sec. 414.617  Transition from regional to national ambulance fee schedule.

    For services furnished during the period July 1, 2004 through 
December 31, 2009, the amount for the ground ambulance base rate is 
subject to a floor amount determined by establishing nine fee schedules 
based on each of the nine census divisions using the same methodology as 
used to establish the national fee schedule. If the regional fee 
schedule methodology for a given census division results in an amount 
that is less than or equal to the national ground base rate, then it is 
not used, and the national FS amount applies. If the regional fee 
schedule methodology for a given census division results in an amount 
that is greater than

[[Page 115]]

the national ground base rate, then the FS portion of the base rate for 
that census division is equal to a blend of the national rate and the 
regional rate in accordance with the following schedule:

------------------------------------------------------------------------
                                                     Regional   National
                    Time period                      percent    percent
------------------------------------------------------------------------
7/1/04-12/31/04...................................         80         20
CY 2005...........................................         60         40
CY 2006...........................................         40         60
CY 2007-CY 2009...................................         20         80
CY 2010 and thereafter............................          0        100
------------------------------------------------------------------------


[69 FR 40292, July 1, 2004]



Sec. 414.620  Publication of the ambulance fee schedule.

    (a) Changes in payment rates resulting from incorporation of the 
annual inflation factor and the productivity adjustment as described in 
Sec. 414.610(f) will be announced by CMS by instruction and on the CMS 
Web site.
    (b) CMS will follow applicable rulemaking procedures in publishing 
revisions to the fee schedule for ambulance services that result from 
any factors other than those described in Sec. 414.610(f).

[75 FR 73626, Nov. 29, 2010]



Sec. 414.625  Limitation on review.

    There will be no administrative or judicial review under section 
1869 of the Act or otherwise of the amounts established under the fee 
schedule for ambulance services, including the following:
    (a) Establishing mechanisms to control increases in expenditures for 
ambulance services.
    (b) Establishing definitions for ambulance services that link 
payments to the type of services provided.
    (c) Considering appropriate regional and operational differences.
    (d) Considering adjustments to payment rates to account for 
inflation and other relevant factors.
    (e) Phasing in the application of the payment rates under the fee 
schedule in an efficient and fair manner.



               Subpart I_Payment for Drugs and Biologicals

    Source: 69 FR 1116, Jan. 7, 2004, unless otherwise noted.



Sec. 414.701  Purpose.

    This subpart implements section 1842(o) of the Social Security Act 
by specifying the methodology for determining the payment allowance 
limit for drugs and biologicals covered under Part B of Title XVIII of 
the Act (hereafter in this subpart referred to as the ``program'') that 
are not paid on a cost or prospective payment system basis. Examples of 
drugs that are subject to the rules contained in this subpart are: drugs 
furnished incident to a physician's service; durable medical equipment 
(DME) drugs; separately billable drugs at independent dialysis 
facilities not under the ESRD composite rate; statutorily covered drugs, 
for example, influenza, pneumococcal and hepatitis vaccines, antigens, 
hemophilia blood clotting factor, immunosuppressive drugs and certain 
oral anti-cancer drugs.



Sec. 414.704  Definitions.

    As used in this subpart, the following definition applies. Drug 
refers to both drugs and biologicals.



Sec. 414.707  Basis of payment.

    (a) Method of payment. (1) Payment for a drug in calendar year 2004 
is based on the lesser of--
    (i) The actual charge on the claim for program benefits; or
    (ii) 85 percent of the average wholesale price determined as of 
April 1, 2003, subject to the exceptions as specified in paragraphs 
(a)(2) through (a)(8) of this section.
    (2) The payment limits for the following drugs are calculated using 
95 percent of the average wholesale price:
    (i) Blood clotting factors.
    (ii) A drug or biological furnished during 2004 that was not 
available for Medicare payment as of April 1, 2003.
    (iii) Pneumococcal and influenza vaccines as well as hepatitis B 
vaccine that is furnished to individuals at high or intermediate risk of 
contracting hepatitis B (as determined by the Secretary).
    (iv) A drug or biological furnished during 2004 in connection with 
the furnishing of renal dialysis services if separately billed by renal 
dialysis facilities.

[[Page 116]]

    (3) The payment limits for infusion drugs furnished through a 
covered item of durable medical equipment are calculated using 95 
percent of the average wholesale price in effect on October 1, 2003.
    (4) The payments limits for drugs contained in the following table 
are calculated based on the percentages of the average wholesale price 
determined as of April 1, 2003 that are specified in the table.

------------------------------------------------------------------------
                                                              Percentage
                                                               used to
                                                              calculate
                            Drug                                 2004
                                                               payment
                                                                limit
------------------------------------------------------------------------
EPOETIN ALFA...............................................           87
LEUPROLIDE ACETATE.........................................           81
GOSERELIN ACETATE..........................................           80
RITUXIMAB..................................................           81
PACLITAXEL.................................................           81
DOCETAXEL..................................................           80
CARBOPLATIN................................................           81
IRINOTECAN.................................................           80
GEMCITABINE HCL............................................           80
PAMIDRONATE DISODIUM.......................................           85
DOLASETRON MESYLATE........................................           80
FILGRASTIM.................................................           81
HYLAN G-F 20...............................................           82
MYCOPHENOLATE MOFETIL......................................           86
GRANISETRON HCL............................................           80
ONDANSETRON................................................           87
VINORELBINE TARTATE........................................           81
SARGRAMOSTIM...............................................           80
TOPOTECAN..................................................           84
IPRATROPIUM BROMIDE........................................           80
ALBUTEROL SULFATE..........................................           80
IMMUNE GLOBULIN............................................           80
LEUCOVORIN CALCIUM.........................................           80
DOXORUBICIN HCL............................................           80
DEXAMETHOSONE SODIUM PHOSPHATE.............................           86
HEPARIN SODIUM LOCK-FLUSH..................................           80
CROMOLYN SODIUM............................................           80
ACETYLCYSTEINE.............................................           80
------------------------------------------------------------------------

    (5) The payment limits for imiglucerase and alglucerase are 
calculated using 94 percent of the average wholesale price determined as 
of April 1, 2003.
    (6) Exception. The payment limit for a drug otherwise subject to 
paragraph (a)(1)(ii) or paragraph (a)(4) of this section may be 
calculated using the percentage of the average wholesale price as the 
Secretary deems appropriate based on data and information submitted by 
the drug manufacturer.
    (i) The manufacturer must submit data after October 15, 2003 and 
before January 1, 2004.
    (ii) The percentage only applies for drugs furnished on or after 
April 1, 2004.
    (7) In the case of blood and blood products (other than blood 
clotting factors), the payment limits shall be determined in the same 
manner as such payment limit was determined on October 1, 2003.
    (b) Mandatory assignment. Effective with services furnished on or 
after February 1, 2001, payment for any drug covered under Part B of 
Medicare may be made on an assignment-related basis only. All billers 
must accept the program allowed charge as payment in full and may not 
bill nor collect from the beneficiary any amount other than the unmet 
Part B deductible and Part B coinsurance amounts, if applicable. 
Violations of this requirement may subject the supplier to sanctions, as 
provided by the statute (See Sec. 402 of this chapter).
    (c) Mandatory reporting of anemia quality indicators. The following 
provisions are effective January 1, 2008:
    (1) Each request for payment for anti-anemia drugs furnished to 
treat anemia resulting from the treatment of cancer must report the 
beneficiary's most recent hemoglobin or hematocrit level;
    (2) Each request for payment for use of erythropoiesis stimulating 
agents must report the beneficiary's most recent hemoglobin or 
hematocrit level.

[69 FR 1116, Jan. 7, 2004, as amended at 72 FR 66402, Nov. 27, 2007]



     Subpart J_Submission of Manufacturer's Average Sales Price Data

    Source: 69 FR 17938, Apr. 6, 2004, unless otherwise noted.



Sec. 414.800  Purpose.

    This subpart implements section 1847A of the Act by specifying the 
requirements for submission of a manufacturer's average sales price data 
for certain drugs and biologicals covered under Part B of Title XVIII of 
the Act that are paid under sections 1842(o)(1)(D), 1847A, and 
1881(b)(13)(A)(ii) of the Act.



Sec. 414.802  Definitions.

    As used in this subpart, unless the context indicates otherwise--

[[Page 117]]

    Bona fide service fees means fees paid by a manufacturer to an 
entity, that represent fair market value for a bona fide, itemized 
service actually performed on behalf of the manufacturer that the 
manufacturer would otherwise perform (or contract for) in the absence of 
the service arrangement, and that are not passed on in whole or in part 
to a client or customer of an entity, whether or not the entity takes 
title to the drug.
    Drug means both drugs and biologicals.
    Manufacturer means any entity that is engaged in the following (This 
term does not include a wholesale distributor of drugs or a retail 
pharmacy licensed under State law):
    (1) Production, preparation, propagation, compounding, conversion or 
processing of prescription drug products, either directly or indirectly 
by extraction from substances of natural origin, or independently by 
means of chemical synthesis, or by a combination of extraction and 
chemical synthesis.
    (2) The packaging, repackaging, labeling, relabeling, or 
distribution of prescription drug products.
    Unit means the product represented by the 11-digit National Drug 
Code, unless otherwise specified by CMS to account for situations where 
labeling indicates that the amount of drug product represented by a 
National Drug Code varies. The method of counting units excludes units 
of CAP drugs (as defined in Sec. 414.902 of this part) sold to an 
approved CAP vendor (as defined in Sec. 414.902 of this part) for use 
under the CAP (as defined in Sec. 414.902 of this part).

[69 FR 17938, Apr. 6, 2004, as amended at 71 FR 48143, Aug. 18, 2006; 71 
FR 69787, Dec. 1, 2006; 74 FR 62012, Nov. 25, 2009; 76 FR 73473, Nov. 
28, 2011]



Sec. 414.804  Basis of payment.

    (a) Calculation of manufacturer's average sales price. (1) The 
manufacturer's average sales price for a quarter for a drug represented 
by a particular 11-digit National Drug Code must be calculated as the 
manufacturer's sales to all purchasers in the United States for that 
particular 11-digit National Drug Code (after excluding sales as 
specified in paragraph (a)(4) of this section and then deducting price 
concessions as specified in paragraphs (a)(2) and (a)(3) of this 
section) divided by the total number of units sold by the manufacturer 
in that quarter (after excluding units associated with sales as 
specified in paragraph (a)(4) of this section).
    (2) Price concessions. (i) In calculating the manufacturer's average 
sales price, a manufacturer must deduct price concessions. Price 
concessions include the following types of transactions and items:
    (A) Volume discounts.
    (B) Prompt pay discounts.
    (C) Cash discounts.
    (D) Free goods that are contingent on any purchase requirement.
    (E) Chargebacks and rebates (other than rebates under the Medicaid 
program).
    (ii) For the purposes of paragraph (a)(2)(i), bona fide services 
fees are not considered price concessions.
    (3) To the extent that data on price concessions, as described in 
paragraph (a)(2) of this section, are available on a lagged basis, the 
manufacturer must estimate this amount in accordance with the 
methodology described in this paragraph.
    (i)(A) For each National Drug Code with at least 12 months of sales 
(including products for which the manufacturer has redesignated the 
National Drug Code for the specific product and package size and has 12 
months of sales across the prior and current National Drug Codes), after 
adjusting for exempted sales, the manufacturer calculates a percentage 
equal to the sum of the price concessions for the most recent 12-month 
period available associated with sales subject to the average sales 
price reporting requirement divided by the total in dollars for the 
sales subject to the average sales price reporting requirement for the 
same 12-month period.
    (B) For each National Drug Code with less than 12 months of sales, 
the calculation described in paragraph (i)(A) of this section is 
performed for the time period equaling the total number of months of 
sales.
    (ii) The manufacturer multiplies the applicable percentage described 
in paragraph (a)(3)(i)(A) or (a)(3)(i)(B) of this section by the total 
in dollars for

[[Page 118]]

the sales subject to the average sales price reporting requirement 
(after adjusting for exempted sales) for the quarter being submitted. 
(The manufacturer must carry a sufficient number of decimal places in 
the calculation of the price concessions percentage in order to round 
accurately the net total sales amount for the quarter to the nearest 
whole dollar.) The result of this multiplication is then subtracted from 
the total in dollars for the sales subject to the average sales price 
reporting requirement (after adjusting for exempted sales) for the 
quarter being submitted.
    (iii) The manufacturer uses the result of the calculation described 
in paragraph (a)(3)(ii) of this section as the numerator and the number 
of units sold in the quarter (after adjusting for exempted sales) as the 
denominator to calculate the manufacturer's average sales price for the 
National Drug Code for the quarter being submitted.
    (iv) Example. After adjusting for exempted sales, the total lagged 
price concessions (discounts, rebates, etc.) over the most recent 12-
month period available associated with sales for National Drug Code 
12345-6789-01 subject to the ASP reporting requirement equal $200,000, 
and the total in dollars for the sales subject to the average sales 
price reporting requirement for the same period equals $600,000. The 
lagged price concessions percentage for this period equals 200,000/
600,000 = 0.33333. The total in dollars for the sales subject to the 
average sales price reporting requirement for the quarter being 
reported, equals $50,000 for 10,000 units sold. The manufacturer's 
average sales price calculation for this National Drug Code for this 
quarter is: $50,000-(0.33333  x  $50,000) = $33,334 (net total sales 
amount); $33,334/10,000 = $3.33 (average sales price).
    (4) Exempted sales. (i) In calculating the manufacturer's average 
sales price, a manufacturer must exclude sales that are exempt from 
inclusion in the determination of the best price under section 
1927(c)(1)(C)(i) of the Act and sales that are merely nominal in amount 
as applied for purposes of section 1927(c)(1)(C)(ii)(III) of the Act, as 
limited by section 1927(c)(1)(D) of the Act.
    (ii) In determining nominal sales exempted under section 
1927(c)(1)(C)(ii)(III) of the Act, the manufacturer calculates the 
average manufacturer price as defined in section 1927(k) of the Act and 
then identifies sales that are eligible to be considered a nominal sale 
under section 1927(c)(1)(D) of the Act and are at less than 10 percent 
of the average manufacturer price. To identify nominal sales, the 
manufacturer must use the average manufacturer price for the calendar 
quarter that is the same calendar quarter as the average sales price 
reporting period.
    (5) The manufacturer's average sales price must be calculated by the 
manufacturer every calendar quarter and submitted to CMS within 30 days 
of the close of the quarter. The first quarter submission must be 
submitted by April 30, 2004. Subsequent reports are due not later than 
30 days after the last day of each calendar quarter.
    (6) The manufacturer's average sales price must be calculated based 
on the amount of product in a vial or other container as conspicuously 
reflected on the FDA approved label as defined by section 201(k) of the 
Food, Drug, and Cosmetic Act.
    (7) Each report must be certified by one of the following:
    (i) The manufacturer's Chief Executive Officer (CEO).
    (ii) The manufacturer's Chief Financial Officer (CFO).
    (iii) An individual who has delegated authority to sign for, and who 
reports directly to, the manufacturer's CEO or CFO.
    (b) [Reserved]

[69 FR 17938, Apr. 6, 2004, as amended at 69 FR 55764, Sept. 16, 2004; 
70 FR 70332, Nov. 21, 2005; 71 FR 69787, Dec. 1, 2006; 72 FR 18914, Apr. 
16, 2007; 75 FR 73626, Nov. 29, 2010]



Sec. 414.806  Penalties associated with the failure to submit 
timely and accurate ASP data.

    Section 1847A(d)(4) specifies the penalties associated with 
misrepresentations associated with ASP data. If the Secretary determines 
that a manufacturer has made a misrepresentation in the reporting of ASP 
data, a civil money penalty in an amount of up to $10,000 may be applied 
for each price

[[Page 119]]

misrepresentation and for each day in which the price misrepresentation 
was applied. Section 1927(b)(3)(C) of the Act, as amended by section 
303(i)(4) of the MMA, specifies the penalties associated with a 
manufacturer's failure to submit timely information or the submission of 
false information.



        Subpart K_Payment for Drugs and Biologicals Under Part B

    Source: 69 FR 66424, Nov. 15, 2004, unless otherwise noted.



Sec. 414.900  Basis and scope.

    (a) This subpart implements sections 1842(o), 1847A, and 1847B of 
the Act and outlines two payment methodologies applicable to drugs and 
biologicals covered under Medicare Part B that are not paid on a cost or 
prospective payment system basis.
    (b) Examples of drugs that are subject to the requirements specified 
in this subpart are:
    (1) Drugs furnished incident to a physician's service; durable 
medical equipment (DME) drugs.
    (2) Separately billable drugs at independent dialysis facilities not 
under the ESRD composite rate.
    (3) Statutorily covered drugs, for example--
    (i) Influenza.
    (ii) Pneumococcal and Hepatitis B vaccines.
    (iii) Antigens.
    (iv) Hemophilia blood clotting factor.
    (v) Immunosuppressive drugs.
    (vi) Certain oral anti-cancer drugs.

[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 39093, July 6, 2005]



Sec. 414.902  Definitions.

    As used in this subpart, unless the context indicates otherwise--
    Approved CAP vendor means an entity that has been awarded a contract 
by CMS to participate in the competitive acquisition program under 1847B 
of the Act.
    Bid means an offer to furnish a CAP drug within a category of CAP 
drugs in a competitive acquisition area for a particular price and time 
period.
    Biosimilar biological product means a biological product approved 
under an abbreviated application for a license of a biological product 
that relies in part on data or information in an application for another 
biological product licensed under section 351 of the Public Health 
Service Act (PHSA) as defined at section 1847A(c)(6)(H) of the Act.
    CAP drug means a physician-administered drug or biological furnished 
on or after January 1, 2006 described in section 1842(o)(1)(C) of the 
Act and supplied by an approved CAP vendor under the CAP as provided in 
this subpart.
    Competitive acquisition area means a geographic area established by 
the Secretary for purposes of implementing the CAP required by section 
1847B of the Act.
    Competitive acquisition program (CAP) means a program as defined 
under section 1847B of the Act.
    Designated carrier means an entity assigned by CMS to process and 
pay claims for drugs and biologicals under the CAP.
    Drug means both drugs and biologicals.
    Emergency delivery means delivery of a CAP drug within one business 
day in appropriate shipping and packaging, in all areas of the United 
States and its territories, with the exception of the Pacific 
Territories. In the Pacific Territories, emergency delivery means 
delivery of a CAP drug within 5 business days in appropriate shipping 
and packaging. In each case, this timeframe shall be reduced if product 
stability requires it, meaning that the manufacturer's labeling 
instructions, drug compendia, or specialized drug stability references 
indicate that a shorter delivery timeframe is necessary to avoid 
adversely affecting the product's integrity, safety, or efficacy.
    Emergency situation means, for the purposes of the CAP, an 
unforeseen occurrence or situation determined by the participating CAP 
physician, in his or her clinical judgment, to require prompt action or 
attention for purposes of permitting the participating CAP physician to 
use a drug from his or her own stock, if the other requirements of 
Sec. 414.906(e) are met.
    Local carrier means an entity assigned by CMS to process and pay 
claims for administration of drugs and biologicals under the CAP.

[[Page 120]]

    Manufacturer's average sales price means the price calculated and 
reported by a manufacturer under part 414, subpart J of this chapter.
    Multiple source drug means a drug described by section 
1847A(c)(6)(C) of the Act.
    Pacific Territories means, for purposes of the CAP, American Samoa, 
Guam, or the Northern Mariana Islands.
    Participating CAP physician means a physician electing to 
participate in the CAP, as described in this subpart. The participating 
CAP physician must complete and sign the participating CAP physician 
election agreement. Physicians who do not participate in Medicare but 
who elect to participate in the CAP must agree to accept assignment for 
CAP drug administration claims.
    Participating CAP physician election agreement means the agreement 
that the physician signs to notify CMS of the physician's election to 
participate in the CAP and to agree to the terms and conditions of CAP 
participation as set forth in this subpart.
    Prescription order means a written order submitted by the 
participating CAP physician to the approved CAP vendor that meets the 
requirements of this subpart.
    Reference biological product means the biological product licensed 
under such section 351 of the PHSA that is referred to in the 
application of the biosimilar biological product as defined at section 
1847A(c)(6)(I) of the Act.
    Routine delivery means delivery of a drug within 2 business days in 
appropriate shipping and packaging in all areas of the United States and 
its territories, with the exception of the Pacific Territories. In the 
Pacific Territories, routine delivery of drug means delivery of a CAP 
drug within 7 business days in appropriate shipping and packaging. In 
each case, this timeframe will be reduced if product stability requires 
it, meaning that the manufacturer's labeling instructions, drug 
compendia, or specialized drug stability references indicate that a 
shorter delivery timeframe is necessary to avoid adversely affecting the 
product's integrity, safety, or efficacy.
    Single source drug means a drug described by section 1847A(c)(6)(D) 
of the Act.
    Timely delivery means delivery of a CAP drug within the defined 
routine and emergency delivery timeframes. Compliance with timely 
delivery standards is also a factor for evaluation of potential and 
approved CAP vendors.
    Unit is defined as in part 414, subpart J of this chapter.
    Wholesale acquisition cost (WAC) means the price described by 
section 1847A(c)(6)(B) of the Act.

[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 39093, July 6, 2005; 75 
FR 73626, Nov. 29, 2010]



Sec. 414.904  Average sales price as the basis for payment.

    (a) Method of payment. Payment for a drug furnished on or after 
January 1, 2005 is based on the lesser of--
    (1) The actual charge on the claim for program benefits; or
    (2) 106 percent of the average sales price, subject to the 
applicable limitations specified in paragraph (d) of this section or 
subject to the exceptions described in paragraph (e) of this section.
    (3) For purposes of this paragraph--
    (i) CMS calculates an average sales price payment limit based on the 
amount of product included in a vial or other container as reflected on 
the FDA-approved label.
    (ii) Additional product contained in the vial or other container 
does not represent a cost to providers and is not incorporated into the 
ASP payment limit.
    (iii) No payment is made for amounts of product in excess of that 
reflected on the FDA-approved label.
    (b) Multiple source drugs--(1) Average sales prices. The average 
sales price for all drug products included within the same multiple 
source drug billing and payment code is the volume-weighted average of 
the manufacturers' average sales prices for those drug products.
    (2) Calculation of the average sales price. (i) For dates of service 
before April 1, 2008, the average sales price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to the drug products) of the manufacturer's average sales price 
and the total number of units sold; and

[[Page 121]]

    (B) Dividing that sum by the sum of the total number of units sold 
for all NDCs assigned to the drug products.
    (ii) For dates of service on or after April 1, 2008, the average 
sales price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to such drug products) of the manufacturer's average sales 
price, determined by the Secretary without dividing such price by the 
total number of billing units for the National Drug Code for the billing 
and payment code and the total number of units sold; and
    (B) Dividing the sum determined under clause (A) by the sum of the 
products (for each National Drug Code assigned to such drug products) of 
the total number of units sold and the total number of billing units for 
the National Drug Code for the billing and payment code.
    (iii) For purposes of this subsection and subsection (c), the term 
billing unit means the identifiable quantity associated with a billing 
and payment code, as established by CMS.
    (c) Single source drugs--(1) Average sales price. The average sales 
price is the volume-weighted average of the manufacturers' average sales 
prices for all National Drug Codes assigned to the drug or biological 
product.
    (2) Calculation of the average sales price. (i) For dates of service 
before April 1, 2008, the average sales price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to the drug product) of the manufacturer's average sales price 
and the total number of units sold; and
    (B) Dividing that sum by the sum of the total number of units sold 
for all NDCs assigned to the drug product.
    (ii) For dates of service on or after April 1, 2008, the average 
sales price is determined by--
    (A) Computing the sum of the products (for each National Drug Code 
assigned to such drug products) of the manufacturer's average sales 
price, determined by the Secretary without dividing such price by the 
total number of billing units for the National Drug Code for the billing 
and payment code and the total number of units sold; and
    (B) Dividing the sum determined under clause (A) by the sum of the 
products (for each National Drug Code assigned to such drug products) of 
the total number of units sold and the total number of billing units for 
the National Drug Code for the billing and payment code.
    (d) Limitations on the average sales price--(1) Wholesale 
acquisition cost for a single source drug. The payment limit for a 
single source drug product is the lesser of 106 percent of the average 
sales price for the product or 106 percent of the wholesale acquisition 
cost for the product.
    (2) Payment limit for a drug furnished to an end-stage renal disease 
patient. (i) Effective for drugs and biologicals furnished in 2005, the 
payment for such drugs and biologicals, including erythropoietin, 
furnished to an end-stage renal disease patient that is separately 
billed by an end-stage renal disease facility and not paid on a cost 
basis is acquisition cost as determined by the Inspector General report 
as required by section 623(c) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 inflated by the percentage 
increase in the Producer Price Index.
    (ii) Except as provided in paragraph (a) of this section, the 
payment for drugs and biologicals, furnished to an end-stage renal 
disease patient that is separately billed by an end-stage renal disease 
facility, is based on 106 percent of the average sales price.
    (iii) Effective for drugs and biologicals furnished in CY 2006 and 
subsequent calendar years, the payment for such drugs and biologicals 
furnished in connection with renal dialysis services and separately 
billed by freestanding and hospital-based renal dialysis facilities not 
paid on a cost basis is the amount determined under section 1847A of the 
Act.
    (3) Widely available market price and average manufacturer price. If 
the Inspector General finds that the average sales price exceeds the 
widely available market price or the average manufacturer price by the 
applicable threshold percentage specified in paragraph (d)(3)(iii) or 
(iv) of this section, the Inspector General is responsible for informing 
the Secretary (at such times

[[Page 122]]

as specified by the Secretary) and the payment amount for the drug or 
biological will be substituted subject to the following adjustments:
    (i) The payment amount substitution will be applied at the next 
average sales price payment amount calculation period after the 
Inspector General informs the Secretary (at such times specified by the 
Secretary) about billing codes for which the average sales price has 
exceeded the average manufacturer price by the applicable threshold 
percentage, and will remain in effect for 1 quarter after publication.
    (ii) Payment at 103 percent of the average manufacturer price for a 
billing code will be applied at such times when all of the following 
criteria are met:
    (A) The threshold for making price substitutions, as defined in 
paragraph (d)(3)(iii) of this section is met.
    (B) 103 percent of the average manufacturer price is less than the 
106 percent of the average sales price for the quarter in which the 
substitution would be applied.
    (C) Beginning in 2013, the drug and dosage form described by the 
HCPCS code is not identified by the FDA to be in short supply at the 
time that ASP calculations are finalized.
    (iii) The applicable percentage threshold for average manufacturer 
price comparisons is 5 percent and is reached when--
    (A) The average sales price for the billing code has exceeded the 
average manufacturer price for the billing code by 5 percent or more in 
2 consecutive quarters, or 3 of the previous 4 quarters immediately 
preceding the quarter to which the price substitution would be applied; 
and
    (B) The average manufacturer price for the billing code is 
calculated using the same set of National Drug Codes used for the 
average sales price for the billing code.
    (iv) The applicable percentage threshold for widely available market 
price comparisons is 5 percent.
    (e) Exceptions to the average sales price--(1) Vaccines. The payment 
limits for hepatitis B vaccine furnished to individuals at high or 
intermediate risk of contracting hepatitis B (as determined by the 
Secretary), pneumococcal vaccine, and influenza vaccine and are 
calculated using 95 percent of the average wholesale price.
    (2) Infusion drugs furnished through a covered item of durable 
medical equipment. The payment limit for an infusion drug furnished 
through a covered item of durable medical equipment is calculated using 
95 percent of the average wholesale price in effect on October 1, 2003 
and is not updated in 2006.
    (3) Blood and blood products. In the case of blood and blood 
products (other than blood clotting factors), the payment limits are 
determined in the same manner as the payment limits were determined on 
October 1, 2003.
    (4) Payment limit in a case where the average sales price during the 
first quarter of sales is unavailable. In the case of a drug during an 
initial period (not to exceed a full calendar quarter) in which data on 
the prices for sales of the drug are not sufficiently available from the 
manufacturer to compute an average sales price for the drug, the payment 
limit is based on the wholesale acquisition cost or the applicable 
Medicare Part B drug payment methodology in effect on November 1, 2003.
    (5) Treatment of certain drugs. Beginning with April 1, 2008, the 
payment amount for--
    (i) Each single source drug or biological described in section 
1842(o)(1)(G) that is treated as a multiple source drug because of the 
application of section 1847A(c)(6)(C)(ii) is the lower of--
    (A) The payment amount that would be determined for such drug or 
biological applying section 1847A(c)(6)(C)(ii); or
    (B) The payment amount that would have been determined for such drug 
or biological if section 1847A(c)(6)(C)(ii) were not applied.
    (ii) A multiple source drug described in section 1842(o)(1)(G) 
(excluding a drug or biological that is treated as a multiple source 
drug because of the application of section 1847A(c)(6)(C)(ii)) is the 
lower of--
    (A) The payment amount that would be determined for such drug or 
biological taking into account the application of section 
1847A(c)(6)(C)(ii); or
    (B) The payment amount that would have been determined for such drug 
or biological if section 1847A(c)(6)(C)(ii) were not applied.

[[Page 123]]

    (f) Except as otherwise specified (see paragraph (e)(2) of this 
section) for infusion drugs, the payment limits are updated quarterly.
    (g) The payment limit is computed without regard to any special 
packaging, labeling, or identifiers on the dosage form or product or 
package.
    (h) The payment amount is subject to applicable deductible and 
coinsurance.
    (i) If manufacturer ASP data is not available prior to the 
publication deadline for quarterly payment limits and the unavailability 
of manufacturer ASP data significantly changes the quarterly payment 
limit for the billing code when compared to the prior quarter's billing 
code payment limit, the payment limit is calculated by carrying over the 
most recent available manufacturer ASP price from a previous quarter for 
an NDC in the billing code, adjusted by the weighted average of the 
change in the manufacturer ASPs for the NDCs that were reported for both 
the most recently available previous quarter and the current quarter.
    (j) Biosimilar biological products. Effective January 1, 2016, the 
payment amount for a biosimilar biological drug product (as defined in 
Sec. 414.902) for all NDCs assigned to such product is the sum of the 
average sales price of all NDCs assigned to the biosimilar biological 
products included within the same billing and payment code as determined 
under section 1847A(b)(6) of the Act and 6 percent of the amount 
determined under section 1847A(b)(4) of the Act for the reference drug 
product (as defined in Sec. 414.902).

[69 FR 66424, Nov. 15, 2004, as amended at 70 FR 70332, Nov. 21, 2005; 
71 FR 69788, Dec. 1, 2006; 72 FR 66402, Nov. 27, 2007; 73 FR 69937, Nov. 
19, 2008; 73 FR 80304, Dec. 31, 2008; 74 FR 62012, Nov. 25, 2009; 75 FR 
73626, Nov. 29, 2010; 76 FR 73473, Nov. 28, 2011; 77 FR 69368, Nov. 16, 
2012; 80 FR 71382, Nov. 16, 2015]



Sec. 414.906  Competitive acquisition program as the basis for payment.

    (a) Program payment. Beginning in 2006, as an alternative to payment 
under Sec. 414.904, payment for a CAP drug may be made through the CAP 
if the following occurs:
    (1) The CAP drug is supplied under the CAP by an approved CAP vendor 
as specified in Sec. 414.908(b).
    (2) The claim for the prescribed drug is submitted by the approved 
CAP vendor that supplied the drug, and payment is made only to that 
vendor.
    (3) The approved CAP vendor collects applicable deductible and 
coinsurance with respect to the drug furnished under the CAP only after 
the drug is administered to the beneficiary.
    (4) The approved CAP vendor delivers CAP drugs directly to the 
participating CAP physician in unopened vials or other original 
containers as supplied by the manufacturer or from a distributor that 
has acquired the products directly from the manufacturer and includes 
language with the shipping material stating that the drug was acquired 
in a manner consistent with all statutory requirements. If the approved 
CAP vendor opts to split shipments, the participating CAP physician must 
be notified in writing which can be included with the initial shipment, 
and each incremental shipment must arrive at least 2 business days 
before the anticipated date of administration.
    (5) The approved CAP vendor bills Medicare only for the amount of 
the drug administered to the patient, and the beneficiary's coinsurance 
will be calculated from the quantity of drug that is administered.
    (b) Exceptions to competitive acquisition. Specific CAP drugs, 
including a category of these drugs, may be excluded from the CAP if the 
application of competitive bidding to these drugs--
    (1) Is not likely to result in significant savings; or
    (2) Is likely to have an adverse impact on access to those drugs.
    (c) Computation of payment amount. Except as specified in paragraph 
(c)(2) of this section, payment for CAP drugs is based on bids submitted 
as a result of the bidding process as described in Sec. 414.910 of this 
subpart.
    (1) Single payment amount. (i) A single payment amount for each CAP 
drug in the competitive acquisition area is determined on the basis of 
the bids submitted and accepted and updated from the bidding period to 
the beginning of the payment year.

[[Page 124]]

    (ii) The single payment amount is then updated quarterly based on 
the approved CAP vendor's reasonable net acquisition costs for that 
category as determined by CMS, and limited by the weighted payment 
amount established under section 1847A of the Act across all drugs for 
which a composite bid is required in the category.
    (iii) The payment amount for each other drug for which the approved 
CAP vendor submits a bid in accordance with Sec. 414.910 of this subpart 
and each other drug that is approved by CMS for the approved CAP vendor 
to furnish under the CAP is also updated quarterly based on the approved 
CAP vendor's reasonable net acquisition costs for each HCPCS code and 
limited by the payment amount established under section 1847A of the 
Act.
    (2) Updates to payment amount. (i) The first update is effective on 
the first day of claims processing for the first quarter of an approved 
CAP vendor's contract. The first quarterly contract update is based on 
the reasonable net acquisition cost (RNAC) data reported to CMS or its 
designee for any purchases of drug before the beginning of CAP claims 
processing for the contract period and reported to CMS no later than 30 
days before the beginning of CAP claims processing.
    (ii) For subsequent quarters, each approved CAP vendor must report 
to CMS or its designee RNAC data for a quarter of CAP drug purchases 
within 30 days of the close of that quarter.
    (iii) For all quarters, only RNAC data from approved CAP vendors 
that are supplying CAP drugs under their CAP contract at the time 
updates are being calculated must be used to calculate updated CAP 
payment amounts.
    (iv) CMS excludes such RNAC data submitted by an approved CAP vendor 
if, during the time calculations are being done, CMS knows that the 
approved CAP vendor will not be under contract for the applicable 
quarterly update.
    (v) The payment amount weights must be calculated based on the more 
recent of the following:
    (A) Contract bidding weights.
    (B) CAP claims data.
    (vi) The payment limit must be determined using the most recent 
payment limits available to CMS under section 1847A of the Act.
    (vii) The following payment amount update calculation must be 
applied for the group of all drugs for which a composite bid is 
required.
    (A) The most recent previous composite payment amount for the group 
is updated by--
    (1) Calculating the percent change in reasonable net acquisition 
costs for each approved CAP vendor;
    (2) Calculating the median of all participating approved CAP 
vendors' adjusted CAP payment amounts; and
    (3) Limiting the payment as described in paragraph (c)(1) of this 
section.
    (B) The median percent change, subject to the limit described in 
paragraph (c)(1) of this section, must be the update percentage for that 
quarter.
    (C) The single update percentage must be applied to the payment 
amount for each drug in the group of drugs for which a composite bid is 
required in the category.
    (viii) The following payment amount update calculation must be 
applied for each of the following items: Each HCPCS code not included in 
the composite bid list; Each HCPCS code added to the drug list during 
the contract period; and each drug that has not yet been assigned a 
HCPCS code, but for which a HCPCS code will be established.
    (A) The most recent previous payment amount for each drug must be 
updated by calculating the percent change in reasonable net acquisition 
costs for each approved CAP vendor, then calculating the median of all 
participating approved CAP vendors' adjusted CAP payment amounts.
    (B) The median percent change calculated for each drug, subject to 
the limit described in paragraph (c)(1) of this section, must be applied 
to the payment amount for each drug.
    (3) Alternative payment amount. The alternative payment amount 
established under section 1847A of the Act may be used to establish 
payment for a CAP drug if--
    (i) The drug is properly assigned to a category established under 
the CAP; and

[[Page 125]]

    (ii) It is a drug for which a HCPCS code must be established.
    (d) Adjustments. There is an established process for adjustments to 
payments to account for drugs that were billed, but which were not 
administered.
    (e) Resupply of participating CAP physician drug inventory. A 
participating CAP physician may acquire drugs under the CAP to resupply 
his or her private inventory if all of the following requirements are 
met:
    (1) The drugs were required immediately.
    (2) The participating CAP physician could not have anticipated the 
need for the drugs.
    (3) The approved CAP vendor could not have delivered the drugs in a 
timely manner. For purposes of this section, timely manner means 
delivery within the emergency delivery timeframe, as defined in 
Sec. 414.902.
    (4) The participating CAP physician administered the drugs in an 
emergency situation, as defined in Sec. 414.902.
    (f) Substitution or addition of drugs on an approved CAP vendor's 
CAP drug list--(1) Short-term substitution of a CAP drug. On an 
occasional basis (for a period of time less than 2 weeks), an approved 
CAP vendor may agree to furnish a substitute NDC within a HCPCS code on 
the approved CAP vendor's CAP drug list if the approved CAP vendor--
    (i) Is willing to accept the payment amount that was established for 
the HCPCS code under this section; and
    (ii) Obtains the participating CAP physician's prior approval.
    (2) Long-term substitution or addition of a CAP drug. An approved 
CAP vendor may submit a request, as specified in paragraph (f)(3) of 
this section, for approval to substitute an NDC supplied by the approved 
CAP vendor for another NDC within the same HCPCS code or to add an NDC 
to the approved CAP vendor's drug list, if at least one of the following 
criteria is met:
    (i) Proposed substitution of an NDC for a period of 2 weeks or 
longer.
    (ii) Proposed addition of one or more NDCs within a HCPCS code 
included in the CAP drug category specified by CMS or on the approved 
CAP vendor's approved CAP drug list.
    (iii) Proposed addition of--
    (A) One or more newly issued HCPCS codes; or
    (B) One of the following single indication orphan drug J codes or 
their updates: J0205, J0256, J9300, J1785, J2355, J3240, J7513, J9010, 
J9015, J9017, J9160, J9216.
    (iv) Beginning January 1, 2007, the proposed addition of a drug(s) 
that has not yet been assigned a HCPCS code, but for which a HCPCS code 
must be established.
    (v) On or after January 1, 2010, the proposed addition of drugs with 
similar therapeutic uses to drugs already supplied under the CAP by the 
approved CAP vendor(s).
    (3) Requesting the addition or substitution of CAP drug. An approved 
CAP vendor that meets the one of the criteria specified in paragraph 
(f)(2) must submit a written request to CMS or its designee. The request 
must--
    (i) Specify the NDC(s) and the respective HCPCS code that is to be 
added or substituted.
    (ii) Address the rationale for the substitution or addition of the 
NDC(s) or the addition of the HCPCS code(s) as applicable; and
    (iii) Address the impact of the substitution of the NDC(s) or the 
addition of the NDC(s) or HCPCS code(s), or both on--
    (A) Patient and drug safety;
    (B) Drug waste; and
    (C) The potential for cost savings.
    (iv) In the case of additions requested under paragraph (f)(2)(v) of 
this section, address and document the need for such an expansion based 
on demand for the product(s).
    (4) Approval of a request(s). CMS or its designee notifies the 
approved CAP vendor of its decision.
    (i) Except as specified in paragraph (f)(4)(ii) of this section, an 
approved request is effective at the beginning of the next calendar 
quarter.
    (ii) Approved substitutions for request based on a drug shortage or 
other exigent circumstance may become effective immediately provided 
that--
    (A) CMS approves the immediate substitution; and
    (B) The approved CAP vendor's notifies its CAP participating 
physicians of

[[Page 126]]

the substitution immediately following CMS approval.
    (5) Payment for an approved drug change(s). The payment for--
    (i) Substituted or added CAP drugs that are within a HCPCS code for 
which payment is computed under paragraph (c)(1) of this section is the 
single payment for that HCPCS code, as determined and updated in 
accordance with paragraph (c)(1) of this section; or
    (ii) Added CAP drugs that are not within a HCPCS code for which 
payment is computed under paragraph (c)(1) of this section is specified 
under paragraph (c)(2) of this section.
    (g) Deletion of drugs on an approved CAP vendor's CAP drug list. 
Deletion of drugs on an approved CAP vendor's CAP drug list due to 
unavailability requires a written request and approval as described in 
paragraphs (f)(3)(i) through (iii) and (f)(4) of this section.

[70 FR 39094, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005; 71 
FR 9460, Feb. 24, 2006; 74 FR 62012, Nov. 25, 2009]



Sec. 414.908  Competitive acquisition program.

    (a) Participating CAP physician selection of an approved CAP vendor. 
(1) CMS provides the participating CAP physician with a process for the 
selection of an approved CAP vendor on an annual basis, with exceptions 
as specified in Sec. 414.908(a)(2). Participating CAP physicians will 
also receive information about the CAP in the enrollment process for 
Medicare participation set forth in section 1842(h) of the Act.
    (2) A participating CAP physician may select an approved CAP vendor 
outside the annual selection process or opt out of the CAP for the 
remainder of the annual selection period when--
    (i) The selected approved CAP vendor ceases participation in the 
CAP;
    (ii) The physician leaves a group practice participating in CAP;
    (iii) The participating CAP physician relocates to another 
competitive acquisition area; or
    (iv) The approved CAP vendor refuses to ship to the participating 
CAP physician because the conditions of Sec. 414.914(i) have been met 
(if this subparagraph (a)(2)(iv) applies, the physician can withdraw 
from the CAP category for the remainder of the year immediately upon 
notice to CMS and the approved CAP vendor); or
    (v) Other exigent circumstances defined by CMS are present, 
including--
    (A) If, up to and including 60 days after the effective date of the 
physician's CAP election agreement, the participating CAP physician 
submits a written request to the designated carrier to terminate the CAP 
election agreement because CAP participation imposes a burden on the 
physician's practice. The written request must document the burden. The 
designated carrier will process the participating CAP physician's 
request and CMS will approve or deny the request under the dispute 
resolution process as specified under Sec. 414.917 of this subpart.
    (B) If, more than 60 days after the effective date of the 
physician's CAP election agreement, the participating CAP physician 
submits a written request to the designated carrier to terminate the CAP 
election agreement because, based on a change in circumstances of which 
the participating CAP physician was not previously aware, CAP 
participation imposes a burden on the physician's practice. The written 
request must document the burden. The designated carrier will process 
the participating CAP physician's request and CMS will approve or deny 
the request under the dispute resolution process as specified under 
Sec. 414.917 of this subpart.
    (3) The physician participating in the CAP--
    (i) Elects to use an approved CAP vendor for the drug category and 
area as set forth in Sec. 414.908(b);
    (ii) Completes and signs the CAP election agreement;
    (iii) Submits a written prescription order to the approved CAP 
vendor with complete patient information for patients new to the 
approved CAP vendor or when information changes. Abbreviated information 
may be sent on all subsequent orders for a patient for which the 
approved CAP vendor has previously received complete information and 
that has no changes to the original information. Prescription orders may 
be initiated by telephone, with a follow-up written order provided 
within 8 hours for routine deliveries

[[Page 127]]

and immediately for emergency deliveries;
    (iv) Does not receive payment for the CAP drug;
    (v) Except where applicable State pharmacy law prohibits it, 
provides the following information to the approved CAP vendor to 
facilitate collection of applicable deductible and coinsurance as 
described in Sec. 414.906(a)(3):
    (A) Date of order.
    (B) Beneficiary name, address, and phone number.
    (C) Physician identifying information:
    Name, practice location/shipping address, group practice information 
(if applicable), PIN, and UPIN.
    (D) Drug name.
    (E) Strength.
    (F) Quantity ordered.
    (G) Dose.
    (H) Frequency/instructions.
    (I) Anticipated date of administration.
    (J) Beneficiary Medicare information/Health insurance (HIC) number.
    (K) Supplementary insurance information (if applicable).
    (L) Medicaid information (if applicable).
    (M) Additional patient information: date of birth, allergies, 
height/weight, ICD-9-CM (if necessary).
    (vi) Agrees to accept the particular National Drug Codes (NDCs) 
supplied by the approved CAP vendor for the duration of the 
participating CAP physician's enrollment with the approved CAP vendor, 
subject to paragraphs (a)(3)(vii) and (a)(3)(xiv) of this section. By 
electing to participate with an approved CAP vendor, the participating 
CAP physician also agrees to accept the changes to the approved CAP 
vendor's CAP drug list that have been approved in accordance with 
Sec. 414.906(f).
    (vii) Agrees to place routine orders for CAP drugs at the HCPCs 
level, except when medical necessity requires a particular formulation 
on the approved CAP vendor's CAP drug list. Medical necessity must be 
documented. When the conditions of this paragraph are met, the 
participating CAP physician may submit a prescription order to the 
approved CAP vendor that specifies the NDC.
    (viii) Notifies the approved CAP vendor when a drug is not 
administered or a smaller amount was administered than was originally 
ordered. The participating CAP physician and the approved CAP vendor 
agree on how to handle the unused CAP drug. If it is agreed that the 
participating CAP physician will maintain the CAP drug in his inventory 
for administration at a later date, the participating CAP physician 
submits a new prescription order at that time. This prescription order 
specifies that the CAP drug is being obtained from the participating CAP 
physician's CAP inventory and shipment should not occur;
    (ix) Maintains a separate electronic or paper inventory for each CAP 
drug obtained;
    (x) Agrees to file the Medicare claim within 30 calendar days of the 
date of drug administration.
    (xi) Agrees to submit documentation such as medical records or 
certification, as necessary, to support payment for a CAP drug;
    (xii) Agrees not to transport CAP drugs from one practice location 
or place of service to another location except in accordance with a 
written agreement between the participating CAP physician and the 
approved CAP vendor that requires that drugs are not subjected to 
conditions that will jeopardize their integrity, stability, and/or 
sterility while being transported.
    (xiii) Agrees to provide the CMS-developed CAP fact sheet to 
beneficiaries; and
    (xiv) May receive payment under the ASP system when medical 
necessity requires a certain brand or formulation of a drug that the 
approved CAP vendor has not been contracted to furnish under the CAP.
    (4) Physician group practices. If a physician group practice using a 
group billing number(s) elects to participate in the CAP, all physicians 
in the group are considered to be participating CAP physicians when 
using the group's billing number(s).
    (b) Program requirements. (1) CMS selects approved CAP vendors 
through a competition among entities based on the following:
    (i) Submission of the bid prices using the OMB-approved Vendor 
Application

[[Page 128]]

and Bid Form for CAP drugs within the category and competitive 
acquisition area that--
    (A) Places the vendor among the qualified bidders with the lowest 
five composite bids; and
    (B) Does not exceed the weighted payment amount established under 
section 1847A of the Act across all drugs in that category.
    (ii) Ability to ensure product integrity.
    (iii) Customer service/Grievance process.
    (iv) At least 3 years experience in furnishing Part B injectable 
drugs.
    (v) Financial performance and solvency.
    (vi) Record of integrity and the implementation of internal 
integrity measures.
    (vii) Internal financial controls.
    (viii) Acquisition of all CAP drugs directly from the manufacturer 
or from a distributor that has acquired the products directly from the 
manufacturer.
    (ix) Maintenance of appropriate licensure to supply CAP drugs in 
States in which they are supplying CAP drugs.
    (x) Cost-sharing assistance as described in Sec. 414.914(g).
    (xi) Other factors as determined by CMS.
    (2) Approved CAP vendors must also meet the contract requirements 
under Sec. 414.914.
    (c) Additional considerations. CMS may refuse to award a contract or 
terminate an approved CAP vendor contract based upon the following:
    (1) Suspension or revocation by the Federal or State government of 
the entity's license for distribution of drugs, including controlled 
substances.
    (2) Exclusion of the entity under section 1128 of the Act from 
participation in Medicare or other Federal health care programs. These 
considerations are in addition to CMS' ability to terminate the approved 
CAP vendor for cause as specified in Sec. 414.914(a).
    (3) Past violations or misconduct related to the pricing, marketing, 
distribution, or handling of drugs provided incident to a physician's 
service.
    (d) Multiple source drugs. In the case of multiple source drugs, 
there must be a competition among entities for the acquisition of at 
least one CAP drug within each billing and payment code within each 
category for each competitive acquisition area.
    (e) Multiple contracts for a category and area. The number of 
bidding qualified entities that are awarded a contract for a given 
category and area may be limited to no fewer than two.

[70 FR 39094, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005; 72 
FR 66402, Nov. 27, 2007; 74 FR 62013, Nov. 25, 2009]



Sec. 414.910  Bidding process.

    (a) Entities may bid to furnish CAP drugs in all competitive 
acquisition areas of the United States, or one or more specific 
competitive acquisition areas.
    (b) The amount of the bid for any CAP drug for a specific 
competitive acquisition area must be uniform for all portions of that 
competitive acquisition area.
    (c) A submitted bid price must include the following:
    (1) All costs related to the delivery of the drug to the 
participating CAP physician.
    (2) The costs of dispensing (including shipping) of the drug and 
management fees. The costs related to the administration of the drug or 
wastage, spillage, or spoilage may not be included.

[70 FR 39095, July 6, 2005]



Sec. 414.912  Conflicts of interest

    (a) Approved CAP vendors and applicants that bid to participate in 
the CAP are subject to the following:
    (1) The conflict of interest standards and requirements of the 
Federal Acquisition Regulation (FAR) organizational conflict of interest 
guidance, found under FAR subpart 9.5.
    (2) Those requirements and standards contained in each individual 
contract awarded to perform functions under section 1847B of the Act.
    (b) Post-award conflicts of interest. Approved CAP vendors must have 
a code of conduct that establishes policies and procedures for 
recognizing and resolving conflicts of interest between the approved CAP 
vendor and any entity, including the Federal Government, with whom it 
does business. The code of conduct which is submitted as part of the 
application must--

[[Page 129]]

    (1) State the need for management, employees, contractors, and 
agents to comply with the approved CAP vendor's code of conduct, and 
policies and procedures for conflicts of interest; and
    (2) State the approved CAP vendor's expectations for management, 
employees, contractors, and agents to comply with the approved CAP 
vendor's code of conduct, and policies and procedures for detecting, 
preventing, and resolving conflicts of interest.

[70 FR 39094, July 6, 2005]



Sec. 414.914  Terms of contract.

    (a) The contract between CMS and the approved CAP vendor will be for 
a term of 3 years, unless terminated or suspended earlier as provided in 
this section or provided in Sec. 414.917. The contract may be 
terminated--
    (1) By CMS for default if the approved CAP vendor violates any term 
of the contract; or
    (2) In the absence of a contract violation, by either CMS or the 
approved CAP vendor, if the terminating party notifies the other party 
by June 30 for an effective date of termination of December 31 of that 
year.
    (b) The contract will provide for a code of conduct for the approved 
CAP vendor that includes standards relating to conflicts of interest 
standards as set forth at Sec. 414.912.
    (c) The approved CAP vendor will have and implement a compliance 
plan that contains policies and procedures that control program fraud, 
waste, and abuse, and consists of the following minimum elements:
    (1) Written policies, procedures, and standards of conduct 
articulating the organization's commitment to comply with all applicable 
Federal and State laws, regulations, and guidance, including, but not 
limited to, the Prescription Drug Marketing Act (PDMA), the physician 
self-referral (``Stark'') prohibition, the Anti-Kickback statute and the 
False Claims Act.
    (2) The designation of a compliance officer and compliance committee 
accountable to senior management.
    (3) Effective training and education of the compliance officer and 
organization employees, contractors, agents, and directors.
    (4) Enforcement of standards through well publicized disciplinary 
guidelines.
    (5) Procedures for effective internal monitoring and auditing.
    (6) Procedures for ensuring prompt responses to detected offenses 
and development of corrective action initiatives relating to the 
organization's contract as an approved CAP vendor.
    (i) If the approved CAP vendor discovers evidence of misconduct 
related to payment or delivery of drugs or biologicals under the 
contract, it will conduct a timely and reasonable inquiry into that 
conduct.
    (ii) The approved CAP vendor will conduct appropriate corrective 
actions including, but not limited to, repayment of overpayments and 
disciplinary actions against responsible individuals, in response to 
potential violations referenced at paragraph (c)(6)(i) of this section.
    (7) Procedures to voluntarily self-report potential fraud or 
misconduct related to the CAP to the appropriate government agency.
    (d) The contract must provide for disclosure of the approved CAP 
vendor's reasonable, net acquisition costs for a specified period of 
time, not to exceed quarterly.
    (e) The contract must provide for appropriate adjustments as 
described in Sec. 414.906(c)(1).
    (f) Under the terms of the contract, the approved CAP vendor must 
also--
    (1) Have sufficient arrangements to acquire and deliver CAP drugs 
within the category in the competitive acquisition area specified by the 
contract;
    (2) Have arrangements in effect for shipment at least 5 weekdays 
each week of CAP drugs under the contract, including the ability to 
comply with the routine and emergency delivery timeframes defined in 
Sec. 414.902;
    (3) Have procedures in place to address and resolve complaints of 
participating CAP physicians and individuals and inquiries regarding 
shipment of CAP drugs;
    (4) Have a grievance and appeals process for dispute resolution;
    (5) Respond within 2 business days to any inquiry, or sooner if the 
inquiry is related to drug quality;
    (6) Staff a toll-free telephone line from 8:30 a.m. or earlier and 
until 5

[[Page 130]]

p.m. or later for all time zones served in the continental United States 
by the CAP vendor on business days (Monday through Friday excluding 
Federal holidays) to provide customer assistance, and establish 
reasonable hours of operation for Hawaii, Alaska, Puerto Rico, and the 
other U.S. territories;
    (7) Staff an emergency toll-free telephone line for weekend and 
evening access when the call center is closed, and determine what hours 
on Saturday and Sunday the call center is staffed and which hours a 
toll-free emergency line is activated; and
    (8) Include assistance for the disabled, the hearing impaired, and 
Spanish-speaking inquirers in all customer service operations.
    (9) Meet applicable licensure requirements in each State in which it 
supplies drugs under the CAP;
    (10) Be enrolled in Medicare as a participating supplier;
    (11) Comply with all applicable Federal and State laws, regulations 
and guidance related to the prevention of fraud and abuse;
    (12) Supply CAP drugs upon receipt of a prescription order to all 
participating CAP physicians who have selected the approved CAP vendor, 
except when the conditions of paragraph (h) of this section or 
Sec. 414.916(b) of this subpart are met;
    (13) Provide direct notification to participating CAP physicians 
enrolled with them of updates to the approved CAP vendor's CAP drug list 
on a quarterly basis. Changes must be disseminated at least 30 days 
before the approved changes are due to take effect, unless immediate 
notification as described in Sec. 414.906(f)(4) is required. The 
approved CAP vendor's entire CAP drug list must be disseminated at least 
once yearly; and approved CAP vendors must make a complete list that 
incorporates the most recent updates available to physicians on an 
ongoing basis. CMS posts on its web site the updated CAP drug lists for 
each approved CAP vendor.
    (14) Ensure that subcontractors who are involved in providing 
services under the approved CAP contractor's CAP contract meet all 
requirements and comply with all laws and regulations relating to the 
services they provide under the CAP program. Notwithstanding any 
relationship the CAP vendor may have with any subcontractor, the 
approved CAP vendor maintains ultimate responsibility for adhering to 
and otherwise fully complying with all terms and conditions of its 
contract with CMS;
    (15) Comply with product integrity and record keeping requirements 
including but not limited to drug acquisition, handling, storage, 
shipping, drug waste, and return processes; and
    (16) Comply with such other terms and conditions as CMS may specify 
in the CAP contract consistent with section 1847B of the Act.
    (g) Under the terms of the contract, the approved CAP vendor must 
provide assistance to beneficiaries experiencing financial difficulty in 
paying their cost-sharing amounts through any one or all of the 
following:
    (1) Referral to a bona fide and independent charitable organization.
    (2) Implementation of a reasonable payment plan.
    (3) A full or partial waiver of the cost-sharing amount after 
determining in good faith that the individual is in financial need or 
the failure of reasonable collection efforts, provided that the waiver 
meets all of the requirements of section 1128A(i)(6)(A) of the Act and 
the corresponding regulations at paragraph (1) of the definition of 
``Remuneration'' in Sec. 1003.101 of this title. The availability of 
waivers may not be advertised or be made as part of a solicitation. 
Approved CAP vendors must inform beneficiaries that they generally make 
available the categories of assistance described in paragraphs (g)(1), 
(g)(2), and (g)(3) of this section. In no event may the approved CAP 
vendor include or make any statements or representations that promise or 
guarantee that beneficiaries receive cost-sharing waivers.
    (h) The approved CAP vendor must verify drug administration prior to 
collection of any applicable cost sharing amount.
    (1) The approved CAP vendor documents, in writing, the following 
information necessary to verify drug administration:
    (i) Beneficiary name.
    (ii) Health insurance number.

[[Page 131]]

    (iii) Expected date of administration.
    (iv) Actual date of administration.
    (v) Identity of the participating CAP physician.
    (vi) Prescription order number.
    (vii) Identity of the individuals who supply and receive the 
information.
    (viii) Dosage supplied.
    (ix) Dosage administered.
    (2) If the information is obtained verbally, the approved CAP vendor 
must also maintain the following information:
    (i) The identities of individuals who exchanged the information.
    (ii) The date and time that the information was obtained.
    (3) The approved CAP vendor must provide this information to CMS or 
the beneficiary upon request.
    (i) The approved CAP vendor must comply with the following 
procedures before it may refuse to make further shipments of CAP drugs 
to a participating CAP physician on behalf of a beneficiary:
    (1) Subsequent to receipt of payment by Medicare, or the 
verification of drug administration by the participating CAP physician, 
the approved CAP vendor must bill any applicable supplemental insurance 
policies.
    (2) An approved CAP vendor that has received payment from the 
designated carrier for CAP drugs that have not been administered must 
promptly refund payment for such drugs to the designated carrier and 
must refund any coinsurance and deductible collected from the 
beneficiary and his or her supplemental insurer.
    (3) At the time of billing the beneficiary, or the participating CAP 
physician's presentation of the bill on behalf of the approved CAP 
vendor, the approved CAP vendor must inform the beneficiary of any types 
of cost-sharing assistance that may be available consistent with the 
requirements of section 1128A(a)(5) of the Act and Sec. 414.914(g).
    (4) If the beneficiary demonstrates a financial need, the approved 
CAP vendor must follow the conditions outlined in paragraph (g) of this 
section.
    (5) For purposes of paragraph (i) of this section delivery means 
postmark date, or the date the coinsurance bill or notice was presented 
to the beneficiary by the participating CAP physician on behalf of the 
approved CAP vendor.
    (i) Except as specified in paragraph (i)(5)(ii) of this section, if 
after 45 days from delivery of the approved CAP vendor's bill to the 
beneficiary, the beneficiary's cost-sharing obligation remains unpaid, 
the approved CAP vendor may refuse further shipments to the 
participating CAP physician for that beneficiary.
    (ii) If the beneficiary has requested cost-sharing assistance within 
45 days of receiving delivery of the approved CAP vendor's bill, 
provisions of paragraphs (i)(6), (i)(7), or (i)(8) of this section, 
apply.
    (6) If the approved CAP vendor implements a reasonable payment plan, 
as specified in Sec. 414.914(g)(2), the approved CAP vendor must 
continue to ship CAP drugs for the beneficiary, as long as the 
beneficiary remains in compliance with the payment plan and makes an 
initial payment under the plan within 15 days after the delivery of the 
approved CAP vendor's written notice to the beneficiary offering the 
payment plan.
    (7) If the approved CAP vendor has waived the cost-sharing 
obligations in accordance with section 1128A of the Act and 
Sec. 414.914(g)(3), the approved CAP vendor may not refuse to ship drugs 
for that beneficiary.
    (8) If the approved CAP vendor refers the beneficiary to a bona fide 
and independent charity in accordance with Sec. 414.914(g)(1), the 
approved CAP vendor may refuse to ship drugs if the past due balance is 
not paid 15 days after the date of delivery of the approved CAP vendor's 
written notice to the beneficiary containing the referral for cost-
sharing assistance.
    (9) The approved CAP vendor may refuse to make further shipments to 
that participating CAP physician on behalf of the beneficiary for the 
lesser of the end of the calendar year or until the beneficiary's 
balance is paid in full.

[70 FR 39096, July 6, 2005, as amended at 70 FR 70333, Nov. 21, 2005; 72 
FR 66403, Nov. 27, 2007; 74 FR 62013, Nov. 25, 2009]

[[Page 132]]



Sec. 414.916  Dispute resolution for vendors and beneficiaries.

    (a) General rule. Cases of an approved CAP vendor's dissatisfaction 
with denied drug claims are resolved through a voluntary alternative 
dispute resolution process delivered by the designated carrier, and a 
reconsideration process provided by CMS.
    (b) Dispute resolution. (1) When an approved CAP vendor is not paid 
on claims submitted to the designated carrier, the vendor may appeal to 
the designated carrier to counsel the responsible participating CAP 
physician on his or her agreement to file a clean claim and pursue an 
administrative appeal in accordance with subpart H of part 405 of this 
chapter. If problems persist, the approved CAP vendor may ask the 
designated carrier to--
    (i) Review the participating CAP physician's performance; and
    (ii) Potentially recommend to CMS that CMS suspend the participating 
CAP physician's CAP election agreement.
    (2) The designated carrier--
    (i) Gathers information from the local carrier, the participating 
CAP physician, the beneficiary, and the approved CAP vendor; and
    (ii) Makes a recommendation to CMS on whether the participating CAP 
physician has been filing his or her CAP drug administration claims in 
accordance with the requirements for physician participation in the CAP 
as set forth in Sec. 414.908(a)(3). The recommendation will include 
numbered findings of fact.
    (3) CMS will review the recommendation of the designated carrier and 
gather relevant additional information from the participating CAP 
physician before deciding whether to suspend the participating CAP 
physician's CAP election agreement. A suspension commencing before 
October 1 will conclude on December 31 of the same year. A suspension 
commencing on or after October 1 will conclude on December 31 of the 
next year.
    (4) Upon notification from CMS of a participating CAP physician's 
suspension from the program, the approved CAP vendor must cease delivery 
of CAP drugs to the suspended participating CAP physician until the 
suspension has been lifted.
    (5) The participating CAP physician may appeal that suspension by 
requesting a reconsideration of CMS' decision. The reconsideration will 
address whether the participating CAP physician's denied claims and 
appeals were the result of the participating CAP physician's failure to 
participate in accordance with the requirements of Sec. 414.908(a)(3).
    (c) Reconsideration--(1) Right to a reconsideration. A participating 
CAP physician dissatisfied with a determination that his or her CAP 
election agreement has been suspended by CMS or a determination under 
Sec. 414.917(d) denying the participating CAP physician's request to 
terminate participation in the CAP under Sec. 414.908(a)(v) is entitled 
to a reconsideration as provided in this subpart.
    (2) Eligibility for reconsideration. CMS reconsiders any 
determination to suspend a participating CAP physician's election 
agreement if the participating CAP physician files a written request for 
reconsideration in accordance with paragraphs (c)(3) and (c)(4) of this 
section.
    (3) Manner and timing of request for reconsideration. A 
participating CAP physician who is dissatisfied with a CMS decision to 
suspend his or her CAP election agreement may request a reconsideration 
of the decision by filing a request with CMS. The request must be filed 
within 30 days of receipt of the CMS decision letter notifying the 
participating CAP physician of CMS' decision to suspend his or her CAP 
election agreement. From the date of receipt of the decision letter 
until the day the reconsideration determination is final, the ASP 
payment methodology under section 1847A of the Act applies to the 
physician.
    (4) Content of request. The request for reconsideration must 
specify--
    (i) The findings or issues with which the participating CAP 
physician disagrees;
    (ii) The reasons for the disagreement;
    (iii) A recital of the facts and law supporting the participating 
CAP physician's position;
    (iv) Any supporting documentation; and

[[Page 133]]

    (v) Any supporting statements from approved CAP vendors, local 
carriers, or beneficiaries.
    (5) Withdrawal of request for reconsideration. A participating CAP 
physician may withdraw his or her request for reconsideration at any 
time before the issuance of a reconsideration determination.
    (6) Discretionary informal hearing. In response to a request for 
reconsideration, CMS may, at its discretion, provide the participating 
CAP physician the opportunity for an informal hearing that--
    (i) Is conducted by a hearing officer appointed by the director of 
the CMS Center for Medicare Management or his or her designee; and
    (ii) Provides the participating CAP physician the opportunity to 
present, by telephone or in person, evidence to rebut CMS' decision to 
suspend or terminate a participating CAP physician's CAP election 
agreement.
    (7) Informal hearing procedures. (i) CMS provides written notice of 
the time and place of the informal hearing at least 10 days before the 
scheduled date.
    (ii) The informal reconsideration hearing will be conducted in 
accordance with the following procedures:
    (A) The hearing is open to CMS and the participating CAP physician 
requesting the reconsideration, including--
    (1) Authorized representatives;
    (2) Technical advisors (individuals with knowledge of the facts of 
the case or presenting interpretation of the facts);
    (3) Representatives from the local carrier;
    (4) Representatives from the approved CAP vendor; and
    (5) Legal counsel.
    (B) The hearing is conducted by the hearing officer who receives 
relevant testimony;
    (C) Testimony and other evidence may be accepted by the hearing 
officer even though it would be inadmissible under the rules of evidence 
applied in Federal courts;
    (D) Either party may call witnesses from among those individuals 
specified in paragraph (c)(7)(ii)(A) of this section; and
    (E) The hearing officer does not have the authority to compel by 
subpoena the production of witnesses, papers, or other evidence.
    (8) Hearing officer's findings. (i) Within 30 days of the hearing 
officer's receipt of the hearing request, the hearing officer presents 
the findings and recommendations to the participating CAP physician who 
requested the reconsideration. If the hearing officer decides to conduct 
an in-person or telephone hearing, the hearing officer will send a 
hearing notice to the participating CAP physician within 10 days of 
receipt of the hearing request, and the findings and recommendations are 
due to the participating CAP physician within 30 days of the hearing's 
conclusion.
    (ii) The written report of the hearing officer includes separate 
numbered findings of fact and the legal conclusions of the hearing 
officer.
    (9) Final reconsideration determination. (i) The hearing officer's 
decision is final unless the director of the CMS Center for Medicare 
Management or his or her designee chooses to review that decision within 
30 days. If the decision is favorable to the participating CAP 
physician, then the participating CAP physician may resume his or her 
participation in CAP. The hearing officer and the CMS official may 
review decisions that are favorable or unfavorable to the participating 
CAP physician.
    (ii) The CMS official may accept, reject, or modify the hearing 
officer's findings.
    (iii) If the CMS official reviews the hearing officer's decision, 
the CMS official issues a final reconsideration determination to the 
participating CAP physician on the basis of the hearing officer's 
findings and recommendations and other relevant information.
    (iv) The reconsideration determination of the CMS official is final. 
If the final decision is unfavorable to the participating CAP physician, 
then the participating CAP physician's CAP election agreement is 
terminated.
    (d) The approved CAP vendor may not charge the beneficiary for the 
full drug coinsurance amount if the designated contractor did not pay 
the approved CAP vendor in full, unless a

[[Page 134]]

properly executed advance beneficiary notice is in place. When a 
beneficiary receives an inappropriate coinsurance bill, the beneficiary 
may participate in the approved CAP vendor's grievance process to 
request correction of the approved CAP vendor's file. If the beneficiary 
is dissatisfied with the result of the approved CAP vendor's grievance 
process, the beneficiary may request intervention from the designated 
carrier. This is in addition to, rather than in place of, any other 
beneficiary appeal rights. The designated carrier will first investigate 
the facts and then facilitate correction to the appropriate claim record 
and beneficiary file.

[70 FR 39097, July 6, 2005, as amended at 72 FR 66403, Nov. 27, 2007; 74 
FR 62013, Nov. 25, 2009]



Sec. 414.917  Dispute resolution and process for suspension or termination 
of approved CAP contract and termination of physician participation under exigent 
          circumstances.

    (a) General rule. If a participating CAP physician finds an approved 
CAP vendor's service, or the quality of a CAP drug supplied by the 
approved CAP vendor to be unsatisfactory, then the physician may address 
the issue first through the approved CAP vendor's grievance process, and 
second through an alternative dispute resolution process administered by 
the designated carrier and CMS. If CMS suspends an approved CAP vendor's 
CAP contract for noncompliance or terminates the CAP contract in 
accordance with Sec. 414.914(a), the approved CAP vendor may request a 
reconsideration in accordance with paragraph (c) of this section.
    (b) Dispute resolution. (1) When a participating CAP physician is 
dissatisfied with an approved CAP vendor's service or the quality of a 
CAP drug supplied by the approved CAP vendor, then the participating CAP 
physician may use the approved CAP vendor's grievance process. If the 
service or quality issues are not resolved through the grievance process 
to the physician's satisfaction, then the participating CAP physician 
may ask the designated carrier to--
    (i) Review the approved CAP vendor's performance; and
    (ii) Potentially recommend termination of the approved CAP vendor's 
CAP contract.
    (2) Responsibility of the designated carrier. The designated 
carrier--
    (i) Gathers information from the local carrier, the participating 
CAP physician, the beneficiary, and the approved CAP vendor; and
    (ii) Makes a recommendation to CMS on whether the approved CAP 
vendor has been meeting the service and quality obligations of its CAP 
contract. This recommendation will include numbered findings of fact.
    (3) CMS will review the recommendation of the designated carrier 
and, gather relevant additional information from the approved CAP 
vendor, the participating CAP physician, the local carrier, and the 
beneficiary before deciding whether to terminate the approved CAP 
vendor's CAP contract.
    (4) The approved CAP vendor may appeal that termination by 
requesting a reconsideration. A determination must be made as to whether 
the approved CAP vendor has been meeting the service and quality 
obligations of its CAP contract. The approved CAP vendor's contract will 
remain suspended during the reconsideration process.
    (c) Reconsideration--(1) Right to reconsideration. An approved CAP 
vendor dissatisfied with a determination that its CAP contract has been 
suspended or terminated by CMS is entitled to a reconsideration as 
provided in this subpart.
    (2) Eligibility for reconsideration. CMS will reconsider any 
determination to suspend or terminate an approved CAP vendor's contract 
if the approved CAP vendor files a written request for reconsideration 
in accordance with paragraphs (c)(3) and (c)(4) of this section.
    (3) Manner and timing of request for reconsideration. An approved 
CAP vendor that is dissatisfied with a CMS decision to suspend or 
terminate its CAP contract may request a reconsideration of the decision 
by filing a request with CMS. The request must be filed within 30 days 
of receipt of the CMS decision letter notifying the approved CAP vendor 
of the suspension or termination of its CAP contract.
    (4) Content of request. The request for reconsideration must 
specify--

[[Page 135]]

    (i) The findings or issues with which the approved CAP vendor 
disagrees;
    (ii) The reasons for the disagreement;
    (iii) A recital of the facts and law supporting the approved CAP 
vendor's position;
    (iv) Any supporting documentation; and
    (v) Any supporting statements from participating CAP physicians, the 
local carrier, or beneficiaries.
    (5) Withdrawal of request for reconsideration. An approved CAP 
vendor may withdraw its request for reconsideration at any time before 
the issuance of a reconsideration determination.
    (6) Discretionary informal hearing. In response to a request for 
reconsideration, CMS may, at its discretion, provide the approved CAP 
vendor the opportunity for an informal hearing that--
    (i) Is conducted by a hearing officer appointed by the Director of 
the CMS Center for Medicare Management or his or her designee; and
    (ii) Provides the approved CAP vendor the opportunity to present, by 
telephone or in person, evidence to rebut CMS' decision to suspend or 
terminate the approved CAP vendor's CAP contract.
    (7) Informal hearing procedures. (i) CMS will provide written notice 
of the time and place of the informal hearing at least 10 days before 
the scheduled date.
    (ii) The informal reconsideration hearing will be conducted in 
accordance with the following procedures:
    (A) The hearing is open to CMS and the approved CAP vendor 
requesting the reconsideration, including--
    (1) Authorized representatives;
    (2) Technical advisors (individuals with knowledge of the facts of 
the case or presenting interpretation of the facts);
    (3) Representatives from the local carriers and the designated 
carrier;
    (4) The participating CAP physician who requested the suspension, if 
any; and
    (5) Legal counsel.
    (B) The hearing will be conducted by the hearing officer, who will 
receive relevant testimony;
    (C) Testimony and other evidence may be accepted by the hearing 
officer even though it would be inadmissible under the rules of evidence 
applied in Federal courts;
    (D) Either party may call witnesses from among those individuals 
specified in the paragraph (c)(7)(ii)(A) of this section; and
    (E) The hearing officer does not have the authority to compel by 
subpoena the production of witnesses, papers, or other evidence.
    (8) Hearing officer's findings. (i) Within 30 days of the hearing 
officer's receipt of the hearing request, the hearing officer will 
present the findings and recommendations to the approved CAP vendor that 
requested the reconsideration. If the hearing officer conducts a hearing 
in person or by phone, the hearing officer will send a hearing notice to 
the approved CAP vendor within 10 days of receipt of the hearing 
request, and the findings and recommendations are due to the approved 
CAP vendor within 30 days from of the hearing's conclusion.
    (ii) The written report of the hearing officer will include separate 
numbered findings of fact and the legal conclusions of the hearing 
officer.
    (9) Final reconsideration determination. (i) The hearing officer's 
decision is final unless the Director of the CMS Center for Medicare 
Management or his or her designee (CMS official) chooses to review that 
decision within 30 days. If the decision is favorable to the approved 
CAP vendor, then the approved CAP vendor may resume participation in 
CAP. The hearing officer and the CMS official may review decisions that 
are favorable or unfavorable to the approved CAP vendor.
    (ii) The CMS official may accept, reject, or modify the hearing 
officer's findings.
    (iii) If the CMS official reviews the hearing officer's decision, 
the CMS official will issue a final reconsideration determination to the 
approved CAP vendor on the basis of the hearing officer's findings and 
recommendations and other relevant information.
    (iv) The reconsideration determination of the CMS official is final.
    (d) CAP participating physicians' exigent circumstances provision. 
The following process must be completed for participating CAP 
physicians' requests

[[Page 136]]

to terminate their participation in the program under exigent 
circumstances provisions described in Sec. 414.908(a)(2)(v):
    (1) The designated carrier must--
    (i) Determine whether a request to terminate CAP participation was 
related to approved CAP vendor service, and if so, forward the issue to 
the approved CAP vendor's grievance process within 1 business day of the 
receipt of the request; or
    (ii) Continue to investigate, consistent with Sec. 414.916(b)(2) of 
this chapter, and within 2 business days of receipt, do any of the 
following:
    (A) Request a single, 2-business day extension. No later than the 
end of any 2-business day extension, the designated carrier must make 
findings and a recommendation as provided in subparagraph (B) or (C).
    (B) Submit a recommendation and relevant findings to CMS that the 
requesting participating CAP physician be permitted to terminate his or 
her participation in the CAP.
    (C) Submit a recommendation and relevant findings to CMS that the 
requesting participating CAP physician not be permitted to terminate his 
or her participation in the CAP.
    (ii) In the case of a request made under Sec. 414.908(a)(2)(v)(B), 
the designated carrier also shall include in its recommendation its 
finding with respect to whether the request is based on a change in 
circumstances of which the participating CAP physician was previously 
unaware.
    (2) CMS will consider the carrier's findings and recommendation and 
may also make its own findings. As a result, CMS will--
    (i) Approve or deny the request to terminate participation in the 
CAP within 2 business days of receipt of the recommendation.
    (ii) Communicate the decision to the appropriate Medicare 
contractors and the participating CAP physician.
    (3) A denial of the participating CAP physician's request to 
terminate participation in the CAP must include written notification of 
the right to request reconsideration under Sec. 414.916(c).
    (4) Upon termination of participation in the CAP a physician must--
    (i) Continue to submit claims for drugs supplied and administered 
under the CAP prior to the effective date of the physician's termination 
from the CAP consistent with Sec. 414.908(a) until all such claims are 
timely submitted.
    (ii) Return any unused CAP drugs that had not been administered to 
the beneficiary prior to the effective date of the physician's 
termination from the CAP to the approved CAP vendor consistent with 
applicable law and regulation and any agreement with the approved CAP 
vendor.
    (iii) Cooperate in any post-payment review activities on claims 
submitted under the CAP, as required under section 1847B(a)(3) of the 
Act.
    (5) An approved CAP vendor that has billed and been paid for CAP 
drugs that have not been administered must refund any payments made by 
CMS or the beneficiary and his or her supplemental insurer in accordance 
with Sec. 414.914(h)(3)(i)(2) of this chapter.

[70 FR 39098, July 6, 2005, as amended at 72 FR 66403, Nov. 27, 2007; 74 
FR 62013, Nov. 25, 2009]



Sec. 414.918  Assignment.

    Payment for a CAP drug may be made only on an assignment-related 
basis.

[70 FR 39099, July 6, 2005]



Sec. 414.920  Judicial review.

    The following areas under the CAP are not subject to administrative 
or judicial review:
    (a) The establishment of payment amounts.
    (b) The awarding of vendor contracts.
    (c) The establishment of competitive acquisition areas.
    (d) The selection of CAP drugs.
    (e) The bidding structure.
    (f) The number of vendors selected.

[70 FR 39099, July 6, 2005]



Sec. 414.930  Compendia for determination of medically-accepted 
indications for off-label uses of drugs and biologicals in an
anti-cancer chemotherapeutic regimen.

    (a) Definitions. For the purposes of this section:
    Compendium means a comprehensive listing of FDA-approved drugs and 
biologicals or a comprehensive listing of a specific subset of drugs and

[[Page 137]]

biologicals in a specialty compendium, for example a compendium of anti-
cancer treatment. A compendium--
    (i) Includes a summary of the pharmacologic characteristics of each 
drug or biological and may include information on dosage, as well as 
recommended or endorsed uses in specific diseases.
    (ii) Is indexed by drug or biological.
    (iii) Has a publicly transparent process for evaluating therapies 
and for identifying potential conflicts of interests.
    Publicly transparent process for evaluating therapies means that the 
process provides that the following information from an internal or 
external request for inclusion of a therapy in a compendium are 
available to the public for a period of not less than 5 years, which 
includes availability on the compendium's Web site for a period of not 
less than 3 years, coincident with the compendium's publication of the 
related recommendation:
    (i) The internal or external request for listing of a therapy 
recommendation including criteria used to evaluate the request.
    (ii) A listing of all the evidentiary materials reviewed or 
considered by the compendium pursuant to the request.
    (iii) A listing of all individuals who have substantively 
participated in the review or disposition of the request.
    (iv) Minutes and voting records of meetings for the review and 
disposition of the request.
    Publicly transparent process for identifying potential conflicts of 
interests means that process provides that the following information is 
identified and made timely available in response to a public request for 
a period of not less than 5 years, coincident with the compendium's 
publication of the related recommendation:
    (i) Direct or indirect financial relationships that exist between 
individuals or the spouse or minor child of individuals who have 
substantively participated in the development or disposition of 
compendia recommendations and the manufacturer or seller of the drug or 
biological being reviewed by the compendium. This may include, for 
example, compensation arrangements such as salary, grant, contract, or 
collaboration agreements between individuals or the spouse or minor 
child of individuals who have substantively participated in the review 
and disposition of the request and the manufacturer or seller of the 
drug or biological being reviewed by the compendium.
    (ii) Ownership or investment interests between individuals or the 
spouse or minor child of individuals who have substantively participated 
in the development or disposition of compendia recommendations and the 
manufacturer or seller of the drug or biological being reviewed by the 
compendium.
    (b) Process for listing compendia for determining medically-accepted 
uses of drugs and biologicals in anti-cancer treatment. (1) The CMS 
process--
    (i) Receives formal written requests for changes to the list of 
compendia during a 30 day window beginning January 15 each year.
    (ii) Publishes a listing of the timely, complete requests by March 
15th and solicits public comment on the requests for 30 days. The 
listing identifies the requestor and the requested action.
    (iii) Considers a compendium's attainment of the MedCAC (Medicare 
Evidence Development and Coverage Advisory Committee, previously known 
as the MCAC--Medicare Coverage Advisory Committee) recommended desirable 
characteristics of compendia (including explicit listing and 
recommendations) in reviewing requests. CMS may consider additional 
reasonable factors.
    (iv) Considers a compendium's grading of evidence used in making 
recommendations regarding off-label uses and the process by which the 
compendium grades the evidence.
    (v) Considers whether the publication that is the subject of the 
request meets the definition of a compendium in this section.
    (vi) Publishes its decision no later than 90 days after the close of 
the public comment period.
    (2) Exception. In addition to the annual process outlined in 
paragraph (b)(1) of this section, CMS may internally generate a request 
for changes to the list of compendia at any time.

[[Page 138]]

    (c) Written request for review. (1) CMS will review a complete, 
written request that is submitted in writing, electronically or via hard 
copy (no duplicate submissions) and includes the following:
    (i) The full name and contact information of the requestor.
    (ii) The full identification of the compendium that is the subject 
of the request, including name, publisher, edition if applicable, date 
of publication, and any other information needed for the accurate and 
precise identification of the specific compendium.
    (iii) A complete written copy of the compendium that is the subject 
of the request.
    (iv) The specific action that is requested of CMS.
    (v) Materials that the requestor must submit for CMS review in 
support of the requested action.
    (vi) A single compendium as its subject.
    (d) CMS may at its discretion combine and consider multiple requests 
that refer to the same compendium.
    (e) For the purposes of this section, publication by CMS may be 
accomplished by posting on the CMS Web site.

[72 FR 66404, Nov. 27, 2007, as amended at 74 FR 62013, Nov. 25, 2009]



                 Subpart L_Supplying and Dispensing Fees



Sec. 414.1000  Purpose.

    This subpart implements section 1842(o)(2) and section 1842(o)(6) of 
the Act, as added by section 303(e)(2) of the MMA, by specifying a 
supplying fee for drugs and biologicals covered under Part B of Title 
XVIII of the Act that are described in sections 1861(s)(2)(J), 
1861(s)(2)(Q), and 1861(s)(2)(T) of the Act.

[69 FR 66425, Nov. 15, 2004]



Sec. 414.1001  Basis of payment.

    (a) Supplying fees. Beginning in CY 2006--
    (1) A supplying fee of $24 is paid to a pharmacy for the first 
prescription of drugs and biologicals described in sections 
1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, that the 
pharmacy provided to a beneficiary during a 30-day period.
    (2) A supplying fee of $16 is paid to a pharmacy for each 
prescription following the first prescription (as specified in paragraph 
(a)(1) of this section) of drugs and biologicals described in sections 
1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act, that the 
pharmacy provided to a beneficiary during a 30-day period.
    (3) A separate supplying fee is paid to a pharmacy for each 
prescription of drugs and biologicals described in sections 
1861(s)(2)(J), 1861(s)(2)(Q), and 1861(s)(2)(T) of the Act.
    (b) Supplying fees following transplant. Beginning CY 2006--(1) A 
supplying fee of $50 is paid to pharmacy for the initial supplied 
prescription of drugs and biologicals described in section 1861(s)(2)(J) 
of the Act, that the pharmacy provided to a patient during the first 30-
day period following a transplant.
    (2) A supplying fee of $16 is paid to a pharmacy for each 
prescription following an initial prescription after a transplant (as 
specified in paragraph (b)(1) of this section) of drugs and biologicals 
describe in section 1861(s)(2)(J) of the Act, that the pharmacy provided 
to a beneficiary during a 30-day period.
    (c) 30-day dispensing fees. Beginning CY 2006--(1) A dispensing fee 
of $57 is paid to a supplier to the extent that the prescription is for 
the initial dispensed 30-day supply of inhalation drugs furnished 
through durable medical equipment covered under section 1861(n) of the 
Act, regardless of the number of partial shipments of that 30-day 
supply.
    (2) Except for supplied inhalation drugs that meet criteria 
described in paragraph (c)(1) of this section, a dispensing fee of $33 
is paid for each dispensed 30-day supply of inhalation drugs furnished 
through durable medical equipment covered under section 1861(n) of the 
Act, regardless of the number of partial shipments of that 30-day 
supply.
    (d) 90-day dispensing fee. Beginning CY 2006, a dispensing fee of 
$66 is paid to a supplier for each dispensed 90-day supply of inhalation 
drugs furnished through durable medical equipment

[[Page 139]]

covered under section 1861(n) of the Act, regardless of the number of 
partial shipments of that 90-day supply.

[70 FR 70334, Nov. 21, 2005]



 Subpart M_Payment for Comprehensive Outpatient Rehabilitation Facility 
                             (CORF) Services

    Source: 72 FR 66404, Nov. 27, 2007, unless otherwise noted.



Sec. 414.1100  Basis and scope.

    This subpart implements sections 1834(k)(1) and (k)(3) of the Act by 
specifying the payment methodology for comprehensive outpatient 
rehabilitation facility services covered under Part B of Title XVIII of 
the Act that are described at section 1861(cc)(1) of the Act.



Sec. 414.1105  Payment for Comprehensive Outpatient Rehabilitation 
Facility (CORF) services.

    (a) Payment under the physician fee schedule. Except as otherwise 
specified under paragraphs (b), (c), (d), and (e) of this section 
payment for CORF services, as defined under Sec. 410.100 of this 
chapter, is paid the lesser of 80 percent of the following:
    (1) The actual charge for the item or service; or
    (2) The nonfacility amount determined under the physician fee 
schedule established under section 1848(b) of the Act for the item or 
service.
    (b) Payment for physician services. No separate payment for 
physician services that are CORF services under Sec. 410.100(a) of this 
chapter will be made.
    (c) Payment for supplies and durable medical equipment, prosthetic 
and orthotic devices, and drugs and biologicals. Supplies and durable 
medical equipment that are CORF services under Sec. 410.100(l) of this 
chapter, prosthetic device services that are CORF services under 
Sec. 410.100(f), orthotic devices that are CORF services under 
Sec. 410.100(g) of this chapter and drugs and biologicals that are CORF 
services under Sec. 410.100(k) of this chapter are paid the lesser of 80 
percent of the following:
    (1) The actual charge for the service provided that payment for such 
item is not included in the payment amount for other CORF services paid 
under paragraphs (a) or (d); or
    (2) The amount determined under the DMEPOS fee schedule established 
under part 414 subparts D and F for the item or the single payment 
amount established under the DMEPOS competitive bidding program provided 
that payment for such item is not included in the payment amount for 
other CORF services paid under paragraphs (a) or (d).
    (d) Payment for drugs and biologicals. Drugs and biologicals that 
are CORF services under Sec. 410.100(j) of this chapter, are paid the 
lesser of 80 percent of the following:
    (1) The actual charge for the service provided that payment for such 
item is not included in the payment amount for other CORF services paid 
under paragraphs (a) or (c); or
    (2) The amount determined using the same methodology for drugs (as 
defined in Sec. 414.704 of this chapter) described in section 1842(o)(1) 
of the Act provided that payment for such drug is not included in the 
payment amount for other CORF services paid under paragraphs (a) or (c).
    (e) Payment for CORF services when no fee schedule amount for the 
service. If there is no fee schedule amount established for a CORF 
service, payment for the item or service will be the lesser of 80 
percent of:
    (i) The actual charge for the service provided that payment for such 
item or service is not included in the payment amount for other CORF 
services paid under paragraphs (a), (c), or (d) of this section.
    (ii) The amount determined under the fee schedule established for a 
comparable service as specified by the Secretary provided that payment 
for such item or service is not included in the payment amount for other 
CORF services paid under paragraphs (a), (c), or (d) of this section.

[[Page 140]]



 Subpart N_Value-Based Payment Modifier Under the Physician Fee Schedule

    Source: 77 FR 69368, Nov. 16, 2012, unless otherwise noted.



Sec. 414.1200  Basis and scope.

    (a) Basis. This subpart implements section 1848(p) of the Act by 
establishing a payment modifier that provides for differential payment 
starting in 2015 to a group of physicians and starting in 2017 to a 
group and a solo practitioner under the Medicare Physician Fee Schedule 
based on the quality of care furnished compared to cost during a 
performance period.
    (b) Scope. This subpart sets forth the following:
    (1) The application of the value-based payment modifier.
    (2) Performance and payment adjustment periods.
    (3) Reporting mechanisms for the value-based payment modifier.
    (4) Alignment of PQRS quality of care measures with the quality 
measures for the value-based payment modifier.
    (5) Additional measures for groups and solo practitioners.
    (6) Cost measures.
    (7) Attribution for quality of care and cost measures.
    (8) Scoring methods for the value-based payment modifier.
    (9) Benchmarks for quality of care measures.
    (10) Benchmarks for cost measures.
    (11) Composite scores.
    (12) Reliability of measures.
    (13) Payment adjustments.
    (14) Value-based payment modifier quality-tiering scoring 
methodology.
    (15) Limitation of review.
    (16) Inquiry process.

[77 FR 69368, Nov. 16, 2012, as amended at 79 FR 68005, Nov. 13, 2014]



Sec. 414.1205  Definitions.

    As used in this subpart, unless otherwise indicated--
    Accountable care organization (ACO) has the same meaning given this 
term under Sec. 425.20 of this chapter.
    Certified registered nurse anesthetist (CRNA) has the same meaning 
given this term under section 1861(bb)(2) of the Act.
    Critical access hospital has the same meaning given this term under 
Sec. 400.202 of this chapter.
    Electronic health record (EHR) has the same meaning given this term 
under Sec. 414.92 of this chapter.
    Eligible professional has the same meaning given this term under 
section 1848(k)(3)(B) of the Act.
    Federally Qualified Health Center has the same meaning given this 
term under Sec. 405.2401(b) of this chapter.
    Group of physicians (Group) means a single Taxpayer Identification 
Number (TIN) with 2 or more eligible professionals, as identified by 
their individual National Provider Identifier (NPI), who have reassigned 
their Medicare billing rights to the TIN.
    Performance period means the calendar year that will be used to 
assess the quality of care furnished compared to cost.
    Performance rate mean the calculated rate for each quality or cost 
measure such as the percent of times that a particular clinical quality 
action was reported as being performed, or a particular outcome was 
attained, for the applicable persons to whom a measure applies as 
described in the denominator for the measure.
    Physician has the same meaning given this term under section 1861(r) 
of the Act.
    Physician assistant (PA), nurse practitioner (NP), and clinical 
nurse specialist (CNS) have the same meanings given these terms under 
section 1861(aa)(5) of the Act.
    Physician Fee Schedule has the same meaning given this term under 
part 410 of this chapter.
    Physician Quality Reporting System means the system established 
under section 1848(k) of the Act.
    Risk score means the beneficiary risk score derived from the CMS 
Hierarchical Condition Categories (HCC) model.
    Solo practitioner means a single Taxpayer Identification Number 
(TIN) with one eligible professional who is identified by an individual 
National Provider Identifier (NPI) billing under the TIN.

[[Page 141]]

    Taxpayer Identification Number (TIN) has the same meaning given this 
term under Sec. 425.20 of this chapter.
    Value-based payment modifier means the percentage as determined 
under Sec. 414.1270 by which amounts paid to a group or solo 
practitioner under the Medicare Physician Fee Schedule established under 
section 1848 of the Act are adjusted based upon a comparison of the 
quality of care furnished to cost as determined by this subpart.

[77 FR 69368, Nov. 16, 2012, as amended at 79 FR 68005, Nov. 13, 2014; 
80 FR 71382, Nov. 16, 2015]



Sec. 414.1210  Application of the value-based payment modifier.

    (a) The value-based payment modifier is applicable:
    (1) For the CY 2015 payment adjustment period, to physicians in 
groups with 100 or more eligible professionals based on the performance 
period described at Sec. 414.1215(a).
    (2) For the CY 2016 payment adjustment period, to physicians in 
groups with 10 or more eligible professionals based on the performance 
period described at Sec. 414.1215(b).
    (3) For the CY 2017 payment adjustment period and each subsequent 
calendar year payment adjustment period, to physicians in groups with 2 
or more eligible professionals and to physicians who are solo 
practitioners based on the performance period for the payment adjustment 
period as described at Sec. 414.1215.
    (4) For the CY 2018 payment adjustment period, to nonphysician 
eligible professionals who are physician assistants, nurse 
practitioners, clinical nurse specialists, and certified registered 
nurse anesthetists in groups with 2 or more eligible professionals and 
to physician assistants, nurse practitioners, clinical nurse 
specialists, and certified registered nurse anesthetists who are solo 
practitioners based on the performance period for the payment adjustment 
period as described at Sec. 414.1215.
    (b) Exceptions. (1) Groups of physicians that are participating in 
the Medicare Shared Savings Program, the testing of the Pioneer ACO 
model, or other similar Innovation Center or CMS initiatives shall not 
be subject to any adjustments under the value-based payment modifier for 
CY 2015 and CY 2016.
    (2) Application of the value-based payment modifier to participants 
in the Shared Savings Program.
    (i) For the CY 2017 payment adjustment period and each subsequent 
calendar year payment adjustment period, the value-based payment 
modifier is applicable to physicians in groups with 2 or more eligible 
professionals and to physicians who are solo practitioners that 
participate in an ACO under the Shared Savings Program during the 
performance period for the payment adjustment period as described at 
Sec. 414.1215. The value-based payment modifier for a group or solo 
practitioner that participates in an ACO under the Shared Savings 
Program during the performance period is determined based on paragraphs 
(b)(2)(i)(A) through (D) of this section.
    (A) The cost composite is classified as ``average'' under 
Sec. 414.1275(b).
    (B) For groups and solo practitioners that participate in a Shared 
Savings Program ACO that successfully reports quality data as required 
by the Shared Savings Program under Sec. 425.504 of this chapter, the 
quality composite score is calculated under Sec. 414.1260(a) using 
quality data reported by the ACO for the performance period through the 
ACO GPRO Web interface as required under Sec. 425.504(a)(1) of this 
chapter or another mechanism specified by CMS and the ACO all-cause 
readmission measure. Groups and solo practitioners that participate in 
two or more ACOs during the applicable performance period receive the 
quality composite score of the ACO that has the highest numerical 
quality composite score. For the CY 2018 payment adjustment period, the 
CAHPS for ACOs survey also will be included in the quality composite 
score. For the CY 2017 and 2018 payment adjustment periods, for groups 
and solo practitioners who participate in a Shared Savings Program ACO 
that does not successfully report quality data as required by the Shared 
Savings Program under Sec. 425.504 and who meet the requirements to 
avoid the PQRS payment adjustment for CY 2018 by reporting to the PQRS 
outside

[[Page 142]]

the ACO, the quality composite is classified as ``average'' under 
Sec. 414.1275(b).
    (C) For the CY 2017 payment adjustment period, the value-based 
payment modifier adjustment will be equal to the amount determined under 
Sec. 414.1275 for the payment adjustment period, except that if the ACO 
(or groups and solo practitioners that participate in the ACO) does not 
successfully report quality data as described in paragraph (b)(2)(i)(B) 
of this section for the performance period, such adjustment will be 
equal to -4% for groups of physicians with 10 or more eligible 
professionals and equal to -2% for groups of physicians with two to nine 
eligible professionals and for physician solo practitioners. If the ACO 
has an assigned beneficiary population during the performance period 
with an average risk score in the top 25 percent of the risk scores of 
beneficiaries nationwide, and a group of physician or physician solo 
practitioner that participates in the ACO during the performance period 
is classified as high quality/average cost under quality-tiering for the 
CY 2017 payment adjustment period, the group or solo practitioner 
receives an upward adjustment of +3  x  (rather than +2  x ) if the 
group has 10 or more eligible professionals or +2  x  (rather than +1 
x ) for a solo practitioner or the group has two to nine eligible 
professionals.
    (D) For the CY 2018 payment adjustment period, the value-based 
payment modifier adjustment will be equal to the amount determined under 
Sec. 414.1275 for the payment adjustment period, except that if the ACO 
(or groups and solo practitioners that participate in the ACO) does not 
successfully report quality data as described in paragraph (b)(2)(i)(B) 
of this section for the performance period, such adjustment will be 
equal to the downward payment adjustment amounts described at 
Sec. 414.1270(d)(1). If the ACO has an assigned beneficiary population 
during the performance period with an average risk score in the top 25 
percent of the risk scores of beneficiaries nationwide, and a group or 
solo practitioner that participates in the ACO during the performance 
period is classified as high quality/average cost under quality-tiering 
for the CY 2018 payment adjustment period, the group or solo 
practitioner receives an upward adjustment of +3  x  (rather than +2 
x ) if the group of physicians has 10 or more eligible professionals, +2 
 x  (rather than +1  x ) for a physician solo practitioner or if the 
group of physicians has two to nine eligible professionals, or +2  x  
(rather than +1  x ) for a solo practitioner who is a nonphysician 
eligible professional or if the group consists of nonphysician eligible 
professionals.
    (E) For the CY 2017 payment adjustment period and each subsequent 
calendar year payment adjustment period, the value-based payment 
modifier for groups and solo practitioners that participate in an ACO 
under the Shared Savings Program during the applicable performance 
period is determined as described under paragraph (b)(2) of this 
section, regardless of whether any eligible professionals in the group 
or the solo practitioner also participate in an Innovation Center model 
during the performance period.
    (F) For groups and solo practitioners that participate in a Shared 
Savings Program ACO that successfully reports quality data as required 
by the Shared Savings Program under Sec. 425.504 of this chapter, the 
same value-based payment modifier adjustment will be applied in the 
payment adjustment period to all groups based on size as specified under 
Sec. 414.1275 and solo practitioners that participated in the ACO during 
the performance period.
    (ii) For the CY 2018 payment adjustment period and each subsequent 
calendar year payment adjustment period, the value-based payment 
modifier is applicable to nonphysician eligible professionals in groups 
with 2 or more eligible professionals and to nonphysician eligible 
professionals who are solo practitioners that participate in an ACO 
under the Shared Savings Program during the performance period for the 
payment adjustment period as described at Sec. 414.1215. The value-based 
payment modifier for nonphysician eligible professionals is determined 
in the same manner as for physicians as described under paragraphs 
(b)(2)(i)(A) through (D) of this section.
    (3) Application of the value-based payment modifier to participants 
in the Pioneer ACO Model and the Comprehensive

[[Page 143]]

Primary Care Initiative. (i) For the CY 2017 payment adjustment period, 
the value-based payment modifier is waived under section 1115A(d)(1) of 
the Act for physicians in groups with 2 or more eligible professionals 
and for physicians who are solo practitioners that participate in the 
Pioneer ACO Model or the Comprehensive Primary Care (CPC) Initiative 
during the performance period for the payment adjustment period as 
described at Sec. 414.1215.
    (ii) For the CY 2018 payment adjustment period, the value-based 
payment modifier is waived under section 1115A(d)(1) of the Act for 
physicians and nonphysician eligible professionals in groups with 2 or 
more eligible professionals and for physicians and nonphysician eligible 
professionals who are solo practitioners that participate in the Pioneer 
ACO Model or the Comprehensive Primary Care (CPC) Initiative during the 
performance period for the payment adjustment period as described at 
Sec. 414.1215.
    (iii) For purposes of the value-based payment modifier, a group or 
solo practitioner is considered to be participating in the Pioneer ACO 
Model or CPC Initiative if at least one eligible professional billing 
under the TIN in the performance period for the payment adjustment 
period as described at Sec. 414.1215 is participating in the Pioneer ACO 
Model or CPC Initiative in the performance period.
    (4) Application of the value-based payment modifier to participants 
in other similar Innovation Center models. (i) For the CY 2017 payment 
adjustment period, the value-based payment modifier is waived under 
section 1115A(d)(1) of the Act for physicians in groups with 2 or more 
eligible professionals and for physicians who are solo practitioners 
that participate in other similar Innovation Center models during the 
performance period for the payment adjustment period as described at 
Sec. 414.1215.
    (ii) For the CY 2018 payment adjustment period, the value-based 
payment modifier is waived under section 1115A(d)(1) of the Act for 
physicians and nonphysician eligible professionals in groups with 2 or 
more eligible professionals and for physicians and nonphysician eligible 
professionals who are solo practitioners that participate in other 
similar Innovation Center models during the performance period for the 
payment adjustment period as described at Sec. 414.1215.
    (iii) For purposes of the value-based payment modifier, a group or 
solo practitioner is considered to be participating in a similar 
Innovation Center model if at least one eligible professional billing 
under the TIN in the performance period for the payment adjustment 
period as described at Sec. 414.1215 is participating in the similar 
model in the performance period.
    (c) Group size and composition determination. (1) The list of groups 
of physicians subject to the value-based payment modifier for the CY 
2015 payment adjustment period is based on a query of PECOS on October 
15, 2013. For each subsequent calendar year payment adjustment period, 
the list of groups and solo practitioners subject to the value-based 
payment modifier is based on a query of PECOS that occurs within 10 days 
of the close of the Physician Quality Reporting System group 
registration process during the applicable performance period described 
at Sec. 414.1215. Groups are removed from the PECOS-generated list if, 
based on a claims analysis, the group did not have the required number 
of eligible professionals, as defined in paragraph (a) of this section, 
that submitted claims during the performance period for the applicable 
calendar year payment adjustment period. Solo practitioners are removed 
from the PECOS-generated list if, based on a claims analysis, the solo 
practitioner did not submit claims during the performance period for the 
applicable calendar year payment adjustment period.
    (2) Beginning with the CY 2016 payment adjustment period, the size 
of a group during the applicable performance period will be determined 
by the lower number of eligible professionals as indicated by the PECOS-
generated list or claims analysis.
    (3) For the CY 2018 payment adjustment period, the composition of a 
group during the applicable performance period will be determined based 
on whether the group includes physicians, physician assistants, nurse 
practitioners, clinical nurse specialists,

[[Page 144]]

certified registered nurse anesthetists, and/or other types of 
nonphysician eligible professionals as indicated by the PECOS-generated 
list or claims analysis.

[77 FR 69368, Nov. 16, 2012, as amended at 78 FR 74820, Dec. 10, 2013; 
79 FR 68005, Nov. 13, 2014; 80 FR 71382, Nov. 16, 2015; 81 FR 80555, 
Nov. 15, 2016]



Sec. 414.1215  Performance and payment adjustment periods for the 
value-based payment modifier.

    (a) The performance period is calendar year 2013 for value-based 
payment modifier adjustments made in the calendar year 2015 payment 
adjustment period.
    (b) The performance period is calendar year 2014 for value-based 
payment modifier adjustments made in the calendar year 2016 payment 
adjustment period.
    (c) The performance period is calendar year 2015 for value-based 
payment modifier adjustments made in the calendar year 2017 payment 
adjustment period.
    (d) The performance period is calendar year 2016 for value-based 
payment modifier adjustments made in the calendar year 2018 payment 
adjustment period.

[77 FR 69368, Nov. 16, 2012, as amended at 78 FR 74820, Dec. 10, 2013; 
80 FR 71383, Nov. 16, 2015]



Sec. 414.1220  Reporting mechanisms for the value-based payment modifier.

    Solo practitioners and groups subject to the value-based payment 
modifier (or individual eligible professionals within such groups) may 
submit data on quality measures as specified under the Physician Quality 
Reporting System using the reporting mechanisms for which they are 
eligible.

[78 FR 74820, Dec. 10, 2013, as amended at 79 FR 68006, Nov. 13, 2014]



Sec. 414.1225  Alignment of Physician Quality Reporting System quality 
measures and quality measures for the value-based payment modifier.

    All of the quality measures for which solo practitioners and groups 
(or individual eligible professionals within such groups) are eligible 
to report under the Physician Quality Reporting System in a given 
calendar year are used to calculate the value-based payment modifier for 
the applicable payment adjustment period, as defined in Sec. 414.1215, 
to the extent a solo practitioner or a group (or individual eligible 
professionals within such group) submit data on such measures.

[79 FR 68006, Dec. 13, 2014]



Sec. 414.1230  Additional measures for groups and solo practitioners.

    The value-based payment modifier includes the following additional 
quality measures (outcome measures) as applicable for all groups and 
solo practitioners subject to the value-based payment modifier:
    (a) A composite of rates of potentially preventable hospital 
admissions for heart failure, chronic obstructive pulmonary disease, and 
diabetes. The rate of potentially preventable hospital admissions for 
diabetes is a composite measure of uncontrolled diabetes, short term 
diabetes complications, long term diabetes complications and lower 
extremity amputation for diabetes.
    (b) A composite of rates of potentially preventable hospital 
admissions for dehydration, urinary tract infections, and bacterial 
pneumonia.
    (c) Rates of an all-cause hospital readmissions measure, except for 
groups with between two to nine eligible professionals and solo 
practitioners starting with the CY 2017 payment adjustment period.

[77 FR 69368, Nov. 16, 2012, as amended at 79 FR 68007, Nov. 13, 2014; 
80 FR 71383, Nov. 16, 2015]



Sec. 414.1235  Cost measures.

    (a) Included measures. Beginning with the CY 2016 payment adjustment 
period, costs for groups and solo practitioners subject to the value-
based payment modifier are assessed based on a cost composite comprised 
of the following 6 cost measures (only the measures identified in 
paragraphs (a)(1) through (5) of this section are included for the 
value-based payment modifier for the CY 2015 payment adjustment period):
    (1) Total per capita costs for all attributed beneficiaries.

[[Page 145]]

    (2) Total per capita costs for all attributed beneficiaries with 
diabetes.
    (3) Total per capita costs for all attributed beneficiaries with 
coronary artery disease.
    (4) Total per capita costs for all attributed beneficiaries with 
chronic obstructive pulmonary disease.
    (5) Total per capita costs for all attributed beneficiaries with 
heart failure.
    (6) Medicare Spending per Beneficiary associated with an acute 
inpatient hospitalization.
    (b) Included payments. Cost measures enumerated in paragraph (a) of 
this section include all fee-for-service payments made under Medicare 
Part A and Part B.
    (c) Cost measure adjustments. (1) Payments under Medicare Part A and 
Part B will be adjusted using CMS' payment standardization methodology 
to ensure fair comparisons across geographic areas.
    (2) The CMS-HCC model (and adjustments for ESRD status) is used to 
adjust standardized payments for the measures listed at paragraphs 
(a)(1) through (5) of this section.
    (3) The beneficiary's age and severity of illness are used to adjust 
the Medicare Spending per Beneficiary measure as specified in paragraph 
(a)(6) of this section.
    (4) Beginning with the CY 2016 payment adjustment period, the cost 
measures of a group and solo practitioner subject to the value-based 
payment modifier are adjusted to account for the group's and solo 
practitioner's specialty mix, by computing the weighted average of the 
national specialty specific expected costs and comparing this to the 
group's actual risk adjusted costs. Each national specialty-specific 
expected cost is weighted by the proportion of Part B payments incurred 
by each specialty within the group.
    (5) The national specialty-specific expected costs referenced in 
paragraph (c)(4) of this section are derived by calculating, for each 
specialty, the weighted average of the risk-adjusted costs computed 
across all groups, where the weight for each group is equal to the 
number of beneficiaries attributed to the group, times the number of 
eligible professionals in the group with the relevant specialty, times 
the proportion of eligible professionals in the group with the relevant 
specialty.

[78 FR 74821, Dec. 10, 2013, as amended at 79 FR 68007, Nov. 13, 2014; 
80 FR 71383, Nov. 16, 2015]



Sec. 414.1240  Attribution for quality of care and cost measures.

    (a) Beneficiaries are attributed to groups and solo practitioners 
subject to the value-based payment modifier using a method generally 
consistent with the method of assignment of beneficiaries under 
Sec. 425.402 of this chapter, for measures other than the Medicare 
Spending per Beneficiary measure.
    (b) For the Medicare Spending per Beneficiary (MSPB) measure, an 
MSPB episode is attributed to the group or the solo practitioner subject 
to the value-based payment modifier whose eligible professionals 
submitted the plurality of claims (as measured by allowable charges) 
under the group's or solo practitioner's TIN for Medicare Part B 
services, rendered during an inpatient hospitalization that is an index 
admission for the MSPB measure during the applicable performance period 
described at Sec. 414.1215.

[79 FR 68007, Nov. 13, 2014]



Sec. 414.1245  Scoring methods for the value-based payment modifier using 
the quality-tiering approach.

    For each quality of care and cost measure, a standardized score is 
calculated for each group and solo practitioner subject to the value-
based payment modifier by dividing--
    (a) The difference between their performance rate and the benchmark, 
by
    (b) The measure's standard deviation.

[77 FR 69368, Nov. 16, 2012, as amended at 79 FR 68007, Nov. 13, 2014]



Sec. 414.1250  Benchmarks for quality of care measures.

    (a) The benchmark for quality of care measures reported through the 
PQRS using the claims, registries, QCDR, or web interface is the 
national mean for that measure's performance rate (regardless of the 
reporting mechanism)

[[Page 146]]

during the year prior to the performance period. In calculating the 
national benchmark, solo practitioners' and groups' (or individual 
eligible professionals' within such groups) performance rates are 
weighted by the number of beneficiaries used to calculate the solo 
practitioners' or groups' (or individual eligible professionals' within 
such groups) performance rate. Beginning with the CY 2016 performance 
period, eCQMs reported via EHRs are excluded from the overall benchmark 
for quality of care measures and separate eCQM benchmarks will be 
developed. The eCQM benchmark is the national mean for the measure's 
performance rate during the year prior to the performance period. In 
calculating the national benchmark, solo practitioners' and groups' (or 
individual eligible professionals' within such groups) performance rates 
are weighted by the number of beneficiaries used to calculate the solo 
practitioners' or groups' (or individual eligible professionals' within 
such groups) performance rate.
    (b) The benchmark for each outcome measure under Sec. 414.1230, is 
the national mean for that measure's performance rate during the year 
prior to the performance period. In calculating the national benchmark, 
solo practitioners' and groups' (or individual eligible professionals' 
within such groups) performance rates are weighted by the number of 
beneficiaries used to calculate the solo practitioners' or groups' (or 
individual eligible professionals' within such groups) performance rate.

[79 FR 68007, Nov. 13, 2014, as amended at 80 FR 71384, Nov. 16, 2015]



Sec. 414.1255  Benchmarks for cost measures.

    (a) For the CY 2015 payment adjustment period, the benchmark for 
each cost measure is the national mean of the performance rates 
calculated among all groups of physicians for which beneficiaries are 
attributed to the group of physicians that are subject to the value-
based payment modifier. In calculating the national benchmark, groups of 
physicians' performance rates are weighted by the number of 
beneficiaries used to calculate the group of physician's performance 
rate.
    (b) Beginning with the CY 2016 payment adjustment period, the 
benchmark for each cost measure is the national mean of the performance 
rates calculated among all groups and solo practitioners that meet the 
minimum number of cases for that measure under Sec. 414.1265(a). In 
calculating the national benchmark, groups and solo practitioners' 
performance rates are weighted by the number of beneficiaries used to 
calculate the group or solo practitioner's performance rate.

[78 FR 74821, Dec. 10, 2013, as amended at 79 FR 68007, Nov. 13, 2014; 
80 FR 71384, Nov. 16, 2015]



Sec. 414.1260  Composite scores.

    (a)(1) The standardized score for each quality of care measure is 
classified into one of the following equally weighted domains to 
determine the quality composite:
    (i) Patient safety.
    (ii) Patient experience.
    (iii) Care coordination.
    (iv) Clinical care.
    (v) Population/community health.
    (vi) Efficiency.
    (2) If a domain includes no measure or does not reach the minimum 
case size in Sec. 414.1265, the remaining domains are equally weighted 
to form the quality of care composite.
    (b)(1) The standardized score for each cost measure is grouped into 
two separate and equally weighted domains to determine the cost 
composite:
    (i) Total per capita costs for all attributed beneficiaries: Total 
per capita costs measure and Medicare Spending per Beneficiary measure; 
and
    (ii) Total per capita costs for all attributed beneficiaries with 
specific conditions: Diabetes, coronary artery disease, chronic 
obstructive pulmonary disease, or heart failure (four measures).
    (2) Measures within each domain are equally weighted.

[77 FR 69368, Nov. 16, 2012, as amended at 78 FR 74821, Dec. 10, 2013]



Sec. 414.1265  Reliability of measures.

    To calculate a composite score for a quality measure or a cost 
measure, a group or solo practitioner subject to

[[Page 147]]

the value-based payment modifier must have 20 or more cases for that 
measure.
    (a) In a performance period, if a group or solo practitioner has 
fewer than 20 cases for a measure, that measure is excluded from its 
domain and the remaining measures in the domain are given equal weight.
    (1) Starting with the CY 2017 payment adjustment period, the 
exception to this paragraph (a) is the all-cause hospital readmissions 
measure described at Sec. 414.1230(c). In a performance period, if a 
group has fewer than 200 cases for this all-cause hospital readmissions 
measure, that measure is excluded from its domain and the remaining 
measures in the domain are given equal weight.
    (2) Starting with the CY 2017 payment adjustment period, the 
Medicare Spending Per Beneficiary measure described at 
Sec. 414.1235(a)(6) is an exception to this paragraph (a). In a 
performance period, if a group or a solo practitioner has fewer than 125 
episodes for this MSPB measure, that measure is excluded from its domain 
and the remaining measures in the domain are given equal weight.
    (b)(1) For the CY 2015 payment adjustment period, if a reliable 
quality of care composite or cost composite cannot be calculated, 
payments will not be adjusted under the value-based payment modifier.
    (2) Beginning with the CY 2016 payment adjustment period, a group 
and a solo practitioner subject to the value-based payment modifier will 
receive a quality composite score that is classified as ``average'' 
under Sec. 414.1275(b)(1) if such group and solo practitioner do not 
have at least one quality measure that meets the minimum number of cases 
under paragraph (a) of this section.
    (3) Beginning with the CY 2016 payment adjustment period, a group 
and a solo practitioner subject to the value-based payment modifier will 
receive a cost composite score that is classified as ``average'' under 
Sec. 414.1275(b)(2) if such group and solo practitioner do not have at 
least one cost measure that meets the minimum number of cases under 
paragraph (a) of this section.

[77 FR 69368, Nov. 16, 2012, as amended at 79 FR 68007, Nov. 13, 2014; 
80 FR 71384, Nov. 16, 2015]



Sec. 414.1270  Determination and calculation of Value-Based Payment 
Modifier adjustments.

    (a) For the CY 2015 payment adjustment period:
    (1) Downward payment adjustments. A downward payment adjustment will 
be applied to a group of physicians subject to the value-based payment 
modifier if--
    (i) Such group neither self-nominates for the PQRS GPRO and reports 
at least one measure, nor elects the PQRS administrative claims option 
for CY 2013 as defined in Sec. 414.90(h).
    (A) Such adjustment will be -1.0 percent.
    (B) [Reserved]
    (ii) Such group elects that its value-based payment modifier be 
calculated using a quality-tiering approach, and is determined to have 
poor performance (low quality and high costs; low quality and average 
costs; or average quality and high costs).
    (A) Such adjustment will not exceed -1.0 percent as specified in 
Sec. 414.1275(c)(1).
    (B) [Reserved]
    (2) No payment adjustments. There will be no value-based payment 
modifier adjustment applied to a group of physicians subject to the 
value-based payment modifier if such group either:
    (i) Self-nominates for the PQRS GPRO and reports at least one 
measure; or
    (ii) Elects the PQRS administrative claims option for CY 2013 as 
defined in Sec. 414.90(h).
    (3) Upward payment adjustments. If a group of physicians subject to 
the value-based payment modifier elects that the value-based payment 
modifier be calculated using a quality-tiering approach, upward payment 
adjustments are determined based on the projected aggregate amount of 
downward payment adjustments determined under paragraph (a)(1) of this 
section and applied as specified in Sec. 414.1275(c)(1).

[[Page 148]]

    (b) For the CY 2016 payment adjustment period:
    (1) A downward payment adjustment of -2.0 percent will be applied to 
a group of physicians subject to the value-based payment modifier if, 
during the applicable performance period as defined in Sec. 414.1215, 
the following apply:
    (i) Such group does not self-nominate for the PQRS GPRO and meet the 
criteria as a group to avoid the PQRS payment adjustment for CY 2016 as 
specified by CMS; and
    (ii) Fifty percent of the eligible professionals in such group do 
not meet the criteria as individuals to avoid the PQRS payment 
adjustment for CY 2016 as specified by CMS.
    (2) For a group of physicians comprised of 100 or more eligible 
professionals that is not included in paragraph (b)(1) of this section, 
the value-based payment modifier adjustment will be equal to the amount 
determined under Sec. 414.1275(c)(2).
    (3) For a group of physicians comprised of between 10 and 99 
eligible professionals that is not included in paragraph (b)(1) of this 
section, the value-based payment modifier adjustment will be equal to 
the amount determined under Sec. 414.1275(c)(2), except that such 
adjustment will be 0.0 percent if the group of physicians is determined 
to be low quality/high cost, low quality/average cost, or average 
quality/high cost.
    (4) If at least fifty percent of the eligible professionals in the 
group meet the criteria as individuals to avoid the PQRS payment 
adjustment for CY 2016 as specified by CMS, and all of those eligible 
professionals use a qualified clinical data registry and CMS is unable 
to receive quality performance data for them, the quality composite 
score for such group will be classified as ``average'' under 
Sec. 414.1275(b)(1).
    (c) For the CY 2017 payment adjustment period:
    (1) A downward payment adjustment of -2.0 percent will be applied to 
a group with two to nine eligible professionals and a solo practitioner 
and a downward payment adjustment of -4.0 percent will be applied to a 
group with 10 or more eligible professionals subject to the value-based 
payment modifier if, during the applicable performance period as defined 
in Sec. 414.1215, the following apply:
    (i) Such group does not meet the criteria as a group to avoid the 
PQRS payment adjustment for CY 2017 as specified by CMS; and
    (ii) Fifty percent of the eligible professionals in such group do 
not meet the criteria as individuals to avoid the PQRS payment 
adjustment for CY 2017 as specified by CMS; or
    (iii) Such solo practitioner does not meet the criteria as an 
individual to avoid the PQRS payment adjustment for CY 2017 as specified 
by CMS.
    (2) For a group comprised of 10 or more eligible professionals that 
is not included in paragraph (c)(1) of this section, the value-based 
payment modifier adjustment will be equal to the amount determined under 
Sec. 414.1275(c)(3)(i).
    (3) For a group comprised of between two to nine eligible 
professionals and a solo practitioner that are not included in paragraph 
(c)(1) of this section, the value-based payment modifier adjustment will 
be equal to the amount determined under Sec. 414.1275(c)(3)(ii).
    (4) If at least fifty percent of the eligible professionals in the 
group meet the criteria as individuals to avoid the PQRS payment 
adjustment for CY 2017 as specified by CMS, and all of those eligible 
professionals use a qualified clinical data registry and CMS is unable 
to receive quality performance data for them, the quality composite 
score for such group will be classified as ``average'' under 
Sec. 414.1275(b)(1).
    (d) For the CY 2018 payment adjustment period:
    (1) A downward payment adjustment of -2.0 percent will be applied to 
a group with two to nine eligible professionals and a solo practitioner, 
a downward payment adjustment of -4.0 percent will be applied to a group 
with 10 or more eligible professionals, and a downward payment 
adjustment of -2.0 percent will be applied to a group or solo 
practitioner consisting of nonphysician eligible professionals subject 
to the value-based payment modifier if, during the applicable 
performance period as defined in Sec. 414.1215, the following apply:
    (i) Such group does not meet the criteria as a group to avoid the 
PQRS

[[Page 149]]

payment adjustment for CY 2018 as specified by CMS; and
    (ii) Fifty percent of the eligible professionals in such group do 
not meet the criteria as individuals to avoid the PQRS payment 
adjustment for CY 2018 as specified by CMS; or
    (iii) Such solo practitioner does not meet the criteria as an 
individual to avoid the PQRS payment adjustment for CY 2018 as specified 
by CMS.
    (2) For a group composed of 10 or more eligible professionals that 
is not included in paragraph (d)(1) of this section, the value-based 
payment modifier adjustment will be equal to the amount determined under 
Sec. 414.1275(c)(4)(i).
    (3) For a group composed of between two to nine eligible 
professionals and a solo practitioner that are not included in paragraph 
(d)(1) of this section, the value-based payment modifier adjustment will 
be equal to the amount determined under Sec. 414.1275(c)(4)(ii).
    (4) For a group and a solo practitioner consisting of nonphysician 
eligible professionals that are not included in paragraph (d)(1) of this 
section, the value-based payment modifier adjustment will be equal to 
the amount determined under Sec. 414.1275(c)(4)(iii).
    (5) If at least 50 percent of the eligible professionals in the 
group meet the criteria as individuals to avoid the PQRS payment 
adjustment for CY 2018 as specified by CMS, and all of those eligible 
professionals use a qualified clinical data registry and CMS is unable 
to receive quality performance data for them, the quality composite 
score for such group will be classified as ``average'' under 
Sec. 414.1275(b)(1).

[78 FR 74821, Dec. 10, 2013, as amended at 79 FR 68007, Nov. 13, 2014; 
80 FR 71384, Nov. 16, 2015]



Sec. 414.1275  Value-based payment modifier quality-tiering
scoring methodology.

    (a) The value-based payment modifier amount for a group and a solo 
practitioner subject to the value-based payment modifier is based upon a 
comparison of the composite of quality of care measures and a composite 
of cost measures.
    (b) Quality composite and cost composite are classified into high, 
average, and low categories based on whether the composites are 
statistically above, not different from, or below the mean composite 
scores.
    (1) Quality composites that are one or more standard deviations 
above the mean are classified into the high category. Quality composites 
that are one or more standard deviations below the mean are classified 
into the low category.
    (2) Cost composites that are one or more standard deviations below 
the mean are classified into the low category. Cost composites that are 
one or more standard deviations above the mean are classified into the 
high category.
    (c)(1) The following value-based payment modifier percentages apply 
to the CY 2015 payment adjustment period:

  CY 2015 Value-Based Payment Modifier Amounts for the Quality-Tiering
                                Approach
------------------------------------------------------------------------
                                                  Average     High cost
           Quality/cost              Low cost       cost      (percent)
------------------------------------------------------------------------
High quality.....................      + 2.0x*      + 1.0x*        + 0.0
Average quality..................      + 1.0x*       + 0.0%         -0.5
Low quality......................       + 0.0%        -0.5%         -1.0
------------------------------------------------------------------------
* Groups of physicians eligible for an additional + 1.0x if (1)
  reporting Physician Quality Reporting System quality measures through
  the GPRO web-interface or CMS-qualified registry, and (2) average
  beneficiary risk score is in the top 25 percent of all beneficiary
  risk scores.

    (2) The following value-based payment modifier percentages apply to 
the CY 2016 payment adjustment period:

  CY 2016 Value-Based Payment Modifier Amounts for the Quality-Tiering
                                Approach
------------------------------------------------------------------------
                                                  Average     High cost
           Quality/cost              Low cost       cost      (percent)
------------------------------------------------------------------------
High quality.....................      + 2.0x*      + 1.0x*        + 0.0
Average quality..................      + 1.0x*       + 0.0%         -1.0

[[Page 150]]

 
Low quality......................       + 0.0%        -1.0%         -2.0
------------------------------------------------------------------------
* Groups of physicians eligible for an additional + 1.0x if reporting
  Physician Quality Reporting System quality measures and average
  beneficiary risk score is in the top 25 percent of all beneficiary
  risk scores.

    (3) The following value-based payment modifier percentages apply to 
the CY 2017 payment adjustment period:
    (i) For groups with 10 or more eligible professionals:

    CY 2017 Value-Based Payment Modifier Amounts for the Quality-Tiering Approach for Groups With 10 or More
                                             Eligible Professionals
----------------------------------------------------------------------------------------------------------------
                      Cost/quality                          Low quality      Average quality      High quality
----------------------------------------------------------------------------------------------------------------
Low Cost...............................................             + 0.0%           * + 2.0x           * + 4.0x
Average Cost...........................................              -2.0%             + 0.0%           * + 2.0x
High Cost..............................................              -4.0%              -2.0%             + 0.0%
----------------------------------------------------------------------------------------------------------------
* Groups eligible for an additional + 1.0x if reporting Physician Quality Reporting System quality measures and
  average beneficiary risk score is in the top 25 percent of all beneficiary risk scores, where `x' represents
  the upward payment adjustment factor.

    (ii) For groups with two to nine eligible professionals and solo 
practitioners:

    CY 2017 Value-Based Payment Modifier Amounts for the Quality-Tiering Approach for Groups With Two to Nine
                                  Eligible Professionals and Solo Practitioners
----------------------------------------------------------------------------------------------------------------
                      Cost/quality                          Low quality      Average quality      High quality
----------------------------------------------------------------------------------------------------------------
Low Cost...............................................             + 0.0%           * + 1.0x           * + 2.0x
Average Cost...........................................             + 0.0%             + 0.0%           * + 1.0x
High Cost..............................................             + 0.0%             + 0.0%             + 0.0%
----------------------------------------------------------------------------------------------------------------
* Groups and solo practitioners eligible for an additional + 1.0x if reporting Physician Quality Reporting
  System quality measures and average beneficiary risk score is in the top 25 percent of all beneficiary risk
  scores, where `x' represents the upward payment adjustment factor.

    (4) The following value-based payment modifier percentages apply to 
the CY 2018 payment adjustment period:
    (i) For physicians, physician assistants, nurse practitioners, 
clinical nurse specialists, and certified registered nurse anesthetists 
in groups with 10 or more eligible professionals:

     CY 2018 Value-Based Payment Modifier Amounts for the Quality-Tiering Approach for Physicians, Physician
   Assistants, Nurse Practitioners, Clinical Nurse Specialists, and Certified Registered Nurse Anesthetists in
                           Groups of Physicians With 10 or More Eligible Professionals
----------------------------------------------------------------------------------------------------------------
             Cost/quality                    Low quality            Average quality            High quality
----------------------------------------------------------------------------------------------------------------
Low Cost.............................  +0.0%..................  +2.0x*.................  +4.0x*
Average Cost.........................  -2.0%..................  +0.0%..................  +2.0x*
High Cost............................  -4.0%..................  -2.0%..................  +0.0%
----------------------------------------------------------------------------------------------------------------
*Groups eligible for an additional +1.0x if reporting Physician Quality Reporting System quality measures and
  average beneficiary risk score is in the top 25 percent of all beneficiary risk scores, where `x' represents
  the upward payment adjustment factor.

    (ii) For physicians, physician assistants, nurse practitioners, 
clinical nurse specialists, and certified registered nurse anesthetists 
in groups with two to nine eligible professionals and physician solo 
practitioners:

[[Page 151]]



     CY 2018 Value-Based Payment Modifier Amounts for the Quality-Tiering Approach for Physicians, Physician
   Assistants, Nurse Practitioners, Clinical Nurse Specialists, and Certified Registered Nurse Anesthetists in
          Groups of Physicians With Two to Nine Eligible Professionals and Physician Solo Practitioners
----------------------------------------------------------------------------------------------------------------
             Cost/quality                    Low quality            Average quality            High quality
----------------------------------------------------------------------------------------------------------------
Low Cost.............................  +0.0%..................  +1.0x*.................  +2.0x*
Average Cost.........................  -1.0%..................  +0.0%..................  +1.0x*
High Cost............................  -2.0%..................  -1.0%..................  +0.0%
----------------------------------------------------------------------------------------------------------------
*Groups and solo practitioners eligible for an additional +1.0x if reporting Physician Quality Reporting System
  quality measures and average beneficiary risk score is in the top 25 percent of all beneficiary risk scores,
  where `x' represents the upward payment adjustment factor.

    (iii) For physician assistants, nurse practitioners, clinical nurse 
specialists, and certified registered nurse anesthetists in groups that 
consist of nonphysician eligible professionals, and solo practitioners 
who are physician assistants, nurse practitioners, clinical nurse 
specialists, and certified registered nurse anesthetists:

  CY 2018 Value-Based Payment Modifier Amounts for the Quality-Tiering Approach for Physician Assistants, Nurse
 Practitioners, Clinical Nurse Specialists, and Certified Registered Nurse Anesthetists in Groups Consisting of
 Nonphysician Eligible Professionals, and Solo Practitioners who are Physician Assistants, Nurse Practitioners,
                     Clinical Nurse Specialists, and Certified Registered Nurse Anesthetists
----------------------------------------------------------------------------------------------------------------
             Cost/quality                    Low quality            Average quality            High quality
----------------------------------------------------------------------------------------------------------------
Low Cost.............................  +0.0%..................  +1.0x*.................  +2.0x*
Average Cost.........................  +0.0%..................  +0.0%..................  +1.0x*
High Cost............................  +0.0%..................  +0.0%..................  +0.0%
----------------------------------------------------------------------------------------------------------------
*Groups and solo practitioners eligible for an additional +1.0x if reporting Physician Quality Reporting System
  quality measures and average beneficiary risk score is in the top 25 percent of all beneficiary risk scores,
  where `x' represents the upward payment adjustment factor.

    (d)(1) Groups of physicians subject to the value-based payment 
modifier that have an attributed beneficiary population with an average 
risk score in the top 25 percent of the risk scores of beneficiaries 
nationwide and for the CY 2015 payment adjustment period elect the 
quality-tiering approach or for the CY 2016 payment adjustment period 
are subject to the quality-tiering approach, receive a greater upward 
payment adjustment as follows:
    (i) Classified as high quality/low cost receive an upward adjustment 
of + 3x (rather than + 2x); and
    (ii) Classified as either high quality/average cost or average 
quality/low cost receive an upward adjustment of + 2x (rather than + 
1x).
    (2) Groups and solo practitioners subject to the value-based payment 
modifier that have an attributed beneficiary population with an average 
risk score in the top 25 percent of the risk scores of beneficiaries 
nationwide and for the CY 2017 payment adjustment period are subject to 
the quality-tiering approach, receive a greater upward payment 
adjustment as follows:
    (i) Classified as high quality/low cost receive an upward adjustment 
of + 5x (rather than + 4x) if the group has 10 or more eligible 
professionals or + 3x (rather than + 2x) if a solo practitioner or the 
group has two to nine eligible professionals; and
    (ii) Classified as either high quality/average cost or average 
quality/low cost receive an upward adjustment of + 3x (rather than + 2x) 
if the group has 10 or more eligible professionals or + 2x (rather than 
+ 1x) if a solo practitioner or the group has two to nine eligible 
professionals.
    (3) Groups and solo practitioners subject to the value-based payment 
modifier that have an attributed beneficiary population with an average 
risk score in the top 25 percent of the risk scores of beneficiaries 
nationwide and for the CY 2018 payment adjustment period are subject to 
the quality-tiering approach, receive a greater upward payment 
adjustment as follows:
    (i) Classified as high quality/low cost receive an upward adjustment 
of +5x (rather than +4x) if the group has 10 or more eligible 
professionals, +3x (rather than +2x) if a solo practitioner or the group 
has two to nine eligible professionals, or +3x (rather than +2x) if a 
solo practitioner or group consisting of nonphysician eligible 
professionals; and
    (ii) Classified as either high quality/average cost or average 
quality/low cost receive an upward adjustment of +3x (rather than +2x) 
if the group has 10 or more eligible professionals, +2x

[[Page 152]]

(rather than +1x) if a solo practitioner or the group has two to nine 
eligible professionals, or +2x (rather than +1x) if a solo practitioner 
or group consisting of nonphysician eligible professionals.

[77 FR 69368, Nov. 16, 2012, as amended at 78 FR 74822, Dec. 10, 2013; 
79 FR 68008, Nov. 13, 2014; 80 FR 71385, Nov. 16, 2015]



Sec. 414.1280  Limitation on review.

    (a) There shall be no administrative or judicial review under 
section 1869 of the Act, section 1878 of the Act, or otherwise of all of 
the following:
    (1) The establishment of the value-based payment modifier.
    (2) The evaluation of the quality of care composite, including the 
establishment of appropriate measure of the quality of care.
    (3) The evaluation of costs composite, including establishment of 
appropriate measures of costs.
    (4) The dates of implementation of the value-based payment modifier.
    (5) The specification of the initial performance period and any 
other performance period.
    (6) The application of the value-based payment modifier.
    (7) The determination of costs.
    (b) [Reserved]



Sec. 414.1285  Informal inquiry process.

    After the dissemination of the annual Physician Feedback reports, a 
group and a solo practitioner may contact CMS to inquire about its 
report and the calculation of the value-based payment modifier.

[77 FR 69368, Nov. 16, 2012, as amended at 79 FR 68008, Nov. 13, 2014]



 Subpart O_Merit-Based Incentive Payment System and Alternative Payment 
                             Model Incentive

    Source: 81 FR 77537, Nov. 4, 2016, unless otherwise noted.



Sec. 414.1300  Basis and scope.

    (a) Basis. This subpart implements the following provisions of the 
Act:
    (1) Section 1833(z)--Incentive Payments for Participation in 
Eligible Alternative Payment Models.
    (2) Section 1848(a)--Payment for Physicians' Services Based on Fee 
Schedule.
    (3) Section 1848(k)--Quality Reporting System.
    (4) Section 1848(q)--Merit-based Incentive Payment System.
    (b) Scope. This subpart part sets forth the following:
    (1) The circumstances under which eligible clinicians are not 
considered MIPS eligible clinicians with respect to a year.
    (2) How individual MIPS eligible clinicians can have their 
performance assessed as a group.
    (3) The data submission methods and data submission criteria for 
each of the MIPS performance categories.
    (4) Methods for calculating a performance category score for each of 
the MIPS performance categories.
    (5) Methods for calculating a MIPS final score and applying the MIPS 
payment adjustment to MIPS eligible clinicians.
    (6) Requirements for an APM to be designated an ``Advanced APM.''
    (7) Methods for eligible clinicians and entities participating in 
Advanced APMs to meet the participation thresholds to become Qualifying 
APM Participants (QPs) and Partial QPs.
    (8) Methods and processes for counting participation in Other Payer 
Advanced APMs in making QP and Partial QP determinations.
    (9) Methods for calculating and paying the APM Incentive Payment to 
QPs.
    (10) Criteria for Physician-Focused Payment Models (PFPMs).



Sec. 414.1305  Definitions.

    As used in this section, unless otherwise indicated--
    Additional performance threshold means the numerical threshold for a 
MIPS payment year against which the final scores of MIPS eligible 
clinicians are compared to determine the additional MIPS payment 
adjustment factors for exceptional performance.
    Advanced Alternative Payment Model (Advanced APM) means an APM that 
CMS determines meets the criteria set forth in Sec. 414.1415.

[[Page 153]]

    Advanced APM Entity means an APM Entity that participates in an 
Advanced APM or Other Payer Advanced APM.
    Affiliated practitioner means an eligible clinician identified by a 
unique APM participant identifier on a CMS-maintained list who has a 
contractual relationship with the Advanced APM Entity for the purposes 
of supporting the Advanced APM Entity's quality or cost goals under the 
Advanced APM.
    Affiliated practitioner list means the list of Affiliated 
Practitioners of an APM Entity that is compiled from a CMS-maintained 
list.
    Alternative Payment Model (APM) means any of the following:
    (1) A model under section 1115A of the Act (other than a health care 
innovation award).
    (2) The shared savings program under section 1899 of the Act.
    (3) A demonstration under section 1866C of the Act.
    (4) A demonstration required by Federal law.
    APM Entity means an entity that participates in an APM or payment 
arrangement with a non-Medicare payer through a direct agreement or 
through Federal or State law or regulation.
    APM Entity group means the group of eligible clinicians 
participating in an APM Entity, as identified by a combination of the 
APM identifier, APM Entity identifier, Taxpayer Identification Number 
(TIN), and National Provider Identifier (NPI) for each participating 
eligible clinician.
    APM Incentive Payment means the lump sum incentive payment for a 
year paid to an eligible clinician who is a QP for the year from 2019 
through 2024.
    Attestation means a secure mechanism, specified by CMS, with respect 
to a particular performance period, whereby a MIPS eligible clinician or 
group may submit the required data for the advancing care information or 
the improvement activities performance categories of MIPS in a manner 
specified by CMS.
    Attributed beneficiary means a beneficiary attributed to the 
Advanced APM Entity under the terms of the Advanced APM or Other Payer 
Advanced APM and listed as an attributed beneficiary on the latest 
available list of attributed beneficiaries at the time of a QP 
determination.
    Attribution-eligible beneficiary means a beneficiary who during the 
QP Performance Period:
    (1) Is not enrolled in Medicare Advantage or a Medicare cost plan;
    (2) Does not have Medicare as a secondary payer;
    (3) Is enrolled in both Medicare Parts A and B;
    (4) Is at least 18 years of age;
    (5) Is a United States resident; and
    (6) Has a minimum of one claim for evaluation and management 
services furnished by an eligible clinician who is in the APM Entity for 
any period during the QP Performance Period or, for an Advanced APM that 
does not base attribution on evaluation and management services and for 
which attributed beneficiaries are not a subset of the attribution-
eligible beneficiary population based on the requirement to have at 
least one claim for evaluation and management services furnished by an 
eligible clinician who is in the APM Entity for any period during the QP 
Performance Period, the attribution basis determined by CMS based upon 
the methodology the Advanced APM uses for attribution, which may include 
a combination of evaluation and management and/or other services.
    Certified Electronic Health Record Technology (CEHRT) means the 
following:
    (1) For any calendar year before 2018, EHR technology (which could 
include multiple technologies) certified under the ONC Health IT 
Certification Program that meets one of the following:
    (i) The 2014 Edition Base EHR definition (as defined at 45 CFR 
170.102) and that has been certified to the certification criteria that 
are necessary to report on applicable objectives and measures specified 
for the MIPS advancing care information performance category, including 
the applicable measure calculation certification criterion at 45 CFR 
170.314(g)(1) or (2) for all certification criteria that support an 
objective with a percentage-based measure.
    (ii) Certification to--
    (A) The following certification criteria:
    (1) CPOE at--

[[Page 154]]

    (i) 45 CFR 170.314(a)(1), (18), (19) or (20); or
    (ii) 45 CFR 170.315(a)(1), (2) or (3).
    (2)(i) Record demographics at 45 CFR 170.314(a)(3); or
    (ii) 45 CFR 170.315(a)(5).
    (3)(i) Problem list at 45 CFR 170.314(a)(5); or
    (ii) 45 CFR 170.315(a)(6).
    (4)(i) Medication list at 45 CFR 170.314(a)(6); or
    (ii) 45 CFR 170.315(a)(7).
    (5)(i) Medication allergy list 45 CFR 170.314(a)(7); or
    (ii) 45 CFR 170.315(a)(8).
    (6)(i) Clinical decision support at 45 CFR 170.314(a)(8); or
    (ii) 45 CFR 170.315(a)(9).
    (7) Health information exchange at transitions of care at one of the 
following:
    (i) 45 CFR 170.314(b)(1) and (2).
    (ii) 45 CFR 170.314(b)(1), (b)(2), and (h)(1).
    (iii) 45 CFR 170.314(b)(1), (b)(2), and (b)(8).
    (iv) 45 CFR 170.314(b)(1), (b)(2), (b)(8), and (h)(1).
    (v) 45 CFR 170.314(b)(8) and (h)(1).
    (vi) 45 CFR 170.314(b)(1), (b)(2), and 170.315(h)(2).
    (vii) 45 CFR 170.314(b)(1), (b)(2), (h)(1), and 170.315(h)(2).
    (viii) 45 CFR 170.314(b)(1), (b)(2), (b)(8), and 170.315(h)(2).
    (ix) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (h)(1), and 
170.315(h)(2).
    (x) 45 CFR 170.314(b)(8), (h)(1), and 170.315(h)(2).
    (xi) 45 CFR 170.314(b)(1), (b)(2), and 170.315(b)(1).
    (xii) 45 CFR 170.314(b)(1), (b)(2), (h)(1), and 170.315(b)(1).
    (xiii) 45 CFR 170.314(b)(1), (b)(2), (b)(8), and 170.315(b)(1).
    (xiv) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (h)(1), and 
170.315(b)(1).
    (xv) 45 CFR 170.314(b)(8), (h)(1), and 170.315(b)(1).
    (xvi) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (h)(1), 170.315(b)(1), 
and 170.315(h)(1).
    (xvii) 45 CFR 170.314(b)(1), (b)(2), (b)(8), (h)(1), 170.315(b)(1), 
and 170.315(h)(2).
    (xviii) 45 CFR 170.314(h)(1) and 170.315(b)(1).
    (xix) 45 CFR 170.315(b)(1) and (h)(1).
    (xx) 45 CFR 170.315(b)(1) and (h)(2).
    (xxi) 45 CFR 170.315(b)(1), (h)(1), and (h)(2); and
    (B) Clinical quality measures at--
    (1) 45 CFR 170.314(c)(1) or 170.315(c)(1);
    (2) 45 CFR 170.314(c)(2) or 170.315(c)(2);
    (3) Clinical quality measure certification criteria that support the 
calculation and reporting of clinical quality measures at 45 CFR 
170.314(c)(2) and (3) and optionally (4); or 45 CFR 170.315(c)(3)(i) and 
(ii) and optionally (c)(4); and can be electronically accepted by CMS if 
the data is submitted electronically.
    (C) Privacy and security at--
    (1) 45 CFR 170.314(d)(1) or 170.315(d)(1);
    (2) 45 CFR 170.314(d)(2) or 170.315(d)(2);
    (3) 45 CFR 170.314(d)(3) or 170.315(d)(3);
    (4) 45 CFR 170.314(d)(4) or 170.315(d)(4);
    (5) 45 CFR 170.314(d)(5) or 170.315(d)(5);
    (6) 45 CFR 170.314(d)(6) or 170.315(d)(6);
    (7) 45 CFR 170.314(d)(7) or 170.315(d)(7);
    (8) 45 CFR 170.314(d)(8) or 170.315(d)(8); and
    (D) The certification criteria that are necessary to report on 
applicable objectives and measures specified for the MIPS advancing care 
information performance category, including the applicable measure 
calculation certification criterion at 45 CFR 170.314(g)(1) or (2) or 45 
CFR 170.315(g)(1) or (2) for all certification criteria that support an 
objective with a percentage-based measure.
    (iii) The definition for 2018 and subsequent years specified in 
paragraph (2) of this definition.
    (2) For 2018 and subsequent years, EHR technology (which could 
include multiple technologies) certified under the ONC Health IT 
Certification Program that meets the 2015 Edition Base EHR definition 
(as defined at 45 CFR 170.102) and has been certified to the 2015 
Edition health IT certification criteria--
    (i) At 45 CFR 170.315(a)(12) (family health history) and 45 CFR 
170.315(e)(3) (patient health information capture); and
    (ii) Necessary to report on applicable objectives and measures 
specified for the MIPS advancing care information performance category 
including the following:
    (A) The applicable measure calculation certification criterion at 45 
CFR 170.315(g)(1) or (2) for all certification criteria that support an 
objective with a percentage-based measure.

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    (B) Clinical quality measure certification criteria that support the 
calculation and reporting of clinical quality measures at 45 CFR 
170.315(c)(2) and (c)(3)(i) and (ii) and optionally (c)(4), and can be 
electronically accepted by CMS.
    CMS-approved survey vendor means a survey vendor that is approved by 
CMS for a particular performance period to administer the CAHPS for MIPS 
survey and to transmit survey measures data to CMS.
    CMS Web Interface means a web product developed by CMS that is used 
by groups that have elected to utilize the CMS Web Interface to submit 
data on the MIPS measures and activities.
    Covered professional services has the meaning given by section 
1848(k)(3)(A) of the Act.
    Eligible clinician means ``eligible professional'' as defined in 
section 1848(k)(3) of the Act, as identified by a unique TIN and NPI 
combination and, includes any of the following:
    (1) A physician.
    (2) A practitioner described in section 1842(b)(18)(C) of the Act.
    (3) A physical or occupational therapist or a qualified speech-
language pathologist.
    (4) A qualified audiologist (as defined in section 1861(ll)(3)(B) of 
the Act).
    Episode payment model means an APM or other payer arrangement 
designed to improve the efficiency and quality of care for an episode of 
care by bundling payment for services furnished to an individual over a 
defined period of time for a specific clinical condition or conditions.
    Estimated aggregate payment amounts means the total payments to a QP 
for Medicare Part B covered professional services for the incentive 
payment base period, estimated by CMS as described in Sec. 414.1450(b).
    Final score means a composite assessment (using a scoring scale of 0 
to 100) for each MIPS eligible clinician for a performance period 
determined using the methodology for assessing the total performance of 
a MIPS eligible clinician according to performance standards for 
applicable measures and activities for each performance category. The 
final score is the sum of each of the products of each performance 
category score and each performance category's assigned weight, 
multiplied by 100.
    Group means a single TIN with two or more eligible clinicians 
(including at least one MIPS eligible clinician), as identified by their 
individual NPI, who have reassigned their billing rights to the TIN.
    Health Professional Shortage Areas (HPSA) means areas as designated 
under section 332(a)(1)(A) of the Public Health Service Act.
    High priority measure means an outcome, appropriate use, patient 
safety, efficiency, patient experience, or care coordination quality 
measure.
    Hospital-based MIPS eligible clinician is a MIPS eligible clinician 
who furnishes 75 percent or more of his or her covered professional 
services in sites of service identified by the Place of Service codes 
used in the HIPAA standard transaction as an inpatient hospital, on-
campus outpatient hospital or emergency room setting based on claims for 
a period prior to the performance period as specified by CMS.
    Improvement activities means an activity that relevant MIPS eligible 
clinician, organizations and other relevant stakeholders identify as 
improving clinical practice or care delivery and that the Secretary 
determines, when effectively executed, is likely to result in improved 
outcomes.
    Incentive payment base period means the calendar year prior to the 
year in which CMS disburses the APM Incentive Payment.
    Low-volume threshold means an individual MIPS eligible clinician or 
group who, during the low-volume threshold determination period, have 
Medicare Part B allowed charges less than or equal to $30,000 or 
provides care for 100 or fewer Part B-enrolled Medicare beneficiaries.
    Meaningful EHR user for MIPS means a MIPS eligible clinician who 
possesses CEHRT, uses the functionality of CEHRT, and reports on 
applicable objectives and measures specified for the advancing care 
information performance category for a performance period in the form 
and manner specified by CMS, supports information exchange and the 
prevention of health information blocking, and engages in activities

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related to supporting providers with the performance of CEHRT.
    Measure benchmark means the level of performance that the MIPS 
eligible clinician is assessed on for a specific performance period at 
the measures and activities level.
    Medicaid APM means a payment arrangement authorized by a State 
Medicaid program that meets the criteria for an Other Payer Advanced APM 
under Sec. 414.1420(a).
    Medical Home Model means an APM under section 1115A of the Act that 
is determined by CMS to have the following characteristics:
    (1) The APM has a primary care focus with participants that 
primarily include primary care practices or multispecialty practices 
that include primary care physicians and practitioners and offer primary 
care services. For the purposes of this provision, primary care focus 
means the inclusion of specific design elements related to eligible 
clinicians practicing under one or more of the following Physician 
Specialty Codes: 01 General Practice; 08 Family Medicine; 11 Internal 
Medicine; 16 Obstetrics and Gynecology; 37 Pediatric Medicine; 38 
Geriatric Medicine; 50 Nurse Practitioner; 89 Clinical Nurse Specialist; 
and 97 Physician Assistant;
    (2) Empanelment of each patient to a primary clinician; and
    (3) At least four of the following:
    (i) Planned coordination of chronic and preventive care.
    (ii) Patient access and continuity of care.
    (iii) Risk-stratified care management.
    (iv) Coordination of care across the medical neighborhood.
    (v) Patient and caregiver engagement.
    (vi) Shared decision-making.
    (vii) Payment arrangements in addition to, or substituting for, fee-
for-service payments (for example, shared savings or population-based 
payments).
    Medicaid Medical Home Model means a payment arrangement under title 
XIX that CMS determines to have the following characteristics:
    (1) The payment arrangement has a primary care focus with 
participants that primarily include primary care practices or 
multispecialty practices that include primary care physicians and 
practitioners and offer primary care services. For the purposes of this 
provision, primary care focus means the inclusion of specific design 
elements related to eligible clinicians practicing under one or more of 
the following Physician Specialty Codes: 01 General Practice; 08 Family 
Medicine; 11 Internal Medicine; 16 Obstetrics and Gynecology; 37 
Pediatric Medicine; 38 Geriatric Medicine; 50 Nurse Practitioner; 89 
Clinical Nurse Specialist; and 97 Physician Assistant;
    (2) Empanelment of each patient to a primary clinician; and
    (3) At least four of the following:
    (i) Planned coordination of chronic and preventive care.
    (ii) Patient access and continuity.
    (iii) Risk-stratified care management.
    (iv) Coordination of care across the medical neighborhood.
    (v) Patient and caregiver engagement.
    (vi) Shared decision-making.
    (vii) Payment arrangements in addition to, or substituting for, fee-
for-service payments (for example, shared savings or population-based 
payments).
    Merit-based Incentive Payment System (MIPS) means the program 
required by section 1848(q) of the Act.
    MIPS APM means an APM that meets the criteria specified under 
Sec. 414.1370(b).
    MIPS eligible clinician as identified by a unique billing TIN and 
NPI combination used to assess performance, means any of the following 
(excluding those identified at Sec. 414.1310(b)):
    (1) A physician as defined in section 1861(r) of the Act.
    (2) A physician assistant, a nurse practitioner, and clinical nurse 
specialist as such terms are defined in section 1861(aa)(5) of the Act.
    (3) A certified registered nurse anesthetist as defined in section 
1861(bb)(2) of the Act.
    (4) A group that includes such clinicians.
    MIPS payment year means a calendar year in which the MIPS payment 
adjustment factor, and if applicable the additional MIPS payment 
adjustment factor, are applied to Medicare Part B payments.

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    New Medicare-Enrolled MIPS eligible clinician means an eligible 
clinician who first becomes a Medicare-enrolled eligible clinician 
within the Provider Enrollment, Chain and Ownership System (PECOS) 
during the performance period for a year and had not previously 
submitted claims under Medicare as an individual, an entity, or a part 
of a physician group or under a different billing number or tax 
identifier.
    Non-patient facing MIPS eligible clinician means an individual MIPS 
eligible clinician that bills 100 or fewer patient facing encounters 
(including Medicare telehealth services defined in section 1834(m) of 
the Act) during the non-patient facing determination period, and a group 
provided that more than 75 percent of the NPIs billing under the group's 
TIN meet the definition of a non-patient facing individual MIPS eligible 
clinician during the non-patient facing determination period.
    Other Payer Advanced APM means a payment arrangement that meets the 
criteria set forth in Sec. 414.1420.
    Other payer arrangement means a payment arrangement with any payer 
that is not an APM.
    Partial Qualifying APM Participant (Partial QP) means an eligible 
clinician determined by CMS to have met the relevant Partial QP 
threshold under Sec. 414.1430(a)(2) and (4) and (b)(2) and (4) for a 
year.
    Partial QP patient count threshold means the minimum threshold score 
specified in Sec. 414.1430(a)(4) and (b)(4) that an eligible clinician 
must attain through a patient count methodology described in 
Secs. 414.1435(b) and 414.1440(c) to become a Partial QP for a year.
    Partial QP payment amount threshold means the minimum threshold 
score specified in Sec. 414.1430(a)(2) and (b)(2) that an eligible 
clinician must attain through a payment amount methodology described 
Secs. 414.1435(a) and 414.1440(b) to become a Partial QP for a year.
    Participation List means the list of participants in an APM Entity 
that is compiled from a CMS-maintained list.
    Performance category score means the assessment of each MIPS 
eligible clinician's performance on the applicable measures and 
activities for a performance category for a performance period based on 
the performance standards for those measures and activities.
    Performance standards means the level of performance and methodology 
that the MIPS eligible clinician is assessed on for a MIPS performance 
period at the measures and activities level for all MIPS performance 
categories.
    Performance threshold means the numerical threshold for a MIPS 
payment year against which the final scores of MIPS eligible clinicians 
are compared to determine the MIPS payment adjustment factors.
    QP patient count threshold means the minimum threshold score 
specified in Sec. 414.1430(a)(3) and (b)(3) that an eligible clinician 
must attain through a patient count methodology described in 
Secs. 414.1435(b) and 414.1440(c) to become a QP for a year.
    QP payment amount threshold means the minimum threshold score 
specified in Sec. 414.1430(a)(1) and (b)(1) that an eligible clinician 
must attain through the payment amount methodology described in 
Secs. 414.1435(a) and 414.1440(b) to become a QP for a year.
    QP Performance Period means the time period that CMS will use to 
assess the level of participation by an eligible clinician in Advanced 
APMs and Other Payer Advanced APMs for purposes of making a QP 
determination for the eligible clinician for the year as specified in 
Sec. 414.1425. The QP Performance Period begins on January 1 and ends on 
August 31 of the calendar year that is 2 years prior to the payment 
year.
    Qualified Clinical Data Registry (QCDR) means a CMS-approved entity 
that has self-nominated and successfully completed a qualification 
process to determine whether the entity may collect medical or clinical 
data for the purpose of patient and disease tracking to foster 
improvement in the quality of care provided to patients.
    Qualified registry means a medical registry, a maintenance of 
certification program operated by a specialty body of the American Board 
of Medical Specialties or other data intermediary that, with respect to 
a particular performance period, has self-nominated and successfully 
completed a vetting process (as specified by CMS) to demonstrate its 
compliance with the MIPS

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qualification requirements specified by CMS for that performance period. 
The registry must have the requisite legal authority to submit MIPS data 
(as specified by CMS) on behalf of a MIPS eligible clinician or group to 
CMS.
    Qualifying APM Participant (QP) means an eligible clinician 
determined by CMS to have met or exceeded the relevant QP payment amount 
or QP patient count threshold under Sec. 414.1430(a)(1), (a)(3), (b)(1), 
or (b)(3) for a year based on participation in an Advanced APM Entity.
    Rural areas means clinicians in zip codes designated as rural, using 
the most recent HRSA Area Health Resource File data set available.
    Small practices means practices consisting of 15 or fewer clinicians 
and solo practitioners.
    Threshold Score means the percentage value that CMS determines for 
an eligible clinician based on the calculations described in 
Sec. 414.1435 or Sec. 414.1440.
    Topped out non-process measure means a measure where the Truncated 
Coefficient of Variation is less than 0.10 and the 75th and 90th 
percentiles are within 2 standard errors.
    Topped out process measure means a measure with a median performance 
rate of 95 percent or higher.



Sec. 414.1310  Applicability.

    (a) Program Implementation. Except as specified in paragraph (b) of 
this section, MIPS applies to payments for items and services furnished 
by MIPS eligible clinicians on or after January 1, 2019.
    (b) Exclusions. (1) For a year, a MIPS eligible clinician does not 
include an eligible clinician who:
    (i) Is a Qualifying APM Participant (as defined at Sec. 414.1305);
    (ii) Is a Partial Qualifying APM Participant (as defined at 
Sec. 414.1305) and does not report on applicable measures and activities 
that are required to be reported under MIPS for any given performance 
period in a year; or
    (iii) For the performance period with respect to a year, does not 
exceed the low-volume threshold as defined at Sec. 414.1305.
    (2) Eligible clinicians, as defined at Sec. 414.1305, who are not 
MIPS eligible clinicians, as defined at Sec. 414.1305, have the option 
to voluntarily report measures and activities for MIPS.
    (c) Treatment of new Medicare-enrolled eligible clinicians. New 
Medicare-enrolled eligible clinician, as defined at Sec. 414.1305, will 
not be treated as a MIPS eligible clinician until the subsequent year 
and the performance period for such subsequent year.
    (d) Clarification. In no case will a MIPS payment adjustment apply 
to the items and services furnished during a year by individual eligible 
clinicians, as described in paragraphs (b) and (c) of this section, who 
are not MIPS eligible clinicians, including eligible clinicians who 
voluntarily report on applicable measures and activities specified under 
MIPS.
    (e) Requirements for groups. (1) The following way is for individual 
eligible clinicians and individual MIPS eligible clinicians to have 
their performance assessed as a group:
    (i) As part of a single TIN associated with two or more eligible 
clinicians (including at least one MIPS eligible clinician), as 
identified by a NPI, that have their Medicare billing rights reassigned 
to the TIN.
    (ii) [Reserved]
    (2) A group must meet the definition of a group at all times during 
the performance period for the MIPS payment year in order to have its 
performance assessed as a group.
    (3) Eligible clinicians and MIPS eligible clinicians within a group 
must aggregate their performance data across the TIN in order for their 
performance to be assessed as a group.
    (4) A group that elects to have its performance assessed as a group 
will be assessed as a group across all four MIPS performance categories.
    (5) A group must adhere to an election process established and 
required by CMS.



Sec. 414.1315  [Reserved]



Sec. 414.1320  MIPS performance period.

    (a) For purposes of the 2019 MIPS payment year, the performance 
period for all performance categories and submission mechanisms except 
for the cost performance category and data for the quality performance 
category reported through the CMS Web Interface,

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for the CAHPS for MIPS survey, and for the all-cause hospital 
readmission measure, is a minimum of a continuous 90-day period within 
CY 2017, up to and including the full CY 2017 (January 1, 2017 through 
December 31, 2017). For purposes of the 2019 MIPS payment year, for data 
reported through the CMS Web Interface or the CAHPS for MIPS survey and 
administrative claims-based cost and quality measures, the performance 
period under MIPS is CY 2017 (January 1, 2017 through December 31, 
2017).
    (b) For purposes of the 2020 MIPS payment year, the performance 
period for:
    (1) The quality and cost performance categories is CY 2018 (January 
1, 2018 through December 31, 2018).
    (2) The advancing care information and improvement activities 
performance categories is a minimum of a continuous 90-day period within 
CY 2018, up to and including the full CY 2018 (January 1, 2018 through 
December 31, 2018).



Sec. 414.1325  Data submission requirements.

    (a) Data submission performance categories. MIPS eligible clinicians 
and groups must submit measures, objectives, and activities for the 
quality, improvement activities, and advancing care information 
performance categories.
    (b) Data submission mechanisms for individual eligible clinicians. 
An individual MIPS eligible clinician may elect to submit their MIPS 
data using:
    (1) A qualified registry for the quality, improvement activities, or 
advancing care information performance categories;
    (2) The EHR submission mechanism (which includes submission of data 
by health IT vendors or other authorized providers on behalf of MIPS 
eligible clinicians) for the quality, improvement activities, or 
advancing care information performance categories;
    (3) A QCDR for the quality, improvement activities, or advancing 
care information performance categories;
    (4) Medicare Part B claims for the quality performance category; or
    (5) Attestation for the improvement activities and advancing care 
information performance categories.
    (c) Data submission mechanisms for groups that are not reporting 
through an APM. Groups may submit their MIPS data using:
    (1) A qualified registry for the quality, improvement activities, or 
advancing care information performance categories;
    (2) The EHR submission mechanism (which includes the submission of 
data by health IT vendors on behalf of groups) for the quality, 
improvement activities, or advancing care information performance 
categories;
    (3) A QCDR for the quality, improvement activities, or advancing 
care information performance categories;
    (4) A CMS Web Interface (for groups comprised of at least 25 MIPS 
eligible clinicians) for the quality, improvement activities, and 
advancing care information performance categories;
    (5) Attestation for the improvement activities and advancing care 
information performance categories; or
    (6) A CMS-approved survey vendor for groups that elect to include 
the CAHPS for MIPS survey as a quality measure. Groups that elect to 
include the CAHPS for MIPS survey as a quality measure must select one 
of the above data submission mechanisms to submit their other quality 
information.
    (d) Requirement to use only one submission mechanism per performance 
category. Except as described in paragraph (c)(6) of this section, MIPS 
eligible clinicians and groups may elect to submit information via 
multiple mechanisms; however, they must use the same identifier for all 
performance categories and they may only use one submission mechanism 
per performance category.
    (e) No data submission requirements for the cost performance 
category and certain quality measures. There are no data submission 
requirements for the cost performance category and for certain quality 
measures used to assess performance in the quality performance category. 
CMS will calculate performance on these measures using administrative 
claims data.

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    (f) Data submission deadlines for all submission mechanisms for 
individual eligible clinicians and groups for all performance 
categories. The submission deadlines are:
    (1) For the qualified registry, QCDR, EHR, and attestation 
submission mechanisms are March 31 following the close of the 
performance period.
    (2) For Medicare Part B claims, data must be submitted on claims 
with dates of service during the performance period that must be 
processed no later than 60 days following the close of the performance 
period.
    (3) For the CMS Web Interface, data must be submitted during an 8-
week period following the close of the performance period. The period 
must begin no earlier than January 2 and end no later than March 31.



Sec. 414.1330  Quality performance category.

    (a) For purposes of assessing performance of MIPS eligible 
clinicians on the quality performance category, CMS will use:
    (1) Quality measures included in the MIPS final list of quality 
measures.
    (2) Quality measures used by QCDRs.
    (b) Subject to CMS's authority to reweight performance category 
weights under section 1848(q)(5)(F) of the Act, performance in the 
quality performance category will comprise:
    (1) 60 percent of a MIPS eligible clinician's final score for MIPS 
payment year 2019.
    (2) 50 percent of a MIPS eligible clinician's final score for MIPS 
payment year 2020.
    (3) 30 percent of a MIPS eligible clinician's final score for each 
MIPS payment year thereafter.



Sec. 414.1335  Data submission criteria for the quality performance category.

    (a) Criteria. A MIPS eligible clinician or group must submit data on 
MIPS quality measures in one of the following manners, as applicable:
    (1) Via claims, qualified registry, EHR or QCDR submission 
mechanism. For the performance period--
    (i) Submit data on at least six measures including at least one 
outcome measure. If an applicable outcome measure is not available, 
report one other high priority measure (appropriate use, patient safety, 
efficiency, patient experience, and care coordination measures). If 
fewer than six measures apply to the MIPS eligible clinician or group, 
report on each measure that is applicable.
    (ii) Subject to paragraph (a)(1)(i) of this section, MIPS eligible 
clinicians and groups can either select their measures from the complete 
MIPS final measure list or a subset of that list, MIPS specialty-
specific measure sets, as designated by CMS.
    (2) Via the CMS Web Interface--for groups only. For the 12-month 
performance period-
    (i) For a group of 25 or more MIPS eligible clinicians, report on 
all measures included in the CMS Web Interface. The group must report on 
the first 248 consecutively ranked beneficiaries in the sample for each 
measure or module.
    (ii) If the sample of eligible assigned beneficiaries is less than 
248, then the group must report on 100 percent of assigned 
beneficiaries. In some instances, the sampling methodology will not be 
able to assign at least 248 patients on which a group may report, 
particularly those groups on the smaller end of the range of 25-99 MIPS 
eligible clinicians.
    (iii) The group is required to report on at least one measure for 
which there is Medicare patient data.
    (iv) Groups reporting via the CMS Web Interface are required to 
report on all of the measures in the set.
    (3) Via CMS-approved survey vendor for CAHPS for MIPS survey- for 
groups only. (i) For the 12-month performance period, a group that 
wishes to voluntarily elect to participate in the CAHPS for MIPS survey 
measures must use a survey vendor that is approved by CMS for a 
particular performance period to transmit survey measures data to CMS.
    (A) The CAHPS for MIPS survey counts for one measure towards the 
MIPS quality performance category and, as a patient experience measure, 
also fulfills the requirement to report at least one high priority 
measure in the absence of an applicable outcome measure.

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    (B) Groups that elect this data submission mechanism must select an 
additional group data submission mechanism in order to meet the data 
submission criteria for the MIPS quality performance category.
    (ii) [Reserved]
    (b) [Reserved]



Sec. 414.1340  Data completeness criteria for the quality performance category.

    (a) MIPS eligible clinicians and groups submitting quality measures 
data using the QCDR, qualified registry, or EHR submission mechanism 
must submit data on:
    (1) At least 50 percent of the MIPS eligible clinician or group's 
patients that meet the measure's denominator criteria, regardless of 
payer for MIPS payment year 2019.
    (2) At least 60 percent of the MIPS eligible clinician or group's 
patients that meet the measure's denominator criteria, regardless of 
payer for MIPS payment year 2020.
    (b) MIPS eligible clinicians submitting quality measures data using 
Medicare Part B claims, must submit data on:
    (1) At least 50 percent of the applicable Medicare Part B patients 
seen during the performance period to which the measure applies for MIPS 
payment year 2019.
    (2) At least 60 percent of the applicable Medicare Part B patients 
seen during the performance period to which the measure applies for MIPS 
payment year 2020.
    (c) Groups submitting quality measures data using the CMS Web 
Interface or a CMS-approved survey vendor to submit the CAHPS for MIPS 
survey must meet the data submission requirement on the sample of the 
Medicare Part B patients CMS provides.



Sec. 414.1350  Cost performance category.

    (a) For purposes of assessing performance of MIPS eligible 
clinicians on the cost performance category, CMS specifies cost measures 
for a performance period.
    (b) Subject to CMS's authority to reweight performance category 
weights under section 1848(q)(5)(F) of the Act, performance in the cost 
performance category comprises:
    (1) 0 percent of a MIPS eligible clinician's final score for MIPS 
payment year 2019.
    (2) 10 percent of a MIPS eligible clinician's final score for MIPS 
payment year 2020.
    (3) 30 percent of a MIPS eligible clinician's final score for each 
MIPS payment year thereafter.



Sec. 414.1355  Improvement activities performance category.

    (a) For purposes of assessing performance of MIPS eligible 
clinicians on the improvement activities performance category, CMS 
specifies an inventory of measures and activities for a performance 
period.
    (b) Subject to CMS's authority to reweight performance category 
weights under section 1848(q)(5)(F) of the Act, performance in the 
improvement activities performance category comprises:
    (1) 15 percent of a MIPS eligible clinician's final score for MIPS 
payment year 2019 and for each MIPS payment year thereafter.
    (2) [Reserved].
    (c) For purposes of assessing performance of MIPS eligible 
clinicians on the improvement activities performance category, CMS uses 
activities included in the improvement activities inventory established 
by CMS through rulemaking.



Sec. 414.1360  Data submission criteria for the improvement 
activities performance category.

    (a) MIPS eligible clinicians must submit data on MIPS improvement 
activities in one of the following manners:
    (1) Via qualified registry, EHR submission mechanisms, QCDR, CMS Web 
Interface or Attestation. For activities that are performed for at least 
a continuous 90-days during the performance period, MIPS eligible 
clinicians must--
    (i) Submit a yes response for activities within the improvement 
activities inventory.
    (ii) [Reserved]
    (2) [Reserved]
    (b) [Reserved]

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Sec. 414.1365  Subcategories for the improvement activities performance category.

    (a) The following are the list of subcategories, of which, with the 
exception of Participation in an APM, include activities for selection 
by a MIPS eligible clinician or group:
    (1) Expanded practice access, such as same day appointments for 
urgent needs and after-hours access to clinician advice.
    (2) Population management, such as monitoring health conditions of 
individuals to provide timely health care interventions or participation 
in a QCDR.
    (3) Care coordination, such as timely communication of test results, 
timely exchange of clinical information to patients or other clinicians, 
and use of remote monitoring or telehealth.
    (4) Beneficiary engagement, such as the establishment of care plans 
for individuals with complex care needs, beneficiary self-management 
assessment and training, and using shared decision-making mechanisms.
    (5) Patient safety and practice assessment, such as through the use 
of clinical or surgical checklists and practice assessments related to 
maintaining certification.
    (6) Participation in an APM.
    (7) Achieving health equity, such as for MIPS eligible clinicians 
that achieve high quality for underserved populations, including persons 
with behavioral health conditions, racial and ethnic minorities, sexual 
and gender minorities, people with disabilities, people living in rural 
areas, and people in geographic HPSAs.
    (8) Emergency preparedness and response, such as measuring MIPS 
eligible clinician participation in the Medical Reserve Corps, measuring 
registration in the Emergency System for Advance Registration of 
Volunteer Health Professionals, measuring relevant reserve and active 
duty uniformed services MIPS eligible clinician activities, and 
measuring MIPS eligible clinician volunteer participation in domestic or 
international humanitarian medical relief work.
    (9) Integrated behavioral and mental health, such as measuring or 
evaluating such practices as: Co-location of behavioral health and 
primary care services; shared/integrated behavioral health and primary 
care records; cross-training of MIPS eligible clinicians, and 
integrating behavioral health with primary care to address substance use 
disorders or other behavioral health conditions, as well as integrating 
mental health with primary care.
    (b) [Reserved]



Sec. 414.1370  APM scoring standard under MIPS.

    (a) General. The APM scoring standard is the MIPS scoring 
methodology applicable for MIPS eligible clinicians identified on the 
Participation List for the performance period of an APM Entity 
participating in a MIPS APM.
    (b) Criteria for MIPS APMs. MIPS APMs are those in which:
    (1) APM Entities participate in the APM under an agreement with CMS 
or through a law or regulation;
    (2) The APM is designed such that APM Entities participating in the 
APM include at least one MIPS eligible clinician on a Participation 
List;
    (3) The APM bases payment on cost/utilization and quality measures; 
and
    (4) The APM is not either of the following:
    (i) New APMs. An APM for which the first performance year begins 
after the first day of the MIPS performance period for the year.
    (ii) APM in final year of operation for which the APM scoring 
standard is impracticable. An APM in the final year of operation for 
which CMS determines, within 60 days after the beginning of the MIPS 
performance period for the year, that it is impracticable for APM Entity 
groups to report to MIPS using the APM scoring standard.
    (c) APM scoring standard performance period. The MIPS performance 
period under Sec. 414.1320 applies for the APM scoring standard.
    (d) APM participant identifier. The APM participant identifier for 
an eligible clinician is the combination of four identifiers:
    (1) APM identifier (established for the APM by CMS);
    (2) APM Entity identifier (established for the APM Entity by CMS);
    (3) Medicare-enrolled billing TIN; and
    (4) Eligible clinician NPI.

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    (e) APM Entity group determination. The APM Entity group is 
determined in the manner prescribed in Sec. 414.1425(b)(1).
    (f) APM Entity group scoring under the APM scoring standard. The 
MIPS final score calculated for the APM Entity group is applied to each 
MIPS eligible clinician in the APM Entity group. The MIPS payment 
adjustment is applied at the TIN/NPI level for each of the MIPS eligible 
clinicians in the APM Entity group. In the event that a Shared Savings 
Program ACO does not report quality measures as required by the Shared 
Savings Program, the ACO participant TINs will each be considered a 
unique APM Entity for purposes of the APM scoring standard.
    (g) MIPS performance category scoring under the APM scoring 
standard--(1) Quality--(i) MIPS APMs that require APM Entities to submit 
quality data using the CMS Web Interface. The MIPS performance category 
score for quality for a performance period will be calculated for the 
APM Entity group using the data submitted for the APM Entity through the 
CMS Web Interface according to the terms of the APM. In the event that a 
Shared Savings Program ACO does not report on quality measures as 
required by the Shared Savings Program, the ACO participant TINs must 
report data for the MIPS quality performance category according to the 
MIPS submission and reporting requirements.
    (ii) [Reserved]
    (2) Cost. The cost performance category weight is zero percent for 
APM Entity groups in MIPS APMs.
    (3) Improvement activities. (i) CMS assigns an improvement 
activities score for each MIPS APM for a performance period based on the 
requirements of the MIPS APM. The assigned improvement activities score 
applies to each APM Entity group in the MIPS APM for the performance 
year. In the event that the assigned score does not represent the 
maximum improvement activities score, APM Entities may report additional 
activities.
    (ii) [Reserved]
    (4) Advancing care information. (i) For APM Entity groups in the 
Shared Savings Program, each ACO participant TIN submits data on the 
advancing care information performance category as specified in 
Sec. 414.1375(b) and performance on the advancing care information 
performance category is assessed for the APM Entity group by calculating 
the weighted mean of the TIN level scores, weighted based on the number 
of MIPS eligible clinicians in the TINs as compared to the total number 
of MIPS eligible clinicians in the APM Entity group.
    (ii) For APM Entity groups in MIPS APMs other than the Shared 
Savings Program, CMS uses one score for each MIPS eligible clinician in 
the APM Entity group to derive a single average APM Entity group score 
for advancing care information. The score for each MIPS eligible 
clinician is the higher of either:
    (A) A group score based on the measure data for the advancing care 
information performance category reported by a TIN for the MIPS eligible 
clinician according to the MIPS submission and reporting requirements 
for groups; or
    (B) An individual score based on the measure data for the advancing 
care information performance category reported by the MIPS eligible 
clinician according to the MIPS submission and reporting requirements 
for individuals.
    (h) APM scoring standard performance category weights. The 
performance category weights used to calculate the final score for an 
APM Entity group are:
    (1) Quality. (i) For the Shared Savings Program and other MIPS APMs 
that require APM Entities to submit quality data through the CMS Web 
Interface: 50 percent.
    (ii) For 2017, for MIPS APMs that do not require APM Entities to 
submit quality data through the CMS Web Interface: 0 percent.
    (2) Cost. 0 percent.
    (3) Improvement activities. (i) For the Shared Savings Program and 
other MIPS APMs that require APM Entities to submit quality data through 
the CMS Web Interface: 20 percent.
    (ii) For 2017, for MIPS APMs that do not require APM Entities to 
submit quality data through the CMS Web Interface: 25 percent.
    (4) Advancing care information. (i) For the Shared Savings Program 
and other

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MIPS APMs that require APM Entities to submit quality data through the 
CMS Web Interface: 30 percent.
    (ii) For 2017, for MIPS APMs that do not require APM Entities to 
submit quality data through the CMS Web Interface: 75 percent.



Sec. 414.1375  Advancing care information performance category.

    (a) Final score. Subject to CMS's authority to reweight performance 
category weights under section 1848(q)(5)(E)(ii) and (q)(5)(F) of the 
Act, performance in the advancing care information performance category 
will comprise 25 percent of a MIPS eligible clinician's final score for 
MIPS payment year 2019 and each MIPS payment year thereafter.
    (b) Reporting for the advancing care information performance 
category: To earn a performance category score for the advancing care 
information performance category for inclusion in the final score, a 
MIPS eligible clinician must:
    (1) CEHRT. Use CEHRT as defined at Sec. 414.1305 for the performance 
period;
    (2) Report MIPS--advancing care information objectives and measures. 
Report on the objectives and associated measures as specified by CMS for 
the advancing care information performance category for the performance 
period as follows:
    (i) Report the numerator (of at least one) and denominator, or yes/
no statement as applicable, for each required measure; or
    (ii) Report a null value for each required measure that includes a 
null value as an acceptable result in the measure specification.
    (3) Support information exchange and the prevention of health 
information blocking, and engage in activities related to supporting 
providers with the performance of CEHRT. (i) Supporting providers with 
the performance of CEHRT (SPPC). To engage in activities related to 
supporting providers with the performance of CEHRT, the MIPS eligible 
clinician--
    (A) Must attest that he or she:
    (1) Acknowledges the requirement to cooperate in good faith with ONC 
direct review of his or her health information technology certified 
under the ONC Health IT Certification Program if a request to assist in 
ONC direct review is received; and
    (2) If requested, cooperated in good faith with ONC direct review of 
his or her health information technology certified under the ONC Health 
IT Certification Program as authorized by 45 CFR part 170, subpart E, to 
the extent that such technology meets (or can be used to meet) the 
definition of CEHRT, including by permitting timely access to such 
technology and demonstrating its capabilities as implemented and used by 
the MIPS eligible clinician in the field.
    (B) Optionally, may also attest that he or she:
    (1) Acknowledges the option to cooperate in good faith with ONC-ACB 
surveillance of his or her health information technology certified under 
the ONC Health IT Certification Program if a request to assist in ONC-
ACB surveillance is received; and
    (2) If requested, cooperated in good faith with ONC-ACB surveillance 
of his or her health information technology certified under the ONC 
Health IT Certification Program as authorized by 45 CFR part 170, 
subpart E, to the extent that such technology meets (or can be used to 
meet) the definition of CEHRT, including by permitting timely access to 
such technology and demonstrating its capabilities as implemented and 
used by the MIPS eligible clinician in the field.
    (ii) Support for health information exchange and the prevention of 
information blocking. The MIPS eligible clinician must attest to CMS 
that he or she--
    (A) Did not knowingly and willfully take action (such as to disable 
functionality) to limit or restrict the compatibility or 
interoperability of certified EHR technology.
    (B) Implemented technologies, standards, policies, practices, and 
agreements reasonably calculated to ensure, to the greatest extent 
practicable and permitted by law, that the certified EHR technology was, 
at all relevant times--
    (1) Connected in accordance with applicable law;

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    (2) Compliant with all standards applicable to the exchange of 
information, including the standards, implementation specifications, and 
certification criteria adopted at 45 CFR part 170;
    (3) Implemented in a manner that allowed for timely access by 
patients to their electronic health information; and
    (4) Implemented in a manner that allowed for the timely, secure, and 
trusted bi-directional exchange of structured electronic health 
information with other health care providers (as defined by 42 U.S.C. 
300jj(3)), including unaffiliated providers, and with disparate 
certified EHR technology and health IT vendors.
    (C) Responded in good faith and in a timely manner to requests to 
retrieve or exchange electronic health information, including from 
patients, health care providers (as defined by 42 U.S.C. 300jj(3)), and 
other persons, regardless of the requestor's affiliation or technology 
vendor.



Sec. 414.1380  Scoring.

    (a) General. MIPS eligible clinicians are scored under MIPS based on 
their performance on measures and activities in four performance 
categories. MIPS eligible clinicians are scored against performance 
standards for each performance category and receive a final score, 
composed of their scores on individual measures and activities, and 
calculated according to the final score methodology.
    (1) Measures and activities in the four performance categories are 
scored against performance standards.
    (i) For the quality performance category, measures are scored 
between zero and 10 points. Performance is measured against benchmarks. 
Bonus points are available for both submitting specific types of 
measures and submitting measures using end-to-end electronic reporting.
    (ii) For the cost performance category, measures are scored between 
one and 10 points. Performance is measured against a benchmark.
    (iii) For the improvement activities performance category, each 
improvement activity is worth a certain number of points. The points for 
each reported activity are summed and scored against a total potential 
performance category score of 40 points.
    (iv) For the advancing care information performance category, the 
performance category score is the sum of a base score, performance 
score, and bonus score.
    (2) [Reserved]
    (b) Performance categories. MIPS eligible clinicians are scored 
under MIPS in four performance categories.
    (1) Quality performance category. For the 2017 performance period. 
MIPS eligible clinicians receive three to ten achievement points for 
each scored quality measure in the quality performance category based on 
the MIPS eligible clinician's performance compared to measure 
benchmarks. A MIPS quality measure must have a measure benchmark to be 
scored based on performance. MIPS quality measures that do not have a 
benchmark will not be scored based on performance. Instead, these 
measures will receive 3 points for the 2017 performance period.
    (i) Measure benchmarks are based on historical performance for the 
measure based on a baseline period. Each benchmark must have a minimum 
of 20 individual clinicians or groups who reported the measure meeting 
the data completeness requirement and minimum case size criteria and 
performance greater than zero. We will restrict the benchmarks to data 
from MIPS eligible clinicians and comparable APM data, including data 
from QPs and Partial QPs.
    (ii) As an exception, if there is no comparable data from the 
baseline period, CMS would use information from the performance period 
to create measure benchmarks, which would not be published until after 
the performance period. For the 2017 performance period, CMS would use 
information from CY 2017 during which MIPS eligible clinicians may 
report for a minimum of any continuous 90-day period.
    (A) CMS Web Interface submission uses benchmarks from the 
corresponding reporting year of the Shared Savings Program.
    (B) [Reserved]
    (iii) Separate benchmarks are used for the following submission 
mechanisms:

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    (A) EHR submission options;
    (B) QCDR and qualified registry submission options;
    (C) Claims submission options;
    (D) CMS Web Interface submission options;
    (E) CMS-approved survey vendor for CAHPS for MIPS submission 
options; and
    (F) Administrative claims submission options.
    (iv) Minimum case requirements for quality measures are 20 cases, 
unless a measure is subject to an exception.
    (v) As an exception, the minimum case requirements for the all-cause 
hospital readmission measure is 200 cases.
    (vi) MIPS eligible clinicians failing to report a measure required 
under this category receive zero points for that measure.
    (vii) MIPS eligible clinicians do not receive zero points if the 
expected measure is submitted but is unable to be scored because it does 
not meet the required case minimum or if the measure does not have a 
measure benchmark for MIPS payment year 2019. Instead, these measures as 
well as measures that are below the data completeness requirement 
receive a score of 3 points in MIPS payment year 2019.
    (viii) As an exception, the administrative claims-based measures and 
CMS Web Interface measures will not be scored if these measures do not 
meet the required case minimum. For CMS Web Interface measures, we will 
recognize the measure was submitted but exclude the measure from being 
scored. For CMS Web Interface measures: measures that do not have a 
measure benchmark will also not be scored, although we will recognize 
that the measure was submitted, and measures that are below the data 
completeness requirement receive 0 points.
    (ix) Measures submitted by MIPS eligible clinicians are scored using 
a percentile distribution, separated by decile categories.
    (x) For each set of benchmarks, CMS calculates the decile breaks for 
measure performance and assigns points based on which benchmark decile 
range the MIPS eligible clinician's measure rate is between.
    (xi) CMS assigns partial points based on the percentile 
distribution.
    (xii) MIPS eligible clinicians are required to submit measures 
consistent with Sec. 414.1335.
    (xiii) Bonus points are available for measures determined to be high 
priority measures when two or more high priority measures are reported.
    (A) Bonus points are not available for the first reported high 
priority measure which is required to be reported. To qualify for bonus 
points, each measure must be reported with sufficient case volume to the 
meet the required case minimum and the required data completeness 
criteria and does not have a zero percent performance rate, regardless 
of whether it is included in the calculation of the quality performance 
category score.
    (B) Outcome and patient experience measures receive two bonus 
points.
    (C) Other high priority measures receive one bonus point.
    (D) Bonus points for high priority measures cannot exceed 10 percent 
of the total possible points for MIPS payment year 2019 and 2020.
    (xiv) One bonus point is also available for each measure submitted 
with end-to-end electronic reporting for a quality measure under certain 
criteria determined by the Secretary. Bonus points cannot exceed 10 
percent of the total possible points for MIPS payment year 2019 and 
2020.
    (xv) A MIPS eligible clinician's quality performance category score 
is the sum of all the points assigned for the measures required for the 
quality performance category criteria plus the bonus points in paragraph 
(b)(1)(xiii) of this section and bonus points in paragraph (b)(1)(xiv) 
of this section. The sum is divided by the sum of total possible points. 
The quality performance category score cannot exceed the total possible 
points for the quality performance category.
    (2) Cost performance category. A MIPS eligible clinician receives 
one to ten achievement points for each cost measure attributed to the 
MIPS eligible clinician based on the MIPS eligible clinician's 
performance compared to the measure benchmark.
    (i) Cost measure benchmarks are based on the performance period. 
Cost

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measures must have a benchmark to be scored.
    (ii) A MIPS eligible clinician must meet the minimum case volume 
specified by CMS to be scored on a cost measure.
    (iii) A MIPS eligible clinician's cost performance category score is 
the equally-weighted average of all scored cost measures.
    (3) Improvement activities performance category. MIPS eligible 
clinicians and groups receive points for improvement activities based on 
patient-centered medical home or comparable specialty practice 
participation, APM participation, and improvement activities reported by 
the MIPS eligible clinician in comparison to the highest potential score 
(40 points) for a given MIPS year.
    (i) CMS assigns credit for the total possible category score for 
each reported improvement activity based on two weights: Medium-
weighted; and high-weighted activities.
    (ii) Improvement activities with a high weighting receive credit for 
20 points, toward the total possible category score.
    (iii) Improvement activities with a medium weighting receive credit 
for
    10 points toward the total possible category score.
    (iv) A MIPS eligible clinician or group in a practice that is 
certified as a patient-centered medical home or comparable specialty 
practice, as determined by the Secretary, receives full credit for 
performance on the improvement activities performance category. For 
purposes of this paragraph (b)(3)(iv), ``full credit'' means that the 
MIPS eligible clinician or group has met the highest potential score of 
40 points. A practice is certified as a patient-centered medical home if 
it meets any of the following criteria:
    (A) The practice has received accreditation from one of four 
accreditation organizations that are nationally recognized;
    (1) The Accreditation Association for Ambulatory Health Care;
    (2) The National Committee for Quality Assurance (NCQA);
    (3) The Joint Commission; or
    (4) The Utilization Review Accreditation Commission (URAC).
    (B) The practice is participating in a Medicaid Medical Home Model 
or Medical Home Model.
    (C) The practice is a comparable specialty practice that has 
received the NCQA Patient-Centered Specialty Recognition.
    (D) The practice has received accreditation from other certifying 
bodies that have certified a large number of medical organizations and 
meet national guidelines, as determined by the Secretary. The Secretary 
must determine that these certifying bodies must have 500 or more 
certified member practices, and require practices to include the 
following:
    (1) Have a personal physician/clinician in a team-based practice.
    (2) Have a whole-person orientation.
    (3) Provide coordination or integrated care.
    (4) Focus on quality and safety.
    (5) Provide enhanced access.
    (v) CMS compares the points associated with the reported activities 
against the highest potential category score of 40 points.
    (vi) A MIPS eligible clinician or group's improvement activities 
category score is the sum of points for all of their reported 
activities, which is capped at 40 points, divided by the highest 
potential category score of 40 points.
    (vii) Non-patient facing MIPS eligible clinicians and groups, small 
practices, and practices located in rural areas and geographic HPSAs 
receive full credit for improvement activities by selecting one high-
weighted improvement activity or two medium-weighted improvement 
activities. Non-patient facing MIPS eligible clinicians and groups, 
small practices, and practices located in rural areas and geographic 
HPSAs receive half credit for improvement activities by selecting one 
medium-weighted improvement activity.
    (viii) To receive full credit as a certified patient-centered 
medical home or comparable specialty practice requires that a TIN that 
is reporting includes at least one practice which is a certified 
patient-centered medical home or comparable specialty practice.
    (ix) MIPS eligible clinicians participating in APMs that are not 
patient-

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centered medical homes for a performance period shall earn a minimum 
score of one-half of the highest potential score for the improvement 
activities performance category.
    (4) Advancing care information performance category. (i) A MIPS 
eligible clinician's advancing care information performance category 
score equals the sum of the base score, performance score, Public Health 
and Clinical Data Registry bonus score and completing improvement 
activities using CEHRT bonus score. The advancing care information 
performance category score will not exceed 100 percentage points.
    (A) A MIPS eligible clinician earns a base score by reporting the 
numerator (of at least one) and denominator or yes/no statement or null 
value as applicable, for each required measure
    (B) A MIPS eligible clinician earns a performance score by reporting 
on certain measures specified by CMS. MIPS eligible clinicians may earn 
up to 10 or 20 percentage points as specified by CMS for each measure 
reported for the performance score.
    (C) A MIPS eligible clinician earn a bonus of five percentage points 
for reporting any measures beyond than the Immunization Registry 
Reporting measure for the Public Health and Clinical Data Registry 
objective.
    (D) A MIPS eligible clinician earns a bonus of 10 percentage points 
for attesting to completing one or more improvement activities specified 
by CMS using CEHRT.
    (ii) [Reserved]
    (c) Final score calculation. Each MIPS eligible clinician receives a 
final score of 0 to 100 points equal to the sum of each of the products 
of each performance category score and each performance category's 
assigned weight, multiplied by 100.
    (1) Performance category weights. Subject to CMS's authority to 
reweight, performance category weights under section 1848(q)(5)(F) of 
the Act:
    (i) Quality performance category weight is defined under 
Sec. 414.1330(b).
    (ii) Cost performance category weight is defined under 
Sec. 414.1350(b).
    (iii) Improvement activities performance category weight is defined 
under Sec. 414.1355(b).
    (iv) Advancing care information performance category weight is 
defined under Sec. 414.1375(a).
    (2) Reweighting the performance categories. If CMS determines there 
are not sufficient measures and activities applicable and available to 
MIPS eligible clinicians, CMS will assign weights to the performance 
categories that are different from the weights specified in 
Sec. 414.1380(c)(1).
    (d) Scoring for APM entities. MIPS eligible clinicians in APM 
Entities that are subject to the APM scoring standard are scored using 
the methodology under Sec. 414.1370.



Sec. 414.1385  Targeted review and review limitations.

    (a) Targeted review. MIPS eligible clinicians or groups may request 
a targeted review of the calculation of the MIPS payment adjustment 
factor under section 1848(q)(6)(A) of the Act and, as applicable, the 
calculation of the additional MIPS payment adjustment factor under 
section 1848(q)(6)(C) of the Act applicable to such MIPS eligible 
clinician or group for a year. The process for targeted reviews is:
    (1) MIPS eligible clinicians and groups have a 60-day period to 
submit a request for targeted review, which begins on the day CMS makes 
available the MIPS payment adjustment factor, and if applicable the 
additional MIPS payment adjustment factor, for the MIPS payment year and 
ends on September 30 of the year prior to the MIPS payment year or a 
later date specified by CMS.
    (2) CMS will respond to each request for targeted review timely 
submitted and determine whether a targeted review is warranted.
    (3) The MIPS eligible clinician or group may include additional 
information in support of their request for targeted review at the time 
the request is submitted. If CMS requests additional information from 
the MIPS eligible clinician or group, it must be provided and received 
by CMS within 30 days of the request. Non-responsiveness to the request 
for additional information may

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result in the closure of the targeted review request, although the MIPS 
eligible clinician or group may submit another request for targeted 
review before the deadline.
    (4) Decisions based on the targeted review are final, and there is 
no further review or appeal.
    (b) Limitations on review. Except as specified in paragraph (a)(4) 
of this section, there is no administrative or judicial review under 
section 1869 or 1879 of the Act, or otherwise of--
    (1) The methodology used to determine the amount of the MIPS payment 
adjustment factor and the amount of the additional MIPS payment 
adjustment factor and the determination of such amounts;
    (2) The establishment of the performance standards and the 
performance period;
    (3) The identification of measures and activities specified for a 
MIPS performance category and information made public or posted on the 
Physician Compare Internet Web site of the CMS; and
    (4) The methodology developed that is used to calculate performance 
scores and the calculation of such scores, including the weighting of 
measures and activities under such methodology.



Sec. 414.1390  Data validation and auditing.

    (a) General. CMS will selectively audit MIPS eligible clinicians and 
groups on a yearly basis. If a MIPS eligible clinician or group is 
selected for audit, the MIPS eligible clinician or group will be 
required to do the following in accordance with applicable law and 
timelines CMS establishes:
    (1) Comply with data sharing requests, providing all data as 
requested by CMS or our designated entity. All data must be shared with 
CMS or our designated entity within 45 days of the data sharing request, 
or an alternate timeframe that is agreed to by CMS and the MIPS eligible 
clinician or group. Data will be submitted via email, facsimile, or an 
electronic method via a secure Web site maintained by CMS.
    (2) Provide substantive, primary source documents as requested. 
These documents may include: Copies of claims, medical records for 
applicable patients, or other resources used in the data calculations 
for MIPS measures, objectives, and activities. Primary source 
documentation also may include verification of records for Medicare and 
non-Medicare beneficiaries where applicable.
    (b) [Reserved]



Sec. 414.1395  Public reporting.

    (a) Public reporting of a MIPS eligible clinician's MIPS data. For 
each program year, CMS will post on a public Web site, in an easily 
understandable format, information regarding the performance of MIPS 
eligible clinicians or groups under the MIPS.
    (b) [Reserved]



Sec. 414.1400  Third party data submission.

    (a) General. (1) MIPS data may be submitted by third party 
intermediaries on behalf of a MIPS eligible clinician or group by:
    (i) A qualified registry;
    (ii) A QCDR;
    (iii) A health IT vendor or other authorized third party that 
obtains data from a MIPS eligible clinician's CEHRT; or
    (iv) A CMS-approved survey vendor.
    (2) Qualified registries, QCDRs, and health IT vendors or other 
authorized third parties may submit data on measures, activities, or 
objectives for any of the following MIPS performance categories:
    (i) Quality;
    (ii) Improvement activities; or
    (iii) Advancing care information, if the MIPS eligible clinician or 
group is using CEHRT.
    (3) CMS-approved survey vendors may submit data for the CAHPS for 
MIPS survey under the MIPS quality performance category.
    (4) Third party intermediaries must meet all the criteria specified 
by CMS to qualify and be approved as a third party intermediary for 
purposes of MIPS, including, but not limited to, the following criteria:
    (i) For measures, activities, and objectives under the quality, 
advancing care information, and improvement activities performance 
categories, if the data is derived from CEHRT, the

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QCDR, qualified registry, or health IT vendor must be able to indicate 
its data source.
    (ii) All submitted data must be submitted in the form and manner 
specified by CMS.
    (b) QCDR self-nomination criteria. QCDRs must self-nominate, for the 
2017 performance period, from November 15, 2016 until January 15, 2017. 
For future years of the program, starting with the 2018 performance 
period, QCDRs must self-nominate from September 1 of the prior year 
until November 1 of the prior year. Entities that desire to qualify as a 
QCDR for the purposes of MIPS for a given performance period will need 
to self-nominate for that performance period and provide all information 
requested by CMS at the time of self-nomination. Having qualified as a 
QCDR does not automatically qualify the entity to participate in 
subsequent MIPS performance periods.
    (c) Establishment of a QCDR entity. For an entity to become 
qualified for a given performance period as a QCDR, the entity must:
    (1) Be in existence as of January 1 of the performance period for 
which the entity seeks to become a QCDR.
    (2) Have at least 25 participants by January 1 of the performance 
period.
    (d) Collaboration of entities to become a QCDR. In situations where 
an entity may not meet the criteria of a QCDR solely on its own but can 
do so in conjunction with another entity, the entity must also comply 
with the following:
    (1) An entity that uses an external organization for purposes of 
data collection, calculation, or transmission may meet the definition of 
a QCDR as long as the entity has a signed, written agreement that 
specifically details the relationship and responsibilities of the entity 
with the external organization effective as of September 1 the year 
prior to the year for which the entity seeks to become a QCDR.
    (2) [Reserved]
    (e) Identifying non-MIPS quality measures. For purposes of QCDRs 
submitting data for the MIPS quality performance category, CMS considers 
the following types of quality measures to be non-MIPS quality measures:
    (1) A measure that is not contained in the annual list of MIPS 
quality measures for the applicable performance period.
    (2) A measure that may be in the annual list of MIPS quality 
measures but has substantive differences, as determined by the 
Secretary, in the manner it is reported by the QCDR.
    (3) CAHPS for MIPS survey. Although the CAHPS for MIPS survey 
included in the MIPS measure set, we consider the changes that need to 
be made for reporting by individual MIPS eligible clinicians (and not as 
a part of a group) significant enough as to treat the CAHPS for MIPS 
survey as a non-MIPS quality measure for purposes of individual MIPS 
eligible clinicians reporting the CAHPS for MIPS survey via a QCDR.
    (f) QCDR measure specifications criteria. A QCDR must provide 
specifications for each measure, activity, or objective the QCDR intends 
to submit to CMS. The QCDR must provide CMS descriptions and narrative 
specifications for each measure, activity, or objective no later than 
January 15 of the applicable performance period for which the QCDR 
wishes to submit quality measures or other performance category 
(improvement activities and advancing care information) data. In future 
years, starting with the 2018 performance period, those specifications 
must be provided to CMS by no later than November 1 prior to the 
applicable performance period for which the QCDR wishes to submit 
quality measures or other performance category (improvement activities 
and advancing care information) data.
    (1) For non-MIPS quality measures, the quality measure 
specifications must include the following for each measure: Name/title 
of measures, NQF number (if NQF-endorsed), descriptions of the 
denominator, numerator, and when applicable, denominator exceptions, 
denominator exclusions, risk adjustment variables, and risk adjustment 
algorithms. The narrative specifications provided must be similar to the 
narrative specifications we provide in our measures list. CMS will 
consider all non-MIPS quality measures submitted by the QCDR but the 
measures

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must address a gap in care and outcome or other high priority measures 
are preferred. Documentation or ``check box'' measures are discouraged. 
Measures that have very high performance rates already or address 
extremely rare gaps in care (thereby allowing for little or no quality 
distinction between eligible clinicians) are also unlikely to be 
approved for inclusion.
    (2) For MIPS quality measures, the QCDR only needs to submit the 
MIPS measure numbers or specialty-specific measure sets (if applicable).
    (3) The QCDR must publicly post the measure specifications (no later 
than 15 days following CMS approval of the measure specifications) for 
each non-MIPS quality measure it intends to submit for MIPS. The QCDR 
may use any public format it prefers. Immediately following posting of 
the measures specification, the QCDR must provide CMS with the link to 
where this information is posted.
    (g) Qualified registry self-nomination criteria. Qualified 
registries must self-nominate, for the 2017 performance period from 
November 15, 2016 until January 15, 2017. For future years of the 
program, starting with the 2018 performance period, the qualified 
registry must self-nominate from September 1 of the prior year until 
November 1 of the prior year. Entities that desire to qualify as a 
qualified registry for a given performance period must self-nominate and 
provide all information requested by CMS at the time of self-nomination. 
Having qualified as a qualified registry does not automatically qualify 
the entity to participate in subsequent MIPS performance periods.
    (h) Establishment of a qualified registry entity. For an entity to 
become qualified for a given performance period as a qualified registry, 
the entity must:
    (1) Be in existence as of January 1 of the performance period for 
which the entity seeks to become a qualified registry.
    (2) Have at least 25 participants by January 1 of the performance 
period.
    (i) CMS-approved survey vendor application criteria. Vendors are 
required to undergo the CMS approval process for each year in which the 
survey vendor seeks to transmit survey measures data to CMS. All CMS-
approved survey vendor applications and materials will be due by April 
30 of the performance period.
    (j) Auditing of entities submitting MIPS data. Any third party 
intermediary (that is, a QCDR, health IT vendor, qualified registry, or 
CMS-approved survey vendor) must comply with the following procedures as 
a condition of their qualification and approval to participate in MIPS 
as a third party intermediary.
    (1) The entity must make available to CMS the contact information of 
each MIPS eligible clinician or group on behalf of whom it submits data. 
The contact information will include, at a minimum, the MIPS eligible 
clinician or group's practice phone number, address, and, if available, 
email.
    (2) The entity must retain all data submitted to CMS for MIPS for a 
minimum of 10 years.
    (3) For the purposes of auditing, CMS may request any records or 
data retained for the purposes of MIPS for up to 6 years and 3 months.
    (k) Probation and disqualification of a third party intermediary. 
(1) If at any time we determine that a third party intermediary (that 
is, a QCDR, health IT vendor, qualified registry, or CMS-approved survey 
vendor) has not met all of the applicable criteria for qualification and 
approval, CMS may place the third party intermediary on probation for 
the current performance period or the following performance period, as 
applicable.
    (2) For purposes of this section, probation means that, for the 
applicable performance period, the third party intermediary must meet 
all applicable criteria for qualification and approval and must submit a 
corrective action plan for remediation or correction of any deficiencies 
identified by CMS that resulted in the probation.
    (3) CMS requires a corrective action plan from the third party 
intermediary to address any deficiencies or issues and prevent them from 
recurring. The corrective action plan must be received and accepted by 
CMS within 14 days of the CMS notification to the third party 
intermediary of the deficiency or probation. If the corrective action 
plan is not received and accepted by CMS

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within the specified time, CMS may disqualify the third party 
intermediary from the MIPS program for the subsequent performance 
period.
    (4) If the third party intermediary has data inaccuracies including 
(but not limited to) TIN/NPI mismatches, formatting issues, calculation 
errors, data audit discrepancies affecting in excess of 3 percent (but 
less than 5 percent) of the total number of MIPS eligible clinicians or 
groups submitted by the third party intermediary, such inaccuracies will 
trigger paragraph (k)(3) of this section and may result in this 
information being posted on the CMS Web site.
    (5) If the third party intermediary does not reduce their data error 
rate below 3 percent for the subsequent performance period, the third 
party intermediary will continue to be on probation and have their 
listing on the CMS Web site continue to note the poor quality of the 
data they are submitting for MIPS for one additional year. After 2 years 
on probation, the third party intermediary will be disqualified for the 
subsequent performance period.
    (6) Before placing the third party intermediary on probation; CMS 
would notify the third party intermediary of the identified issues, at 
the time of discovery of such issues.
    (7) If the third party intermediary does not submit an acceptable 
corrective action plan within 14 days of notification of deficiencies, 
and correct the deficiencies within 30 days or before the submission 
deadline--whichever is sooner, CMS may disqualify the third party 
intermediary from participating in MIPS for the current performance 
period or the following performance period, as applicable.



Sec. 414.1405  Payment.

    (a) General. Each MIPS eligible clinician receives a MIPS payment 
adjustment factor, and if applicable an additional MIPS payment 
adjustment factor for exceptional performance, for a MIPS payment year 
determined by comparing their final score to the performance threshold 
and additional performance threshold for the year.
    (b) Performance threshold. A performance threshold will be specified 
for each MIPS payment year.
    (1) MIPS eligible clinicians with a final score at or above the 
performance threshold receive a zero or positive MIPS payment adjustment 
factor on a linear sliding scale such that an adjustment factor of 0 
percent is assigned for a final score at the performance threshold and 
an adjustment factor of the applicable percent is assigned for a final 
score of 100.
    (2) MIPS eligible clinicians with a final score below the 
performance threshold receive a negative MIPS payment adjustment factor 
on a linear sliding scale such that an adjustment factor of 0 percent is 
assigned for a final score at the performance threshold and an 
adjustment factor of the negative of the applicable percent is assigned 
for a final score of 0; further, MIPS eligible clinicians with final 
scores that are equal to or greater than zero, but not greater than one-
fourth of the performance threshold, receive a negative MIPS payment 
adjustment factor that is equal to the negative of the applicable 
percent.
    (3) A scaling factor not to exceed 3.0 may be applied to positive 
MIPS payment adjustment factors to ensure budget neutrality such that 
the estimated increase in aggregate allowed charges resulting from the 
application of the positive MIPS payment adjustment factors for the MIPS 
payment year equals the estimated decrease in aggregate allowed charges 
resulting from the application of negative MIPS payment adjustment 
factors for the MIPS payment year.
    (c) Applicable percent. For MIPS payment year 2019, 4 percent. For 
MIPS payment year 2020, 5 percent. For MIPS payment year 2021, 7 
percent. For MIPS payment year 2022 and each subsequent MIPS payment 
year, 9 percent.
    (d) Additional performance threshold. An additional performance 
threshold will be specified for each of the MIPS payment years 2019 
through 2024.
    (1) In addition to the MIPS payment adjustment factor, MIPS eligible 
clinicians with a final score at or above the additional performance 
threshold receive an additional MIPS payment adjustment factor for 
exceptional performance on a linear sliding scale such that an 
additional adjustment factor of 0.5 percent is assigned for a final 
score

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at the additional performance threshold and an additional adjustment 
factor of 10 percent is assigned for a final score of 100, subject to 
the application of a scaling factor as determined by CMS, such that the 
estimated aggregate increase in payments resulting from the application 
of the additional MIPS payment adjustment factors for the MIPS payment 
year shall not exceed $500,000,000 for each of the MIPS payment years 
2019 through 2024.
    (2) [Reserved]
    (e) Application of adjustments to payments. For each MIPS payment 
year, the MIPS payment adjustment factor, and if applicable the 
additional MIPS payment adjustment factor, are applied to Medicare Part 
B payments for items and services furnished by the MIPS eligible 
clinician during the year.



Sec. 414.1410  Advanced APM determination.

    (a) General. An APM is an Advanced APM for a payment year if CMS 
determines that it meets the criteria in Sec. 414.1415 during the QP 
Performance Period.
    (b) Advanced APM and Other Payer Advanced APM determination process. 
CMS identifies Advanced APMs and Other Payer Advanced APMs in the 
following manner:
    (1) Advanced APM determination. (i) No later than January 1, 2017, 
CMS will post on its Web site a list of all Advanced APMs for the first 
QP Performance Period.
    (ii) CMS updates the Advanced APM list on its Web site at intervals 
no less than annually.
    (iii) CMS will include notice of whether a new APM is an Advanced 
APM in the first public notice of the new APM.
    (2) Other Payer Advanced APM determination. (i) CMS identifies Other 
Payer Advanced APMs following conclusion of the QP Performance Period 
using information submitted to CMS according to Sec. 414.1445. CMS will 
not make determinations for other payer arrangements for which 
insufficient information is submitted.
    (ii) CMS makes Other Payer Advanced APM determinations prior to QP 
determinations under Sec. 414.1440.
    (iii) CMS makes final Other Payer Advanced APM determinations and 
notifies Advanced APM Entities and eligible clinicians of such 
determinations as soon as practicable.



Sec. 414.1415  Advanced APM criteria.

    (a) Use of certified electronic health record technology (CEHRT)--
(1) Required use of CEHRT. To be an Advanced APM, an APM must:
    (i) Require at least 50 percent of eligible clinicians in each 
participating APM Entity group, or, for APMs in which hospitals are the 
APM Entities, each hospital, to use CEHRT to document and communicate 
clinical care to their patients or other health care providers; or
    (ii) For the Shared Savings Program, apply a penalty or reward to an 
APM Entity based on the degree of the use of CEHRT of the eligible 
clinicians in the APM Entity.
    (b) Payment based on quality measures. (1) To be an Advanced APM, an 
APM must include quality measure results as a factor when determining 
payment to participants under the terms of the APM.
    (2) At least one of the quality measures upon which an Advanced APM 
bases the payment in paragraph (b)(1) of this section must have an 
evidence-based focus, be reliable and valid, and meet at least one of 
the following criteria:
    (i) Used in the MIPS quality performance category as described in 
Sec. 414.1330;
    (ii) Endorsed by a consensus-based entity;
    (iii) Developed under section 1848(s) of the Act;
    (iv) Submitted in response to the MIPS Call for Quality Measures 
under section 1848(q)(2)(D)(ii) of the Act; or
    (v) Any other quality measures that CMS determines to have an 
evidence-based focus and to be reliable and valid.
    (3) In addition to the quality measure requirements under paragraph 
(b)(2) of this section, the quality measures upon which an Advanced APM 
bases the payment in paragraph (b)(1) of this section must include at 
least one outcome measure. This requirement does not apply if CMS 
determines that there are no available or applicable outcome

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measures included in the MIPS quality measures list for the Advanced 
APM's first QP Performance Period.
    (c) Financial risk. To be an Advanced APM, an APM must either meet 
the financial risk standard under paragraph (d)(1) or (2) of this 
section and the nominal amount standard under paragraph (d)(3) or (4) of 
this section or be an expanded Medical Home Model under section 1115A(c) 
of the Act.
    (1) Generally applicable financial risk standard. Except for 
paragraph (c)(2) of this section, to be an Advanced APM, an APM must, 
based on whether an APM Entity's actual expenditures for which the APM 
Entity is responsible under the APM exceed expected expenditures during 
a specified QP Performance Period, do one or more of the following:
    (i) Withhold payment for services to the APM Entity or the APM 
Entity's eligible clinicians;
    (ii) Reduce payment rates to the APM Entity or the APM Entity's 
eligible clinicians; or
    (iii) Require the APM Entity to owe payment(s) to CMS.
    (2) Medical Home Model financial risk standard. The following 
standard applies only for APM Entities that are participating in Medical 
Home Models, and, starting in the 2018 QP Performance Period, such APM 
Entities must be owned and operated by an organization with fewer than 
50 eligible clinicians whose Medicare billing rights have been 
reassigned to the TIN(s) of the organization(s) or any of the 
organization's subsidiary entities. The APM Entity participates in a 
Medical Home Model that, based on the APM Entity's failure to meet or 
exceed one or more specified performance standards, which may include 
expected expenditures, does one or more of the following:
    (i) Withholds payment for services to the APM Entity or the APM 
Entity's eligible clinicians;
    (ii) Reduces payment rates to the APM Entity or the APM Entity's 
eligible clinicians;
    (iii) Requires the APM Entity to owe payment(s) to CMS; or
    (iv) Causes the APM Entity to lose the right to all or part of an 
otherwise guaranteed payment or payments.
    (3) Generally applicable nominal amount standard. (i) Except as 
provided in paragraph (c)(4) of this section, the total amount an APM 
Entity potentially owes CMS or foregoes under an APM must be at least 
equal to either:
    (A) For QP Performance Periods 2017 and 2018, 8 percent of the 
estimated average total Medicare Parts A and B revenues of participating 
APM Entities; or
    (B) 3 percent of the expected expenditures for which an APM Entity 
is responsible under the APM.
    (ii) [Reserved]
    (4) Medical Home Model nominal amount standard. (i) For a Medical 
Home Model to be an Advanced APM, the total annual amount that an 
Advanced APM Entity potentially owes CMS or foregoes must be at least 
the following amounts:
    (A) For QP Performance Period 2017, 2.5 percent of the estimated 
average total Medicare Parts A and B revenues of participating APM 
Entities.
    (B) For QP Performance Period 2018, 3 percent of the estimated 
average total Medicare Parts A and B revenues of participating APM 
Entities;
    (C) For QP Performance Period 2019, 4 percent of the estimated 
average total Medicare Parts A and B revenues of participating APM 
Entities.
    (D) For QP Performance Period 2020 and later, 5 percent of the 
estimated average total Medicare Parts A and B revenues of participating 
APM Entities.
    (5) Expected expenditures. For the purposes of this section, 
expected expenditures is defined as the beneficiary expenditures for 
which an APM Entity is responsible under an APM. For episode payment 
models, expected expenditures mean the episode target price.
    (6) Capitation. A full capitation arrangement meets this Advanced 
APM criterion. For purposes of this part, a capitation arrangement means 
a payment arrangement in which a per capita or otherwise predetermined 
payment is made under the APM for all items and services for which 
payment is made through the APM furnished to a population of 
beneficiaries, and no settlement is performed to reconcile or share 
losses incurred or savings earned

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by the APM Entity. Arrangements between CMS and Medicare Advantage 
Organizations under the Medicare Advantage program (42 U.S.C. 422) are 
not considered capitation arrangements for purposes of this paragraph.



Sec. 414.1420  Other payer advanced APMs.

    (a) Other Payer Advanced APM criteria. A payment arrangement with a 
payer other than Medicare is an Other Payer Advanced APM for a QP 
Performance Period if CMS determines that the arrangement meets the 
following criteria during the QP Performance Period:
    (1) Use of CEHRT, as described in paragraph (b) of this section;
    (2) Quality measures comparable to measures under the MIPS quality 
performance category apply, as described in paragraph (c) of this 
section; and
    (3) Either:
    (i) Requires APM Entities to bears more than nominal financial risk 
if actual aggregate expenditures exceed expected aggregate expenditures, 
as described in paragraph (d) of this section; or
    (ii) Is a Medicaid Medical Home Model that meets criteria comparable 
to Medical Home Models expanded under section 1115A(c) of the Act, as 
described in paragraph (d)(3) of this section.
    (b) Use of CEHRT. To be an Other Payer Advanced APM, an other payer 
arrangement must require participants to use CEHRT as defined in 
Sec. 414.1305. The other payer arrangement must require at least 50 
percent of eligible clinicians in each participating APM Entity group, 
or each hospital if hospitals are the APM Entities, to use CEHRT to 
document and communicate clinical care.
    (c) Quality measure use. (1) To be an Other Payer Advanced APM, a 
payment arrangement must apply quality measures comparable to measures 
under the MIPS quality performance category, as described in paragraph 
(c)(2) of this section.
    (2) At least one of the quality measures used in the payment 
arrangement with an APM Entity must have an evidence-based focus, be 
reliable and valid, and meet at least one of the following criteria:
    (i) Used in the MIPS quality performance category, as described in 
Sec. 414.1330;
    (ii) Endorsed by a consensus-based entity;
    (iii) Developed under section 1848(s) of the Act;
    (iv) Submitted in response to the MIPS Call for Quality Measures 
under section 1848(q)(2)(D)(ii) of the Act; or
    (v) Any other quality measures that CMS determines to have an 
evidence-based focus and to be reliable and valid.
    (3) To meet the quality measure use criterion, an other payment 
arrangement must use an outcome measure if there is an applicable 
outcome measure on the MIPS quality measure list. If an Other Payer 
Advanced APM has no outcome measure, the Advanced APM Entity must attest 
that there is no applicable outcome measure on the MIPS list.
    (d) Other Payer Advanced APM financial risk. To be an Other Payer 
Advanced APM, an other payer arrangement must meet either the financial 
risk standard under paragraph (d)(1) or (2) of this section and the 
nominal risk standard under paragraph (d)(3) or (4) of this section, 
make payment using a full capitation arrangement under paragraph (d)(6) 
of this section, or be a Medicaid Medical Home Model that meets criteria 
comparable to an expanded Medical Home Model under section 1115A(c) of 
the Act.
    (1) Other Payer Advanced APM financial risk standard. Except for APM 
Entities to which paragraph (d)(2) of this section applies, to be an 
Other Payer Advanced APM, an APM Entity must, based on whether an APM 
Entity's actual expenditures for which the APM Entity is responsible 
under the APM exceed expected expenditures during a specified 
performance period do one or more of the following:
    (i) Withhold payment for services to the APM Entity or the APM 
Entity's eligible clinicians;
    (ii) Reduce payment rates to the APM Entity or the APM Entity's 
eligible clinicians; or
    (iii) Require direct payment by the APM Entity to the payer.

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    (2) Medicaid Medical Home Model financial risk standard. For an APM 
Entity owned and operated by an organization with fewer than 50 eligible 
clinicians whose Medicare billing rights have been reassigned to the 
TIN(s) of the organization(s) or any of the organization's subsidiary 
entities, the following standard applies. The APM Entity participates in 
a Medicaid Medical Home Model that, based on the APM Entity's failure to 
meet or exceed one or more specified performance standards, does one or 
more of the following:
    (i) Withhold payment for services to the APM Entity or the APM 
Entity's eligible clinicians;
    (ii) Require direct payment by the APM Entity to the Medicaid 
program;
    (iii) Reduce payment rates to the APM Entity or the APM Entity's 
eligible clinicians; or
    (iv) Require the APM Entity to lose the right to all or part of an 
otherwise guaranteed payment or payments.
    (3) Other Payer Advanced APM nominal amount standard. (i) Except for 
risk arrangements described under paragraph (d)(2) of this section, the 
total amount an APM Entity potentially owes us or foregoes under an 
Other Payer Advanced APM is at least be equal to 3 percent of the 
expected expenditures for which an APM Entity is responsible under the 
payment arrangement.
    (ii) Except for risk arrangements described under paragraph (d)(2) 
of this section, the risk arrangement must have:
    (A) A marginal risk rate of at least 30 percent; and
    (B) Total potential risk of at least 4 percent of expected 
expenditures.
    (4) Medicaid Medical Home Model nominal amount standard. For an APM 
Entity owned and operated by an organization with fewer than 50 eligible 
clinicians whose Medicare billing rights have been reassigned to the 
TIN(s) of the organization(s) or any of the organization's subsidiary 
entities, the following standard applies. For a Medicaid Medical Home 
Model to be an Other Payer Advanced APM, the total annual amount that an 
Advanced APM Entity potentially owes CMS or foregoes must be at least 
the following amounts:
    (i) For QP Performance Period 2019, 4 percent of the estimated 
average total revenue of participating APM Entities from the payer.
    (ii) For QP Performance Period 2020 and later, 5 percent of the 
estimated average total revenue of participating APM Entities for the 
payer.
    (5) Marginal risk rate. For purposes of this section, the marginal 
risk rate is defined as the percentage of actual expenditures that 
exceed expected expenditures for which an APM Entity is responsible 
under an APM.
    (i) In the event that the marginal risk rate varies depending on the 
amount by which actual expenditures exceed expected expenditures, the 
lowest marginal risk rate across all possible levels of actual 
expenditures would be used for comparison to the marginal risk rate 
specified in paragraph (d)(3)(ii)(A) of this section, with exceptions 
for large losses as described in paragraph (d)(5)(ii) of this section 
and small losses as described in paragraph (d)(5)(iii) of this section.
    (ii) Allowance for large losses. The determination in paragraph 
(d)(3)(ii)(A) of this section may disregard the marginal risk rates that 
apply in cases when actual expenditures exceed expected expenditures by 
an amount sufficient to require the APM Entity to make financial risk 
payments under the Other Payer Advanced APM greater than or equal to the 
total risk requirement under paragraph (d)(3)(i) of this section.
    (iii) Allowance for minimum loss rate. The determination in 
paragraph (d)(3)(ii)(A) of this section may disregard the marginal risk 
rates that apply in cases when actual expenditures exceed expected 
expenditures by less than 4 percent of expected expenditures.
    (6) Expected expenditures. For the purposes of this section, 
expected expenditures is defined as the Other Payer Advanced APM 
benchmark, except for episode payment models, for which it is defined as 
the episode target price.
    (7) Capitation. A capitation arrangement meets this Other Payer 
Advanced APM criterion. For purposes of paragraph (d)(3) of this 
section, a capitation arrangement means a payment arrangement in which a 
per capita or

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otherwise predetermined payment is made under the APM for all items and 
services for which payment is made through the APM furnished to a 
population of beneficiaries, and no settlement is performed for the 
purpose of reconciling or sharing losses incurred or savings earned by 
the APM Entity. Arrangements made directly between CMS and Medicare 
Advantage Organizations under the Medicare Advantage program (42 U.S.C. 
422) are not considered capitation arrangements for purposes of this 
paragraph.



Sec. 414.1425  Qualifying APM participant determination: In general.

    (a) List used for QP determination. (1) For Advanced APMs with 
Advanced APM Entities that include eligible clinicians on a 
Participation List, the Participation List defines the APM Entity group, 
regardless of whether the Advanced APM Entity also has eligible 
clinicians on an Affiliated Practitioner List.
    (2) For Advanced APMs with Advanced APM Entities that do not include 
eligible clinicians on a Participation List but do include eligible 
clinicians on an Affiliated Practitioner List, the Affiliated 
Practitioner List defines the eligible clinicians who will be assessed 
to become QPs.
    (3) For Advanced APMs with some Advanced APM Entities that include 
eligible clinicians on a Participation List and other Advanced APM 
Entities that only include eligible clinicians on an Affiliated 
Practitioner List, paragraph (a)(1) applies to APM Entities that include 
eligible clinicians on a Participation List, and paragraph (a)(2) 
applies to APM Entities that only include eligible clinicians on an 
Affiliated Practitioner List.
    (b) Group or individual determination--(1) APM Entity group 
determination. Except for Sec. 414.1445 and paragraph (b)(2) of this 
section, for purposes of the QP determinations for a year, eligible 
clinicians are grouped and assessed through their collective 
participation in an APM Entity group that is in an Advanced APM. To be 
included in the APM Entity group for purposes of the QP determination, 
an eligible clinician's APM participant identifier must be present on a 
Participation List of an APM Entity group on one of the dates: March 31, 
June 30, or August 31 of the QP Performance Period. An eligible 
clinician included on a Participation List on any one of these dates is 
included the APM Entity group even if that eligible clinician is not 
included on that Participation List at one of the prior or later listed 
dates. CMS performs QP determinations for the eligible clinicians in APM 
Entity group three times during the QP Performance Period using claims 
data for services furnished from January 1 through each of the 
respective QP determination dates: March 31, June 30, and August 31. An 
eligible clinician can only be determined to be a QP if the eligible 
clinician appears on the Participation List on a date (March 31, June 
30, or August 31) CMS uses to determine the APM Entity group and to make 
QP determinations collectively for the APM Entity group based on 
participation in the Advanced APM.
    (2) Affiliated practitioner individual determination. When the 
Affiliated Practitioner List defines the eligible clinicians to be 
assessed, for purposes of the QP determinations for a year, those 
eligible clinicians are assessed individually. To be assessed as an 
Affiliated Practitioner, an eligible clinician must be identified on an 
Affiliated Practitioner List on one of the dates: March 31, June 30, or 
August 31 of the QP Performance Period. An eligible clinician included 
on an Affiliated Practitioner List on any one of these dates is assessed 
as an Affiliated Practitioner even if that eligible clinician is not 
included on that Affiliated Practitioner List at one of the prior or 
later listed dates. For such eligible clinicians, CMS performs QP 
determinations during the QP Performance Period using claims data for 
services furnished from January 1 through each of the respective QP 
determination dates that the eligible clinician is on the Affiliated 
Practitioner List: March 31, June 30, and August 31.
    (c) QP determination. (1) CMS makes QP determinations as set forth 
in Secs. 414.1435 and 414.1440.
    (2) An eligible clinician cannot be both a QP and a Partial QP for a 
year.

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A determination that an eligible clinician is a QP means that the 
eligible clinician is not a Partial QP.
    (3) An eligible clinician is a QP for a year if the eligible 
clinician is in an APM Entity group that achieves a Threshold Score that 
meets or exceeds the corresponding QP payment amount threshold or QP 
patient count threshold for that QP Performance Period, as described in 
Sec. 414.1430(a)(1) and (3) and (b)(1) and (3).
    (4) Notwithstanding paragraph (c)(3) of this section, an eligible 
clinician is a QP for a year if:
    (i) The eligible clinician is included in more than one Advanced APM 
Entity group and none of the Advanced APM Entity groups in which the 
eligible clinician is included meets the QP payment amount threshold or 
the QP patient count threshold, or the eligible clinician is an 
Affiliated Practitioner; and
    (ii) CMS determines that the eligible clinician individually 
achieves a Threshold Score that meets or exceeds the QP payment amount 
threshold or the QP patient count threshold.
    (5) Notwithstanding paragraph (c)(3) of this section, an eligible 
clinician is not a QP for a year if the APM Entity group voluntarily or 
involuntarily terminates from an Advanced APM before the end of the QP 
Performance Period.
    (6) Notwithstanding paragraph (c)(4) of this section, an eligible 
clinician is not a QP for a year if any of the Advanced APM Entities in 
which the eligible clinician participates voluntarily or involuntarily 
terminates from the Advanced APM before the end of the QP Performance 
Period.
    (d) Partial QP determination. (1) An eligible clinician is a Partial 
QP for a year if the APM Entity group collectively achieves a Threshold 
Score that meets or exceeds the corresponding Partial QP threshold for 
that year, as described in Sec. 414.1430(a)(2) and (4) and (b)(2) and 
(4).
    (2) Notwithstanding paragraph (d)(1) of this section, an eligible 
clinician is a Partial QP for a year if:
    (i) The eligible clinician is included in more than one APM Entity 
group and none of the APM Entity groups in which the eligible clinician 
is included meets the corresponding QP or Partial QP threshold, or the 
eligible clinician is an Affiliated Practitioner; and
    (ii) CMS determines that the eligible clinician individually 
achieves a Threshold Score that meets or exceeds the corresponding 
Partial QP Threshold.
    (3) Notwithstanding paragraph (d)(1) of this section, an eligible 
clinician is not a Partial QP for a year if the APM Entity group 
voluntarily or involuntarily terminates from an Advanced APM before the 
end of the QP Performance Period.
    (4) Notwithstanding paragraph (d)(2) of this section, an eligible 
clinician is not a Partial QP for a year if any of the Advanced APM 
Entities in which the eligible clinician participates voluntarily or 
involuntarily terminates from the Advanced APM before the end of the QP 
Performance Period.
    (e) Notification of QP determination. CMS notifies eligible 
clinicians determined to be QPs or Partial QPs for a year as soon as 
practicable following each QP determination date in the QP Performance 
Period.
    (f) Order of threshold options. (1) For payment years 2019 and 2020, 
CMS performs QP determinations for an eligible clinicians only under the 
Medicare Option described in Sec. 414.1435.
    (2) For payment years 2021 and later, CMS performs QP determinations 
for eligible clinicians under the Medicare Option, as described in 
Sec. 414.1435 and, except as specified in paragraphs (d)(2)(i) and (ii) 
of this section, the All-Payer Combination Option, described in 
Sec. 414.1440.
    (i) If CMS determines the eligible clinician to be a QP under the 
Medicare Option, then CMS does not calculate a Threshold Score for such 
eligible clinician under the All-Payer Combination Option.
    (ii) If the Threshold Score for an eligible clinician under the 
Medicare Option is less than the amount specified in 
Sec. 414.1430(b)(2)(ii) and (b)(3)(iii), then CMS does not perform a QP 
determination for such eligible clinician(s) under the All-Payer 
Combination Option.

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Sec. 414.1430  Qualifying APM participant determination: 
QP and partial QP thresholds.

    (a) Medicare Option--(1) QP payment amount threshold. The QP payment 
amount thresholds are the following values for the indicated payment 
years:
    (i) 2019 and 2020: 25 percent.
    (ii) 2021 and 2022: 50 percent.
    (iii) 2023 and later: 75 percent.
    (2) Partial QP payment amount threshold. The Partial QP payment 
amount thresholds are the following values for the indicated payment 
years:
    (i) 2019 and 2020: 20 percent.
    (ii) 2021 and 2022: 40 percent.
    (ii) 2023 and later: 50 percent.
    (3) QP patient count threshold. The QP patient count thresholds are 
the following values for the indicated payment years:
    (i) 2019 and 2020: 20 percent
    (ii) 2021 and 2022: 35 percent
    (ii) 2023 and later: 50 percent
    (4) Partial QP patient count threshold. The Partial QP patient count 
thresholds are the following values for the indicated payment years:
    (i) 2019 and 2020: 10 percent
    (ii) 2021 and 2022: 25 percent
    (iii) 2023 and later: 35 percent
    (b) All-Payer Combination Option--(1) QP payment amount threshold.
    (i) The QP payment amount thresholds are the following values for 
the indicated payment years:
    (A) 2021 and 2022: 50 percent.
    (B) 2023 and later: 75 percent.
    (ii) To meet the QP payment amount threshold under this option, the 
eligible clinician must also meet a 25 percent QP payment amount 
threshold under the Medicare Option.
    (2) Partial QP payment amount threshold. (i) The Partial QP payment 
amount thresholds are the following values for the indicated payment 
years:
    (A) 2021 and 2022: 40 percent.
    (B) 2023 and later: 50 percent.
    (ii) To meet the QP payment amount threshold under this option, the 
eligible clinician must also meet a 20 percent Partial QP payment amount 
threshold under the Medicare Option.
    (3) QP patient count threshold. (i) The QP patient count thresholds 
are the following values for the indicated payment years:
    (A) 2021 and 2022: 35 percent.
    (B) 2023 and later: 50 percent.
    (ii) To meet the QP patient count threshold under this option, the 
eligible clinician must also meet a 20 percent QP patient count 
threshold under the Medicare Option.
    (4) Partial QP patient count threshold. (i) The Partial QP patient 
count thresholds are the following values for the indicated payment 
years:
    (A) 2021 and 2022: 25 percent.
    (B) 2023 and later: 35 percent.
    (ii) To meet the Partial QP patient count threshold under this 
option, the eligible clinician group or eligible clinician must also 
meet a 10 percent QP patient count threshold under the Medicare Option.



Sec. 414.1435  Qualifying APM participant determination: Medicare option.

    (a) Payment amount method. The Threshold Score for an Advanced APM 
Entity group or eligible clinician is calculated as a percent by 
dividing the value described under paragraph (a)(1) of this section by 
the value described under paragraph (a)(2) of this section.
    (1) Numerator. The aggregate of payments for Medicare Part B covered 
professional services furnished by the Advanced APM Entity group to 
attributed beneficiaries during the QP Performance Period.
    (2) Denominator. The aggregate of payments for Medicare Part B 
covered professional services furnished by the APM Entity group to all 
attribution-eligible beneficiaries during the QP Performance Period.
    (3) Claims and adjustments. In the calculations under paragraphs 
(a)(1) and (2) of this section, CMS compiles claims and treats claims 
adjustments, supplemental service payments, and alternative payment 
methods in the same manner as described in Sec. 414.1450.
    (b) Patient count method. The Threshold Score for each eligible 
clinician in an APM Entity group is calculated as a percent under the 
patient count method by dividing the value described under paragraph 
(b)(1) of this section by the value described under paragraph (b)(2) of 
this section.
    (1) Numerator. The number of attributed beneficiaries to whom the 
Advanced APM Entity group furnishes Medicare Part B covered professional

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services or services by a Rural Health Clinic (RHC) or Federally-
Qualified Health Center (FQHC) during the QP Performance Period.
    (2) Denominator. The number of attribution-eligible beneficiaries to 
whom the APM Entity group or eligible clinician furnish Medicare Part B 
covered professional services or services by a Rural Health Clinic (RHC) 
or Federally-Qualified Health Center (FQHC) during the QP Performance 
Period.
    (3) Unique beneficiaries. For each Advanced APM Entity group, a 
unique Medicare beneficiary is counted no more than one time for the 
numerator and no more than one time for the denominator.
    (4) Beneficiaries count multiple times. Based on attribution under 
the terms of an Advanced APM, a single Medicare beneficiary may be 
counted in the numerator or denominator for multiple different Advanced 
APM Entity groups.
    (c) Attribution. (1) Attributed beneficiaries are determined from 
Advanced APM attributed beneficiary lists generated by each Advanced 
APM's specific attribution methodology.
    (2) When operationally feasible, this attributed beneficiary list 
will be the final beneficiary list used for reconciliation purposes in 
the Advanced APM.
    (3) When it is not operationally feasible to use the final 
attributed beneficiary list, the attributed beneficiary list will be 
taken from the Advanced APM's most recently available attributed 
beneficiary list at the end of the QP Performance Period.
    (d) Use of methods. CMS calculates Threshold Scores for an Advanced 
APM Entity under both the payment amount and patient count methods for 
each QP Performance Period. CMS then assigns the score to the eligible 
clinicians included in the Advanced APM Entity that results in the 
greater QP status. QP status is greater than a Partial QP status, which 
is greater than no QP status.



Sec. 414.1440  Qualifying APM participant determination: 
All-payer combination option.

    (a) Payments excluded from calculations. (1) These calculations 
include a combination of both Medicare payments for Part B covered 
professional services and all other payments for all other payers, 
except for payments made by:
    (i) The Secretary of Defense for the costs of Department of Defense 
health care programs;
    (ii) The Secretary of Veterans Affairs for the cost of Department of 
Veterans Affairs health care programs; and
    (iii) Under Title XIX in a State in which no Medicaid Medical Home 
Model or APM is available.
    (2) Title XIX payments will only be included in the numerator and 
denominator as specified in paragraphs (b)(2) and (3) of this section 
for an Advanced APM Entity if:
    (i) A State has at least one Medicaid Medical Home Model or Medicaid 
APM in operation that is determined to be an Other Payer Advanced APM; 
and
    (ii) The Advanced APM Entity is eligible to participate in at least 
one of such Other Payer Advanced APMs during the QP Performance Period, 
regardless of whether the Advanced APM Entity actually participates in 
such Other Payer Advanced APMs. This will apply to both the payment 
amount and patient count methods.
    (b) Payment amount method--(1) In general. The Threshold Score for 
an Advanced APM Entity group or eligible clinician will be calculated by 
dividing the value described under the numerator by the value described 
under the denominator as specified in paragraphs (b)(2) and (3) of this 
section.
    (2) Numerator. The aggregate amount of all payments from all payers, 
except those excluded under paragraph (a) of this section, to the 
Advanced APM Entity group or eligible clinician under the terms of Other 
Payer Advanced APMs during the QP Performance Period. CMS calculates 
Medicare Part B covered professional services under the All-Payer 
Combination Option in the same manner as it is calculated under the 
Medicare Option.
    (3) Denominator. The aggregate amount of all payments from all 
payers, except those excluded under paragraph (a) of this section, to 
the Advanced APM Entity group during the QP Performance Period. The 
portion of this amount that relates to Medicare Part B covered 
professional services is

[[Page 181]]

calculated under the All-Payer Combination Option in the same manner as 
it is calculated under the Medicare Option.
    (c) Patient count method--(1) In general. The Threshold Score for an 
Advanced APM Entity group or eligible clinician is calculated by 
dividing the value described under the numerator by the value described 
under the denominator as specified in paragraphs (c)(2) and (3) of this 
section).
    (2) Numerator. The number of unique patients to whom the Advanced 
APM Entity group or eligible clinician furnishes services that are 
included in the measures of aggregate expenditures used under the terms 
of all of their Other Payer Advanced APMs during the QP Performance 
Period, plus the patient count numerator specified in paragraph (a)(1) 
of this section.
    (3) Denominator. The number of unique patients to whom eligible 
clinicians in the Advanced APM Entity group furnish services under all 
non-excluded payers during the QP Performance Period.
    (d) Participation in multiple Other Payer Advanced APMs. (1) For 
each APM Entity group or eligible clinician, a unique patient is counted 
no more than one time for the numerator and no more than one time for 
the denominator for each payer.
    (2) CMS may count a single patient in the numerator and/or 
denominator for multiple different Advanced APM Entities or eligible 
clinicians.
    (3) For purposes of this section, Advanced APM Entities are 
considered the same entity across Other Payer Advanced APMs if CMS 
determines that the Participation Lists are substantially similar or if 
one entity is a subset of the other.



Sec. 414.1445  Identification of other payer advanced APMs.

    (a) Identification of Medicaid APMs. CMS will make an annual 
determination prior to the QP Performance Period to identify Medicaid 
Medical Home Models and Medicaid APMs.
    (b) Data used to calculate the Threshold Score under the All-Payer 
Combination Option. To be assessed under the All-Payer Combination 
Option, APM Entities or eligible clinicians must submit the following 
information for each other payment arrangement in a manner and by a date 
specified by CMS:
    (1) Payment arrangement information necessary to assess the other 
payer arrangement on all Other Payer Advanced APM criteria under 
Sec. 414.1420;
    (2) For each other payment arrangement, the amount of revenues for 
services furnished through the arrangement, the total revenues from the 
payer, the numbers of patients furnished any service through the 
arrangement, and the total numbers of patients furnished any service 
through the payer.
    (3) An attestation from the payer that the submitted information is 
accurate.
    (c) Requirement to submit adequate information. (1) CMS makes a QP 
determination with respect to the individual eligible clinician under 
the All-Payer Combination Option if:
    (i) The eligible clinician's Advanced APM Entity submits the 
information required under this section for CMS to assess the APM Entity 
group under the All-Payer Combination Option; or
    (ii) The eligible clinician submits adequate information under this 
section.
    (2) If neither the Advanced APM Entity nor the eligible clinician 
submits all of the information required under this section, then CMS 
does not make a QP assessment for such eligible clinician under the All-
Payer Combination Option.
    (d) Outcome measure. An Other Payer Advanced APM must base payment 
on at least one outcome measure.
    (1) Exception. If an Other Payer Advanced APM has no outcome 
measure, the Advanced APM Entity must submit an attestation in a manner 
and by a date determined by CMS that there is no available or applicable 
outcome measure on the MIPS list of quality measures.
    (2) [Reserved]



Sec. 414.1450  APM incentive payment.

    (a) In general. (1) CMS makes a lump sum payment to QPs in the 
amount described in paragraph (b) of this section in the manner 
described in paragraphs (d) and (e) of this section.

[[Page 182]]

    (2) CMS provides notice of the amount of the APM Incentive Payment 
to QPs as soon as practicable following the calculation and validation 
of the APM Incentive Payment amount, but in any event no later than 1 
year after the incentive payment base period.
    (b) APM Incentive Payment amount. (1) The amount of the APM 
Incentive Payment is equal to 5 percent of the estimated aggregate 
payments for covered professional services as defined in section 
1848(k)(3)(A) of the Act furnished during the calendar year immediately 
preceding the payment year.
    (2) The estimated aggregate payment amount for covered professional 
services includes all such payments to any and all of the TIN/NPI 
combinations associated with the NPI of the QP.
    (3) In calculating the estimated aggregate payment amount for a QP, 
CMS uses claims submitted with dates of service from January 1 through 
December 31 of the incentive payment base period, and processing dates 
of January 1 of the base period through March 31 of the subsequent 
payment year.
    (4) The payment adjustment amounts, negative or positive, as 
described in sections 1848(m), (o), (p), and (q) of the Act are not 
included in calculating the APM Incentive Payment amount.
    (5) Incentive payments made to eligible clinicians under sections 
1833(m), (x), and (y) of the Act are not included in calculating the APM 
Incentive Payment amount.
    (6) Financial risk payments such as shared savings payments or net 
reconciliation payments are excluded from the amount of covered 
professional services in calculating the APM Incentive Payment amount.
    (7) Supplemental service payments in the amount of covered 
professional services are included in calculating the APM Incentive 
Payment amount according to this paragraph (b). Supplemental service 
payments are included in the amount of covered professional services 
when calculating the APM Incentive Payment amount when the supplemental 
service payment meets the following four criteria:
    (i) Is payment for services that constitute physicians services 
authorized under section 1832(a) and defined under section 1861(s) of 
the Act.
    (ii) Is made for only Part B services under the criterion in 
paragraph (b)(9)(i) of this section.
    (iii) Is directly attributable to services furnished to an 
individual beneficiary.
    (iv) Is directly attributable to an eligible clinician, including an 
eligible clinician that is a group of individual eligible clinicians.
    (8) For payment amounts that are affected by a cash flow mechanism, 
the payment amounts that would have occurred if the cash flow mechanism 
were not in place are used in calculating the APM Incentive Payment 
amount.
    (c) APM Incentive Payment recipient. (1) CMS pays the entire APM 
Incentive Payment amount to the TIN associated with the QP's 
participation in the Advanced APM entity that met the applicable QP 
threshold during the QP Performance Period.
    (2) In the event that an eligible clinician is no longer affiliated 
with the TIN associated with the QP's participation in the Advanced APM 
Entity that met the applicable QP threshold during the QP Performance 
Period at the time of the APM Incentive Payment distribution, CMS makes 
the APM Incentive Payment to the TIN listed on the eligible clinician's 
CMS-588 EFT Application form on the date that the APM Incentive Payment 
is distributed.
    (3) In the event that an eligible clinician becomes a QP through 
participation in multiple Advanced APMs, CMS divides the APM Incentive 
Payment amount between the TINs associated with the QP's participation 
in each Advanced APM during the QP Performance Period. Such payments 
will be divided in proportion to the amount of payments associated with 
each TIN that the eligible clinician received for covered professional 
services during the QP Performance Period.
    (d) Timing of the APM Incentive Payment. APM Incentive Payments made 
under this section are made as soon as practicable following the 
calculation and validation of the APM Incentive Payment amount, but in 
any event no later than 1 year after the incentive payment base period.

[[Page 183]]

    (e) Treatment of APM Incentive Payment amount in APMs. (1) APM 
Incentive Payments made under this section are not included in 
determining actual expenditures under an APM.
    (2) APM Incentive Payments made under this section are not included 
in calculations for the purposes of rebasing benchmarks in an APM.
    (f) Treatment of APM Incentive Payment for other Medicare incentive 
payments and payment adjustments. APM Incentive Payments made under this 
section will not be included in determining the amount of incentive 
payment made to eligible clinicians under section 1833(m), (x), and (y) 
of the Act.



Sec. 414.1455  Limitation on review.

    There is no administrative or judicial review under sections 1869, 
1878, or otherwise, of the Act of the following:
    (a) The determination that an eligible clinician is a QP or Partial 
QP under Sec. 414.1425 and the determination that an APM Entity is an 
Advanced APM Entity under Sec. 414.1410.
    (b) The determination of the amount of the APM Incentive Payment 
under Sec. 414.1450, including any estimation as part of such 
determination.



Sec. 414.1460  Monitoring and program integrity.

    (a) Vetting eligible clinicians prior to payment of the APM 
Incentive Payment. Prior to payment of the APM Incentive Payment, CMS 
determines if eligible clinicians were in compliance with all Medicare 
conditions of participation and the terms of the relevant Advanced APMs 
in which they participate during the QP Performance Period. For QPs not 
meeting these standards there may be a reduction or denial of the APM 
Incentive Payment. A determination under this provision is not binding 
for other purposes.
    (b) Termination by Advanced APMs. CMS may reduce or deny an APM 
Incentive Payment to eligible clinicians who are terminated by APMs or 
whose Advanced APM Entities are terminated by APMs for non-compliance 
with all Medicare conditions of participation or the terms of the 
relevant Advanced APMS in which they participate during the QP 
Performance Periods.
    (c) Information submitted for All-Payer Combination Option. 
Information submitted by eligible clinicians or Advanced APM Entities to 
meet the requirements of the All-Payer Combination Option may be subject 
to audit by CMS. Eligible clinicians and Advanced APM Entities must 
maintain copies of any supporting documentation related to All-Payer 
Combination Option for at least 10 years and must attest to the accuracy 
and completeness of the data submitted.
    (d) Recoupment of APM Incentive Payment. For any QPs who are 
terminated from an Advanced APM or found to be in violation of any 
Federal, State, or tribal statute, regulation, or other binding guidance 
during the QP Performance Period or Incentive Payment Base Period or 
terminated after these periods as a result of a violation occurring 
during either period, CMS may rescind such eligible clinicians' QP 
determinations and, if necessary, recoup part or all of any such 
eligible clinicians' APM Incentive Payment or deduct such amount from 
future payments to such individuals. CMS may reopen and recoup any 
payments that were made in error in accordance with procedures similar 
to those set forth at 42 CFR 405.980 and 42 CFR 405.370 through 405.379 
or established under the relevant APM. The APM Incentive Payment will be 
recouped if an audit reveals a lack of support for attested statements 
provided by eligible clinicians and Advanced APM Entities.
    (e) Maintenance of records. An Advanced APM Entity or eligible 
clinician that submits information to CMS under Sec. 414.1445 for 
assessment under the All-Payer Combination Option must maintain such 
books contracts, records, documents, and other evidence for a period of 
10 years from the final date of the QP Performance Period or from the 
date of completion of any audit, evaluation, or inspection, whichever is 
later, unless:
    (1) CMS determines there is a special need to retain a particular 
record or group of records for a longer period and notifies the Advanced 
APM Entity of eligible clinician at least 30 days before the formal 
disposition date; or
    (2) There has been a termination, dispute, or allegation of fraud or 
similar

[[Page 184]]

fault against the Advanced APM Entity or eligible clinician, in which 
case the Advanced APM Entity or eligible clinician must retain records 
for an additional 6 years from the date of any resulting final 
resolution of the termination, dispute, or allegation of fraud or 
similar fault.
    (f) OIG authority. None of the provisions of this part limit or 
restrict OIG's authority to audit, evaluate, investigate, or inspect the 
Advanced APM Entity, its eligible clinicians, and other individuals or 
entities performing functions or services related to its APM activities.



Sec. 414.1465  Physician-focused payment models.

    (a) Definition. A physician-focused payment model (PFPM) is an 
Alternative Payment Model:
    (1) In which Medicare is a payer;
    (2) In which eligible clinicians that are eligible professionals as 
defined in section 1848(k)(3)(B) of the Act are participants and play a 
core role in implementing the APM's payment methodology; and
    (3) Which targets the quality and costs of services that eligible 
professionals participating in the Alternative Payment Model provide, 
order, or can significantly influence.
    (b) Criteria. In carrying out its review of physician-focused 
payment model proposals, the PTAC must assess whether the physician-
focused payment model meets the following criteria for PFPMs sought by 
the Secretary. The Secretary seeks PFPMs that:
    (1) Incentives: Pay for higher-value care. (i) Value over volume: 
provide incentives to practitioners to deliver high-quality health care.
    (ii) Flexibility: provide the flexibility needed for practitioners 
to deliver high-quality health care.
    (iii) Quality and Cost: are anticipated to improve health care 
quality at no additional cost, maintain health care quality while 
decreasing cost, or both improve health care quality and decrease cost.
    (iv) Payment methodology: pay APM Entities with a payment 
methodology designed to achieve the goals of the PFPM Criteria. 
Addresses in detail through this methodology how Medicare, and other 
payers if applicable, pay APM Entities, how the payment methodology 
differs from current payment methodologies, and why the PFPM cannot be 
tested under current payment methodologies.
    (v) Scope: aim to broaden or expand the CMS APM portfolio by 
addressing an issue in payment policy in a new way or including APM 
Entities whose opportunities to participate in APMs have been limited.
    (vi) Ability to be evaluated: have evaluable goals for quality of 
care, cost, and any other goals of the PFPM.
    (2) Care delivery improvements: Promote better care coordination, 
protect patient safety, and encourage patient engagement. (i) 
Integration and Care Coordination: encourage greater integration and 
care coordination among practitioners and across settings where multiple 
practitioners or settings are relevant to delivering care to the 
population treated under the PFPM.
    (ii) Patient Choice: encourage greater attention to the health of 
the population served while also supporting the unique needs and 
preferences of individual patients.
    (iii) Patient Safety: aim to maintain or improve standards of 
patient safety.
    (3) Information Enhancements: Improving the availability of 
information to guide decision-making. (i) Health Information Technology: 
encourage use of health information technology to inform care.
    (ii) [Reserved]



PART 415_SERVICES FURNISHED BY PHYSICIANS IN PROVIDERS, SUPERVISING PHYSICIANS 
IN TEACHING SETTINGS, AND RESIDENTS IN CERTAIN SETTINGS--Table of Contents



                      Subpart A_General Provisions

Sec.
415.1  Basis and scope.

   Subpart B_Fiscal Intermediary Payments to Providers for Physician 
                                Services

415.50  Scope.
415.55  General payment rules.
415.60  Allocation of physician compensation costs.

[[Page 185]]

415.70  Limits on compensation for physician services in providers.

      Subpart C_Part B Carrier Payments for Physician Services to 
                       Beneficiaries in Providers

415.100  Scope.
415.102  Conditions for fee schedule payment for physician services to 
          beneficiaries in providers.
415.105  Amounts of payment for physician services to beneficiaries in 
          providers.
415.110  Conditions for payment: Medically directed anesthesia services.
415.120  Conditions for payment: Radiology services.
415.130  Conditions for payment: Physician pathology services.

            Subpart D_Physician Services in Teaching Settings

415.150  Scope.
415.152  Definitions.
415.160  Election of reasonable cost payment for direct medical and 
          surgical services of physicians in teaching hospitals: General 
          provisions.
415.162  Determining payment for physician services furnished to 
          beneficiaries in teaching hospitals.
415.164  Payment to a fund.
415.170  Conditions for payment on a fee schedule basis for physician 
          services in a teaching setting.
415.172  Physician fee schedule payment for services of teaching 
          physicians.
415.174  Exception: Evaluation and management services furnished in 
          certain centers.
415.176  Renal dialysis services.
415.178  Anesthesia services.
415.180  Teaching setting requirements for the interpretation of 
          diagnostic radiology and other diagnostic tests.
415.184  Psychiatric services.
415.190  Conditions of payment: Assistants at surgery in teaching 
          hospitals.

                     Subpart E_Services of Residents

415.200  Services of residents in approved GME programs.
415.202  Services of residents not in approved GME programs.
415.204  Services of residents in skilled nursing facilities and home 
          health agencies.
415.206  Services of residents in nonprovider settings.
415.208  Services of moonlighting residents.

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

    Source: 60 FR 63178, Dec. 8, 1995, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 415.1  Basis and scope.

    (a) Basis. This part is based on the provisions of the following 
sections of the Act: Section 1848 establishes a fee schedule for payment 
for physician services. Section 1861(q) specifies what is included in 
the term ``physician services'' covered under Medicare. Section 
1862(a)(14) sets forth the exclusion of nonphysician services furnished 
to hospital patients under Part B of Medicare. Section 1886(d)(5)(B) 
provides for a payment adjustment under the prospective payment system 
for the operating costs of inpatient hospital services furnished to 
Medicare beneficiaries in cost reporting periods beginning on or after 
October 1, 1983, to account for the indirect costs of medical education. 
Section 1886(h) establishes the methodology for Medicare payment of the 
cost of direct GME activities.
    (b) Scope. This part sets forth rules for fiscal intermediary 
payments to providers for physician services, Part B carrier payments 
for physician services to beneficiaries in providers, physician services 
in teaching settings, and services of residents.



   Subpart B_Fiscal Intermediary Payments to Providers for Physician 
                                Services



Sec. 415.50  Scope.

    This subpart sets forth rules for payment by fiscal intermediaries 
to providers for services furnished by physicians. Payment for covered 
services is made either under the prospective payment system (PPS) to 
PPS-participating providers in accordance with part 412 of this chapter 
or under the reasonable cost method to non-PPS participating providers 
in accordance with part 413 of this chapter.



Sec. 415.55  General payment rules.

    (a) Allowable costs. Except as specified otherwise in Secs. 413.102 
of this chapter (concerning compensation of owners), 415.60 (concerning 
allocation of physician compensation costs), and 415.162 (concerning 
payment for physician services furnished to beneficiaries in

[[Page 186]]

teaching hospitals), costs a provider incurs for services of physicians 
are allowable only if the following conditions are met:
    (1) The services do not meet the conditions in Sec. 415.102(a) 
regarding fee schedule payment for services of physicians to a 
beneficiary in a provider.
    (2) The services include a surgeon's supervision of services of a 
qualified anesthetist, but do not include physician availability 
services, except for reasonable availability services furnished for 
emergency rooms and the services of standby surgical team physicians.
    (3) The provider has incurred a cost for salary or other 
compensation it furnished the physician for the services.
    (4) The costs incurred by the provider for the services meet the 
requirements in Sec. 413.9 of this chapter regarding costs related to 
patient care.
    (5) The costs do not include supervision of interns and residents 
unless the provider elects reasonable cost payment as specified in 
Sec. 415.160, or any other costs incurred in connection with an approved 
GME program that are payable under Secs. 413.75 through 413.83 of this 
chapter.
    (b) Allocation of allowable costs. The provider must follow the 
rules in Sec. 415.60 regarding allocation of physician compensation 
costs to determine its costs of services.
    (c) Limits on allowable costs. The intermediary must apply the 
limits on compensation set forth in Sec. 415.70 to determine its 
payments to a provider for the costs of services.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.60  Allocation of physician compensation costs.

    (a) Definition. For purposes of this subpart, physician compensation 
costs means monetary payments, fringe benefits, deferred compensation, 
and any other items of value (excluding office space or billing and 
collection services) that a provider or other organization furnishes a 
physician in return for the physician services. Other organizations are 
entities related to the provider within the meaning of Sec. 413.17 of 
this chapter or entities that furnish services for the provider under 
arrangements within the meaning of the Act.
    (b) General rule. Except as provided in paragraph (d) of this 
section, each provider that incurs physician compensation costs must 
allocate those costs, in proportion to the percentage of total time that 
is spent in furnishing each category of services, among--
    (1) Physician services to the provider (as described in 
Sec. 415.55);
    (2) Physician services to patients (as described in Sec. 415.102); 
and
    (3) Activities of the physician, such as funded research, that are 
not paid under either Part A or Part B of Medicare.
    (c) Allowable physician compensation costs. Only costs allocated to 
payable physician services to the provider (as described in Sec. 415.55) 
are allowable costs to the provider under this subpart.
    (d) Allocation of all compensation to services to the provider. 
Generally, the total physician compensation received by a physician is 
allocated among all services furnished by the physician, unless--
    (1) The provider certifies that the compensation is attributable 
solely to the physician services furnished to the provider; and
    (2) The physician bills all patients for the physician services he 
or she furnishes to them and personally receives the payment from or on 
behalf of the patients. If returned directly or indirectly to the 
provider or an organization related to the provider within the meaning 
of Sec. 413.17 of this chapter, these payments are not compensation for 
physician services furnished to the provider.
    (e) Assumed allocation of all compensation to beneficiary services. 
If the provider and physician agree to accept the assumed allocation of 
all the physician services to direct services to beneficiaries as 
described under Sec. 415.102(a), CMS does not require a written 
allocation agreement between the physician and the provider.
    (f) Determination and payment of allowable physician compensation 
costs. (1) Except as provided under paragraph (e) of this section, the 
intermediary pays the provider for these costs only if--

[[Page 187]]

    (i) The provider submits to the intermediary a written allocation 
agreement between the provider and the physician that specifies the 
respective amounts of time the physician spends in furnishing physician 
services to the provider, physician services to patients, and services 
that are not payable under either Part A or Part B of Medicare; and
    (ii) The compensation is reasonable in terms of the time devoted to 
these services.
    (2) In the absence of a written allocation agreement, the 
intermediary assumes, for purposes of determining reasonable costs of 
the provider, that 100 percent of the physician compensation cost is 
allocated to services to beneficiaries as specified in paragraph (b)(2) 
of this section.
    (g) Recordkeeping requirements. Except for services furnished in 
accordance with the assumed allocation under paragraph (e) of this 
section, each provider that claims payment for services of physicians 
under this subpart must meet all of the following requirements:
    (1) Maintain the time records or other information it used to 
allocate physician compensation in a form that permits the information 
to be validated by the intermediary or the carrier.
    (2) Report the information on which the physician compensation 
allocation is based to the intermediary or the carrier on an annual 
basis and promptly notify the intermediary or carrier of any revisions 
to the compensation allocation.
    (3) Retain each physician compensation allocation, and the 
information on which it is based, for at least 4 years after the end of 
each cost reporting period to which the allocation applies.



Sec. 415.70  Limits on compensation for physician services in providers.

    (a) Principle and scope. (1) Except as provided in paragraphs (a)(2) 
and (a)(3) of this section, CMS establishes reasonable compensation 
equivalency limits on the amount of compensation paid to physicians by 
providers. These limits are applied to a provider's costs incurred in 
compensating physicians for services to the provider, as described in 
Sec. 415.55(a).
    (2) Limits established under this section do not apply to costs of 
physician compensation attributable to furnishing inpatient hospital 
services that are paid for under the prospective payment system 
implemented under part 412 of this chapter or to costs of physician 
compensation attributable to approved GME programs that are payable 
under Secs. 413.75 through 413.83 of this chapter.
    (3) Compensation that a physician receives for activities that may 
not be paid for under either Part A or Part B of Medicare is not 
considered in applying these limits.
    (b) Methodology for establishing limits. (1) For cost reporting 
periods beginning before January 1, 2015. CMS establishes a methodology 
for determining annual reasonable compensation equivalency limits and, 
to the extent possible, considers average physician incomes by specialty 
and type of location using the best available data.
    (2) For cost reporting periods beginning on or after January 1, 
2015. CMS establishes a methodology for determining annual reasonable 
compensation equivalency limits and, to the extent possible, considers 
average physician incomes by specialty using the best available data.
    (c) Application of limits. If the level of compensation exceeds the 
limits established under paragraph (b) of this section, Medicare payment 
is based on the level established by the limits.
    (d) Adjustment of the limits. The intermediary may adjust limits 
established under paragraph (b) of this section to account for costs 
incurred by the physician or the provider related to malpractice 
insurance, professional memberships, and continuing medical education.
    (1) For the costs of membership in professional societies and 
continuing medical education, the intermediary may adjust the limit by 
the lesser of--
    (i) The actual cost incurred by the provider or the physician for 
these activities; or
    (ii) Five percent of the appropriate limit.
    (2) For the cost of malpractice expenses incurred by either the 
provider or the physician, the intermediary may adjust the reasonable 
compensation

[[Page 188]]

equivalency limit by the cost of the malpractice insurance expense 
related to the physician service furnished to patients in providers.
    (e) Exception to limits. An intermediary may grant a provider an 
exception to the limits established under paragraph (b) of this section 
only if the provider can demonstrate to the intermediary that it is 
unable to recruit or maintain an adequate number of physicians at a 
compensation level within these limits.
    (f) Notification of changes in methodologies and payment limits. (1) 
Before the start of a cost reporting period to which limits established 
under this section will be applied, CMS publishes a notice in the 
Federal Register that sets forth the amount of the limits and explains 
how it calculated the limits.
    (2) If CMS proposes to revise the methodology for establishing 
payment limits under this section, CMS publishes a notice, with 
opportunity for public comment, in the Federal Register. The notice 
explains the proposed basis and methodology for setting limits, 
specifies the limits that would result, and states the date of 
implementation of the limits.
    (3) If CMS updates limits by applying the most recent economic index 
data without revising the limit methodology, CMS publishes the revised 
limits in a notice in the Federal Register without prior publication of 
a proposal or public comment period.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005; 79 
FR 50358, Aug. 22, 2014]



      Subpart C_Part B Carrier Payments for Physician Services to 
                       Beneficiaries in Providers



Sec. 415.100  Scope.

    This subpart implements section 1887(a)(1)(A) of the Act by 
providing general conditions that must be met in order for services 
furnished by physicians to beneficiaries in providers to be paid for on 
the basis of the physician fee schedule under part 414 of this chapter. 
Section 415.102 sets forth the conditions for fee schedule payment for 
physician services to beneficiaries in providers. Section 415.105 sets 
forth general requirements for determining the amounts of payment for 
services that meet the conditions of this section. Sections 415.120 and 
415.130 set forth additional conditions for payment for physician 
services in the specialties of radiology and pathology (laboratory 
services).



Sec. 415.102  Conditions for fee schedule payment for physician 
services to beneficiaries in providers.

    (a) General rule. If the physician furnishes services to 
beneficiaries in providers, the carrier pays on a fee schedule basis 
provided the following requirements are met:
    (1) The services are personally furnished for an individual 
beneficiary by a physician.
    (2) The services contribute directly to the diagnosis or treatment 
of an individual beneficiary.
    (3) The services ordinarily require performance by a physician.
    (4) In the case of radiology or laboratory services, the additional 
requirements in Sec. 415.120 or Sec. 415.130, respectively, are met.
    (b) Exception. If a physician furnishes services in a provider that 
do not meet the requirements in paragraph (a) of this section, but are 
related to beneficiary care furnished by the provider, the intermediary 
pays for those services, if otherwise covered. The intermediary follows 
the rules in Secs. 415.55 and 415.60 for payment on the basis of 
reasonable cost or PPS, as appropriate.
    (c) Effect of billing charges for physician services to a provider. 
(1) If a physician furnishes services that may be paid under the 
reasonable cost rules in Sec. 415.55 or Sec. 415.60, and paid by the 
intermediary, or would be paid under those rules except for the PPS 
rules in part 412 of this chapter, and under the payment rules for GME 
established by Secs. 413.75 through 413.83 of this chapter, neither the 
provider nor the physician may seek payment from the carrier, 
beneficiary, or another insurer.
    (2) If a physician furnishes services to an individual beneficiary 
that do not meet the applicable conditions in Secs. 415.120 (concerning 
conditions for payment for radiology services) and 415.130 (concerning 
conditions for payment for physician pathology services),

[[Page 189]]

the carrier does not pay on a fee schedule basis.
    (3) If the physician, the provider, or another entity bills the 
carrier or the beneficiary or another insurer for physician services 
furnished to the provider, as described in Sec. 415.55(a), CMS considers 
the provider to which the services are furnished to have violated its 
provider participation agreement, and may terminate that agreement. See 
part 489 of this chapter for rules governing provider agreements.
    (d) Effect of physician assumption of operating costs. If a 
physician or other entity enters into an agreement (such as a lease or 
concession) with a provider, and the physician (or entity) assumes some 
or all of the operating costs of the provider department in which the 
physician furnishes physician services, the following rules apply:
    (1) If the conditions set forth in paragraph (a) of this section are 
met, the carrier pays for the physician services under the physician fee 
schedule in part 414 of this chapter.
    (2) To the extent the provider incurs a cost payable on a reasonable 
cost basis under part 413 of this chapter, the intermediary pays the 
provider on a reasonable cost basis for the costs associated with 
producing these services, including overhead, supplies, equipment costs, 
and services furnished by nonphysician personnel.
    (3) The physician (or other entity) is treated as being related to 
the provider within the meaning of Sec. 413.17 of this chapter 
(concerning cost to related organizations).
    (4) The physician (or other entity) must make its books and records 
available to the provider and the intermediary as necessary to verify 
the nature and extent of the costs of the services furnished by the 
physician (or other entity).

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.105  Amounts of payment for physician services to 
beneficiaries in providers.

    (a) General rule. The carrier determines amounts of payment for 
physician services to beneficiaries in providers in accordance with the 
general rules governing the physician fee schedule payment in part 414 
of this chapter, except as provided in paragraph (b) of this section.
    (b) Application in certain settings--(1) Teaching hospitals. The 
carrier applies the rules in subpart D of this part (concerning 
physician services in teaching settings), in addition to those in this 
section, in determining whether fee schedule payment should be made for 
physician services to individual beneficiaries in a teaching hospital.
    (2) Hospital-based ESRD facilities. The carrier applies 
Secs. 414.310 through 414.314 of this chapter, which set forth 
determination of reasonable charges under the ESRD program, to determine 
the amount of payment for physician services furnished to individual 
beneficiaries in a hospital-based ESRD facility approved under part 405 
subpart U.



Sec. 415.110  Conditions for payment: Medically directed anesthesia services.

    (a) General payment rule. Medicare pays for the physician's medical 
direction of anesthesia services for one service or two through four 
concurrent anesthesia services furnished after December 31, 1998, only 
if each of the services meets the condition in Sec. 415.102(a) and the 
following additional conditions:
    (1) For each patient, the physician--
    (i) Performs a pre-anesthetic examination and evaluation;
    (ii) Prescribes the anesthesia plan;
    (iii) Personally participates in the most demanding aspects of the 
anesthesia plan including, if applicable, induction and emergence;
    (iv) Ensures that any procedures in the anesthesia plan that he or 
she does not perform are performed by a qualified individual as defined 
in operating instructions;
    (v) Monitors the course of anesthesia administration at frequent 
intervals;
    (vi) Remains physically present and available for immediate 
diagnosis and treatment of emergencies; and
    (vii) Provides indicated post-anesthesia care.
    (2) The physician directs no more than four anesthesia services 
concurrently and does not perform any other services while he or she is 
directing the

[[Page 190]]

single or concurrent services so that one or more of the conditions in 
paragraph (a)(1) of this section are not violated.
    (3) If the physician personally performs the anesthesia service, the 
payment rules in Sec. 414.46(c) of this chapter apply (Physician 
personally performs the anesthesia procedure).
    (b) Medical documentation. The physician alone inclusively documents 
in the patient's medical record that the conditions set forth in 
paragraph (a)(1) of this section have been satisfied, specifically 
documenting that he or she performed the pre-anesthetic exam and 
evaluation, provided the indicated post-anesthesia care, and was present 
during the most demanding procedures, including induction and emergence 
where applicable.

[63 FR 58912, Nov. 2, 1998]



Sec. 415.120  Conditions for payment: Radiology services.

    (a) Services to beneficiaries. The carrier pays for radiology 
services furnished by a physician to a beneficiary on a fee schedule 
basis only if the services meet the conditions for fee schedule payment 
in Sec. 415.102(a) and are identifiable, direct, and discrete diagnostic 
or therapeutic services furnished to an individual beneficiary, such as 
interpretation of x-ray plates, angiograms, myelograms, pyelograms, or 
ultrasound procedures. The carrier pays for interpretations only if 
there is a written report prepared for inclusion in the patient's 
medical record maintained by the hospital.
    (b) Services to providers. The carrier does not pay on a fee 
schedule basis for physician services to the provider (for example, 
administrative or supervisory services) or for provider services needed 
to produce the x-ray films or other items that are interpreted by the 
radiologist. However, the intermediary pays the provider for these 
services in accordance with Sec. 415.55 for provider costs; 
Sec. 415.102(d)(2) for costs incurred by a physician, such as under a 
lease or concession agreement; or part 412 of this chapter for payment 
under PPS.



Sec. 415.130  Conditions for payment: Physician pathology services.

    (a) Definitions. The following definitions are used in this section.
    (1) Covered hospital means, with respect to an inpatient or an 
outpatient, a hospital that had an arrangement with an independent 
laboratory that was in effect as of July 22, 1999, under which a 
laboratory furnished the technical component of physician pathology 
services to fee-for-service Medicare beneficiaries who were hospital 
inpatients or outpatients, and submitted claims for payment for this 
technical component directly to a Medicare carrier.
    (2) Fee-for-service Medicare beneficiaries means those beneficiaries 
who are entitled to benefits under Part A or are enrolled under Part B 
of Title XVIII of the Act or both and are not enrolled in any of the 
following:
    (i) A Medicare + Choice plan under Part C of Title XVIII of the Act.
    (ii) A plan offered by an eligible organization under section 1876 
of the Act;
    (iii) A program of all-inclusive care for the elderly (PACE) under 
1894 of the Act; or
    (iv) A social health maintenance organization (SHMO) demonstration 
project established under section 4018(b) of the Omnibus Budget 
Reconciliation Act of 1987.
    (b) Physician pathology services. The carrier pays for pathology 
services furnished by a physician to an individual beneficiary on a fee 
schedule basis only if the services meet the conditions for payment in 
Sec. 415.102(a) and are one of the following services:
    (1) Surgical pathology services.
    (2) Specific cytopathology, hematology, and blood banking services 
that have been identified to require performance by a physician and are 
listed in program operating instructions.
    (3) Clinical consultation services that meet the requirements in 
paragraph (c) of this section.
    (4) Clinical laboratory interpretative services that meet the 
requirements of paragraphs (c)(1), (c)(3), and (c)(4) of this section 
and that are specifically listed in program operating instructions.

[[Page 191]]

    (c) Clinical consultation services. For purposes of this section, 
clinical consultation services must meet the following requirements:
    (1) Be requested by the beneficiary's attending physician.
    (2) Relate to a test result that lies outside the clinically 
significant normal or expected range in view of the condition of the 
beneficiary.
    (3) Result in a written narrative report included in the 
beneficiary's medical record.
    (4) Require the exercise of medical judgment by the consultant 
physician.
    (d) Physician pathology services furnished by an independent 
laboratory. (1) The technical component of physician pathology services 
furnished by an independent laboratory to a hospital inpatient or 
outpatient on or before June 30, 2012, may be paid to the laboratory by 
the contractor under the physician fee schedule if the Medicare 
beneficiary is a patient of a covered hospital as defined in paragraph 
(a)(1) of this section.
    (2) For services furnished after June 30, 2012, an independent 
laboratory may not bill the Medicare contractor for the technical 
component of physician pathology services furnished to a hospital 
inpatient or outpatient.
    (3) For services furnished on or after January 1, 2008, the date of 
service policy in Sec. 414.510 of this chapter applies to the TC of 
specimens for physician pathology services.

[60 FR 63178, Dec. 8, 1995, as amended at 64 FR 59442, Nov. 2, 1999; 66 
FR 55332, Nov. 1, 2001; 71 FR 69788, Dec. 1, 2006; 72 FR 66405, Nov. 27, 
2007; 73 FR 69938, Nov. 19, 2008; 75 FR 73626, Nov. 29, 2010; 76 FR 
73473, Nov. 28, 2011; 77 FR 69371, Nov. 16, 2012]



            Subpart D_Physician Services in Teaching Settings



Sec. 415.150  Scope.

    This subpart sets forth the rules governing payment for the services 
of physicians in teaching settings and the criteria for determining 
whether the payments are made as one of the following:
    (a) Services to the hospital under the reasonable cost election in 
Secs. 415.160 through 415.164.
    (b) Provider services through the direct GME payment mechanism in 
Secs. 413.75 through 413.83 of this chapter.
    (c) Physician services to beneficiaries under the physician fee 
schedule as set forth in part 414 of this chapter.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.152  Definitions.

    As used in this subpart--
    Approved graduate medical education (GME) program means one of the 
following:
    (1) A residency program approved by the Accreditation Council for 
Graduate Medical Education, by the American Osteopathic Association, by 
the Commission on Dental Accreditation of the American Dental 
Association, or by the Council on Podiatric Medical Education of the 
American Podiatric Medical Association.
    (2) A program otherwise recognized as an ``approved medical 
residency program'' under Sec. 413.75(b) of this chapter.
    Direct medical and surgical services means services to individual 
beneficiaries that are either personally furnished by a physician or 
furnished by a resident under the supervision of a physician in a 
teaching hospital making the cost election described in Secs. 415.160 
through 415.162.
    Nonprovider setting means a setting other than a hospital, skilled 
nursing facility, home health agency, or comprehensive outpatient 
rehabilitation facility in which residents furnish services. These 
include, but are not limited to, family practice or multispecialty 
clinics and physician offices.
    Resident means one of the following:
    (1) An individual who participates in an approved GME program, 
including programs in osteopathy, dentistry, and podiatry.
    (2) A physician who is not in an approved GME program, but who is 
authorized to practice only in a hospital, for example, individuals with 
temporary or restricted licenses, or unlicensed graduates of foreign 
medical schools. For purposes of this subpart, the term resident is 
synonymous with the terms intern and fellow.
    Teaching hospital means a hospital engaged in an approved GME 
residency

[[Page 192]]

program in medicine, osteopathy, dentistry, or podiatry.
    Teaching physician means a physician (other than another resident) 
who involves residents in the care of his or her patients.
    Teaching setting means any provider, hospital-based provider, or 
nonprovider settings in which Medicare payment for the services of 
residents is made under the direct GME payment provisions of 
Secs. 413.75 through 413.83, or on a reasonable-cost basis under the 
provisions of Sec. 409.26 or Sec. 409.40(f) for resident services 
furnished in skilled nursing facilities or home health agencies, 
respectively.

[60 FR 63178, Dec. 8, 1995, as amended at 61 FR 59554, Nov. 22, 1996; 63 
FR 26359, May 12, 1998; 70 FR 47490, Aug. 12, 2005; 74 FR 44001, Aug. 
27, 2009; 75 FR 50418, Aug. 16, 2010]



Sec. 415.160  Election of reasonable cost payment for direct medical and 
surgical services of physicians in teaching hospitals: General provisions.

    (a) Scope. A teaching hospital may elect to receive payment on a 
reasonable cost basis for the direct medical and surgical services of 
its physicians in lieu of fee schedule payments that might otherwise be 
made for these services.
    (b) Conditions. A teaching hospital may elect to receive these 
payments only if--
    (1) The hospital notifies its intermediary in writing of the 
election and meets the conditions of either paragraph (b)(2) or 
paragraph (b)(3) of this section;
    (2) All physicians who furnish services to Medicare beneficiaries in 
the hospital agree not to bill charges for these services; or
    (3) All physicians who furnish services to Medicare beneficiaries in 
the hospital are employees of the hospital and, as a condition of 
employment, are precluded from billing for these services.
    (c) Effect of election. If a teaching hospital elects to receive 
reasonable cost payment for physician direct medical and surgical 
services furnished to beneficiaries--
    (1) Those services and the supervision of interns and residents 
furnishing care to individual beneficiaries are covered as hospital 
services, and
    (2) The intermediary pays the hospital for those services on a 
reasonable cost basis under the rules in Sec. 415.162. (Payment for 
other physician compensation costs related to approved GME programs is 
made as described in Sec. 413.78 of this chapter.)
    (d) Election declined. If the teaching hospital does not make this 
election, payment is made--
    (1) For physician services furnished to beneficiaries on a fee 
schedule basis as described in part 414 subject to the rules in this 
subpart, and
    (2) For the supervision of interns and residents as described in 
Secs. 413.75 through 413.83.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.162  Determining payment for physician services furnished to
beneficiaries in teaching hospitals.

    (a) General rule. Payments for direct medical and surgical services 
of physicians furnished to beneficiaries and supervision of interns and 
residents furnishing care to beneficiaries is made by Medicare on the 
basis of reasonable cost if the hospital exercises the election as 
provided for in Sec. 415.160. If this election is made, the following 
occurs:
    (1) Physician services furnished to beneficiaries and supervision of 
interns and residents furnishing care to beneficiaries are paid on a 
reasonable-cost basis, as provided for in paragraph (b) of this section.
    (2) Payment for certain medical school costs may be made as provided 
for in paragraph (c) of this section.
    (3) Payments for services donated by volunteer physicians to 
beneficiaries are made to a fund designated by the organized medical 
staff of the teaching hospital or medical school as provided for in 
paragraph (d) of this section.
    (b) Reasonable cost of physician services and supervision of interns 
and residents. (1) Physician services furnished to beneficiaries and 
supervision of interns and residents furnishing care to beneficiaries in 
a teaching hospital are payable as provider services on a reasonable-
cost basis.
    (2) For purposes of this paragraph, reasonable cost is defined as 
the direct

[[Page 193]]

salary paid to these physicians, plus applicable fringe benefits.
    (3) The costs must be allocated to the services as provided by 
paragraph (j) of this section and apportioned to program beneficiaries 
as provided by paragraph (g) of this section.
    (4) Other allowable costs incurred by the provider related to the 
services described in this paragraph are payable subject to the 
requirements applicable to all other provider services.
    (c) Reasonable costs for the services furnished by a medical school 
or related organization in a hospital. An amount is payable to the 
hospital by CMS under the Medicare program provided that the costs would 
be payable if incurred directly by the hospital rather than under the 
arrangement. The amount must not be in excess of the reasonable costs 
(as defined in paragraphs (c)(1) and (c)(2) of this section) incurred by 
a teaching hospital for services furnished by a medical school or 
organization as described in Sec. 413.17 of this chapter for certain 
costs to the medical school (or a related organization) in furnishing 
services in the hospital.
    (1) Reasonable costs of physician services--(i) When the medical 
school and the hospital are related organizations. If the medical school 
(or organization related to the medical school) and the hospital are 
related by common ownership or control as described in Sec. 413.17 of 
this chapter--
    (A) The costs of these services are allowable costs to the hospital 
under the provisions of Sec. 413.17 of this chapter; and
    (B) The reimbursable costs to the hospital are determined under the 
provisions of this section in the same manner as the costs incurred for 
physicians on the hospital staff and without regard to payments made to 
the medical school by the hospital.
    (ii) When the medical school and the hospital are not related 
organizations. (A) If the medical school and the hospital are not 
related organizations under the provisions of Sec. 413.17 of this 
chapter and the hospital makes payment to the medical school for the 
costs of those services furnished to all patients, payment is made by 
Medicare to the hospital for the reasonable cost incurred by the 
hospital for its payments to the medical school for services furnished 
to beneficiaries.
    (B) Costs incurred under an arrangement must be allocated to the 
full range of services furnished to the hospital by the medical school 
physicians on the same basis as provided for under paragraph (j) of this 
section, and costs allocated to direct medical and surgical services 
furnished to hospital patients must be apportioned to beneficiaries as 
provided for under paragraph (g) of this section.
    (C) If the medical school and the hospital are not related 
organizations under the provisions of Sec. 413.17 of this chapter and 
the hospital makes payment to the medical school only for the costs of 
those services furnished to beneficiaries, costs of the medical school 
not to exceed 105 percent of the sum of physician direct salaries, 
applicable fringe benefits, employer's portion of FICA taxes, Federal 
and State unemployment taxes, and workmen's compensation paid by the 
medical school or an organization related to the medical school may be 
recognized as allowable costs of the medical school.
    (D) These allowable medical school costs must be allocated to the 
full range of services furnished by the physicians of the medical school 
or organization related as provided by paragraph (j) of this section.
    (E) Costs allocated to direct medical and surgical services 
furnished to hospital patients must be apportioned to beneficiaries as 
provided by paragraph (g) of this section.
    (2) Reasonable costs of other than direct medical and surgical 
services. These costs are determined in accordance with paragraph (c)(1) 
of this section except that--
    (i) If the hospital makes payment to the medical school for other 
than direct medical and surgical services furnished to beneficiaries and 
supervision of interns and residents furnishing care to beneficiaries, 
these payments are subject to the required cost-finding and 
apportionment methods applicable to the cost of other hospital services 
(except for direct medical and surgical services furnished to 
beneficiaries); or

[[Page 194]]

    (ii) If the hospital makes payment to the medical school only for 
these services furnished to beneficiaries, the cost of these services is 
not subject to cost-finding and apportionment as otherwise provided by 
this subpart, and the reasonable cost paid by Medicare must be 
determined on the basis of the health insurance ratio(s) used in the 
apportionment of all other provider costs (excluding physician direct 
medical and surgical services furnished to beneficiaries) applied to the 
allowable medical school costs incurred by the medical school for the 
services furnished to all patients of the hospital.
    (d) ``Salary equivalent'' payments for direct medical and surgical 
services furnished by physicians on the voluntary staff of the hospital. 
(1) CMS makes payments under the Medicare program to a fund as defined 
in Sec. 415.164 for direct medical and surgical services furnished to 
beneficiaries on a regularly scheduled basis by physicians on the unpaid 
voluntary medical staff of the hospital (or medical school under 
arrangement with the hospital).
    (i) These payments represent compensation for contributed medical 
staff time which, if not contributed, would have to be obtained through 
employed staff on a payable basis.
    (ii) Payments for volunteer services are determined by applying to 
the regularly scheduled contributed time an hourly rate not to exceed 
the equivalent of the average direct salary (exclusive of fringe 
benefits) paid to all full-time, salaried physicians (other than interns 
and residents) on the hospital staff or, if the number of full-time 
salaried physicians is minimal in absolute terms or in relation to the 
number of physicians on the voluntary staff, to physicians at like 
institutions in the area.
    (iii) This ``salary equivalent'' is a single hourly rate covering 
all physicians regardless of specialty and is applied to the actual 
regularly scheduled time contributed by the physicians in furnishing 
direct medical and surgical services to beneficiaries including 
supervision of interns and residents in that care.
    (iv) A physician who receives any compensation from the hospital or 
a medical school related to the hospital by common ownership or control 
(within the meaning of Sec. 413.17 of this chapter) for direct medical 
and surgical services furnished to any patient in the hospital is not 
considered an unpaid voluntary physician for purposes of this paragraph.
    (v) If, however, a physician receives compensation from the hospital 
or related medical school or organization only for services that are 
other than direct medical and surgical services, a salary equivalent 
payment for the physician's regularly scheduled direct medical and 
surgical services to beneficiaries in the hospital may be imputed. 
However, the sum of the imputed value for volunteer services and the 
physician's actual compensation from the hospital and the related 
medical school (or organization) may not exceed the amount that would 
have been imputed if all of the physician's hospital and medical school 
services (compensated and volunteer) had been volunteer services, or 
paid at the rate of $30,000 per year, whichever is less.
    (2) The following examples illustrate how the allowable imputed 
value for volunteer services is determined. In each example, it has been 
assumed that the average salary equivalent hourly rate is equal to the 
hourly rate for the individual physician's compensated services.

    Example No: 1. Dr. Jones received $3,000 a year from Hospital X for 
services other than direct medical services to all patients, for 
example, utilization review and administrative services. Dr. Jones also 
voluntarily furnished direct medical services to beneficiaries. The 
imputed value of the volunteer services amounted to $10,000 for the cost 
reporting period. The full imputed value of Dr. Jones' volunteer direct 
medical services would be allowed since the total amount of the imputed 
value ($10,000) and the compensated services ($3,000) does not exceed 
$30,000.
    Example No: 2. Dr. Smith received $25,000 from Hospital X for 
services as a department head in a teaching hospital. Dr. Smith also 
voluntarily furnished direct medical services to beneficiaries. The 
imputed value of the volunteer services amounted to $10,000. Only $5,000 
of the imputed value of volunteer services would be allowed since the 
total amount of the imputed value ($10,000) and the compensated services 
($25,000) exceeds the $30,000 maximum amount allowable for all of Dr. 
Smith's services.

[[Page 195]]

                              Computation:

Maximum amount allowable for all services performed by Dr.       $30,000
 Smith for purposes of this computation......................
Less compensation received from Hospital X for other than        $25,000
 direct medical services to individual patients..............
Allowable amount of imputed value for the volunteer services      $5,000
 furnished by Dr. Smith......................................
 

    Example No. 3. Dr. Brown is not compensated by Hospital X for any 
services furnished in the hospital. Dr. Brown voluntarily furnished 
direct surgical services to beneficiaries for a period of 6 months, and 
the imputed value of these services amounted to $20,000. The allowable 
amount of the imputed value for volunteer services furnished by Dr. 
Brown would be limited to $15,000 ($30,000  x  6/12).

    (3) The amount of the imputed value for volunteer services 
applicable to beneficiaries and payable to a fund is determined in 
accordance with the aggregate per diem method described in paragraph (g) 
of this section.
    (4) Medicare payments to a fund must be used by the fund solely for 
improvement of care of hospital patients or for educational or 
charitable purposes (which may include but are not limited to medical 
and other scientific research).
    (i) No personal financial gain, either direct or indirect, from 
benefits of the fund may inure to any of the hospital staff physicians, 
medical school faculty, or physicians for whom Medicare imputes costs 
for purposes of payment into the fund.
    (ii) Expenses met from contributions made to the hospital from a 
fund are not included as a reimbursable cost when expended by the 
hospital, and depreciation expense is not allowed with respect to 
equipment or facilities donated to the hospital by a fund or purchased 
by the hospital from monies in a fund.
    (e) Requirements for payment--(1) Physicians on the hospital staff. 
The requirements under which the costs of physician direct medical and 
surgical services (including supervision of interns and residents) to 
beneficiaries are the same as those applicable to the cost of all other 
covered provider services except that the costs of these services are 
separately determined as provided by this section and are not subject to 
cost-finding as described in Sec. 413.24 of this chapter.
    (2) Physicians on the medical school faculty. Payment is made to a 
hospital for the costs of services of physicians on the medical school 
faculty, provided that if the medical school is not related to the 
hospital (within the meaning of Sec. 413.17 of this chapter, concerning 
cost to related organizations), the hospital does not make payment to 
the medical school for services furnished to all patients and the 
following requirements are met: If the hospital makes payment to the 
medical school for services furnished to all patients, these 
requirements do not apply. (See paragraph (c)(1)(ii) of this section.)
    (i) There is a written agreement between the hospital and the 
medical school or organization, specifying the types and extent of 
services to be furnished by the medical school and specifying that the 
hospital must pay to the medical school an amount at least equal to the 
reasonable cost (as defined in paragraph (c) of this section) of 
furnishing the services to beneficiaries.
    (ii) The costs are paid to the medical school by the hospital no 
later than the date on which the cost report covering the period in 
which the services were furnished is due to CMS.
    (iii) Payment for the services furnished under an arrangement would 
have been made to the hospital had the services been furnished directly 
by the hospital.
    (3) Physicians on the voluntary staff of the hospital (or medical 
school under arrangement with the hospital). If the conditions for 
payment to a fund outlined in Sec. 415.164 are met, payments are made on 
a ``salary equivalent'' basis (as defined in paragraph (d) of this 
section) to a fund.
    (f) Requirements for payment for medical school faculty services 
other than physician direct medical and surgical services. If the 
requirements for payment for physician direct medical and surgical 
services furnished to beneficiaries in a teaching hospital described in 
paragraph (e) of this section are met, payment is made to a hospital for 
the costs of medical school faculty services other than physician direct

[[Page 196]]

medical and surgical services furnished in a teaching hospital.
    (g) Aggregate per diem methods of apportionment--(1) For the costs 
of physician direct medical and surgical services. The cost of physician 
direct medical and surgical services furnished in a teaching hospital to 
beneficiaries is determined on the basis of an average cost per diem as 
defined in paragraph (h)(1) of this section for physician direct medical 
and surgical services to all patients (see Secs. 415.172 through 
415.184) for each of the following categories of physicians:
    (i) Physicians on the hospital staff.
    (ii) Physicians on the medical school faculty.
    (2) For the imputed value of physician volunteer direct medical and 
surgical services. The imputed value of physician direct medical and 
surgical services furnished to beneficiaries in a teaching hospital is 
determined on the basis of an average per diem, as defined in paragraph 
(h)(1) of this section, for physician direct medical and surgical 
services to all patients except that the average per diem is derived 
from the imputed value of the physician volunteer direct medical and 
surgical services furnished to all patients.
    (h) Definitions. (1) Average cost per diem for physician direct 
medical and surgical services (including supervision of interns and 
residents) furnished in a teaching hospital to patients in each category 
of physician services described in paragraph (g)(1) of this section 
means the amount computed by dividing total reasonable costs of these 
services in each category by the sum of--
    (i) Inpatient days (as defined in paragraph (h)(2) of this section); 
and
    (ii) Outpatient visit days (as defined in paragraph (h)(3) of this 
section).
    (2) Inpatient days are determined by counting the day of admission 
as 3.5 days and each day after a patient's day of admission, except the 
day of discharge, as 1 day.
    (3) Outpatient visit days are determined by counting only one visit 
day for each calendar day that a patient visits an outpatient department 
or multiple outpatient departments.
    (i) Application. (1) The following illustrates how apportionment 
based on the aggregate per diem method for costs of physician direct 
medical and surgical services furnished in a teaching hospital to 
patients is determined.

                           Teaching Hospital Y

                     Statistical and financial data:

Total inpatient days as defined in paragraph (h)(2) of this       75,000
 section and outpatient visit days as defined in paragraph
 (h)(3) of this section....................................
Total inpatient Part A days................................       20,000
Total inpatient Part B days where Part A coverage is not           1,000
 available.................................................
Total outpatient Part B visit days.........................        5,000
Total cost of direct medical and surgical services            $1,500,000
 furnished to all patients by physicians on the hospital
 staff as determined in accordance with paragraph (i) of
 this section..............................................
Total cost of direct medical and surgical services            $1,650,000
 furnished to all patients by physicians on the medical
 school faculty as determined in accordance with paragraph
 (i) of this section.......................................
 

    Computation of cost applicable to program for physicians on the 
hospital staff:
    Average cost per diem for direct medical and surgical services to 
patients by physicians on the hospital staff: $1,500,000  75,000 = $20 
per diem.

Cost of physician direct medical and surgical services          $400,000
 furnished to inpatient beneficiaries covered under Part A:
 $20 per diem  x  20,000...................................
Cost of physician direct medical and surgical services           $20,000
 furnished to inpatient beneficiaries covered under Part B:
 $20 per diem  x  1,000....................................
Cost of physician direct medical and surgical services          $100,000
 furnished to outpatient beneficiaries covered under Part
 B: $20 per diem  x  5,000.................................
 

    Computation of cost applicable to program for physicians on the 
medical school faculty:
    Average cost per diem for direct medical and surgical services to 
patients by physicians on the medical school faculty: $1,650,000  
75,000 = $22 per diem.

Cost of physician direct medical and surgical services          $440,000
 furnished to inpatient beneficiaries covered under Part A:
 $22 per diem  x  20,000...................................

[[Page 197]]

 
Cost of physician direct medical and surgical services           $22,000
 furnished to inpatient beneficiaries covered under Part B:
 $20 per diem  x  1,000....................................
Cost of physician direct medical and surgical services          $110,000
 furnished to outpatient beneficiaries covered under Part
 B: $22 per diem  x  5,000.................................
 

    (2) The following illustrates how the imputed value of physician 
volunteer direct medical and surgical services furnished in a teaching 
hospital to beneficiaries is determined.

    Example: The physicians on the medical staff of Teaching Hospital Y 
donated a total of 5,000 hours in furnishing direct medical and surgical 
services to patients of the hospital during a cost reporting period and 
did not receive any compensation from either the hospital or the medical 
school. Also, the imputed value for any physician volunteer services did 
not exceed the rate of $30,000 per year per physician.

                     Statistical and financial data:

Total salaries paid to the full-time salaried physicians by     $800,000
 the hospital (excluding interns and residents)............
Total physicians who were paid for an average of 40 hours             20
 per week or 2,080 (52 weeks  x  40 hours per week) hours
 per year..................................................
Average hourly rate equivalent: $800,000  41,600 (2,080  x       $19.23
  20)......................................................
 

    Computation of total imputed value of physician volunteer services 
applicable to all patients:

(Total donated hours  x  average hourly rate equivalent):        $96,150
 5,000  x  $19.23..........................................
Total inpatient days (as defined in paragraph (h)(2) of           75,000
 this section) and outpatient visit days (as defined in
 paragraph (h)(3) of this section).........................
Total inpatient Part A days................................       20,000
Total inpatient Part B days if Part A coverage is not              1,000
 available.................................................
Total outpatient Part B visit days.........................        5,000
 

    Computation of imputed value of physician volunteer direct medical 
and surgical services furnished to Medicare beneficiaries:
    Average per diem for physician direct medical and surgical services 
to all patients: $96,150  75,000 = $1.28 per diem

Imputed value of physician direct medical and surgical           $25,600
 services furnished to inpatient beneficiaries covered
 under Part A: $1.28 per diem  x  20,000...................
Imputed value of physician direct medical and surgical            $1,280
 services furnished to inpatient beneficiaries covered
 under Part B: $1.28 per diem  x  1,000....................
Imputed value of physician direct medical and surgical            $6,400
 services furnished to outpatient beneficiaries covered
 under Part B: $1.28 per diem  x  5,000....................
Total......................................................      $33,280
 

    (j) Allocation of compensation paid to physicians in a teaching 
hospital. (1) In determining reasonable cost under this section, the 
compensation paid by a teaching hospital, or a medical school or related 
organization under arrangement with the hospital, to physicians in a 
teaching hospital must be allocated to the full range of services 
implicit in the physician compensation arrangements. (However, see 
paragraph (d) of this section for the computation of the ``salary 
equivalent'' payments for volunteer services furnished to patients.)
    (2) This allocation must be made and must be capable of 
substantiation on the basis of the proportion of each physician's time 
spent in furnishing each type of service to the hospital or medical 
school.



Sec. 415.164  Payment to a fund.

    (a) General rules. Payment for certain voluntary services by 
physicians in teaching hospitals (as these services are described in 
Sec. 415.160) is made on a salary equivalent basis (as described in 
Sec. 415.162(d)) subject to the conditions and limitations contained in 
parts 405 and 413 of this chapter and this part 415, to a single fund 
(as defined in paragraph (b) of this section) designated by the 
organized medical staff of the hospital (or, if the services are 
furnished in the hospital by the faculty of a medical school, to a fund 
as may be designated by the faculty), if the following conditions are 
met:
    (1) The hospital (or medical school furnishing the services under 
arrangement with the hospital) incurs no actual cost in furnishing the 
services.

[[Page 198]]

    (2) The hospital has an agreement with CMS under part 489 of this 
chapter.
    (3) The intermediary, or CMS as appropriate, has received written 
assurances that--
    (i) The payment is used solely for the improvement of care of 
hospital patients or for educational or charitable purposes; and
    (ii) Neither the individuals who are furnished the services nor any 
other persons are charged for the services (and if charged, provision is 
made for the return of any monies incorrectly collected).
    (b) Definition of a fund. For purposes of paragraph (a) of this 
section, a fund is an organization that meets either of the following 
requirements:
    (1) The organization has and retains exemption, as a governmental 
entity or under section 501(c)(3) of the Internal Revenue Code 
(nonprofit educational, charitable, and similar organizations), from 
Federal taxation.
    (2) The organization is an organization of physicians who, under the 
terms of their employment by an entity that meets the requirements of 
paragraph (b)(1) of this section, are required to turn over to that 
entity all income that the physician organization derives from the 
physician services.
    (c) Status of a fund. A fund approved for payment under paragraph 
(a) of this section has all the rights and responsibilities of a 
provider under Medicare except that it does not enter into an agreement 
with CMS under part 489 of this chapter.



Sec. 415.170  Conditions for payment on a fee schedule basis for 
physician services in a teaching setting.

    Services meeting the conditions for payment in Sec. 415.102(a) 
furnished in teaching settings are payable under the physician fee 
schedule if--
    (a) The services are personally furnished by a physician who is not 
a resident; or
    (b) The services are furnished by a resident in the presence of a 
teaching physician except as provided in Sec. 415.172 (concerning 
physician fee schedule payment for services of teaching physicians), 
Sec. 415.174 (concerning an exception for services furnished in hospital 
outpatient and certain other ambulatory settings), Sec. 415.176 
(concerning renal dialysis services), and Sec. 415.184 (concerning 
psychiatric services), as applicable.



Sec. 415.172  Physician fee schedule payment for services of teaching physicians.

    (a) General rule. If a resident participates in a service furnished 
in a teaching setting, physician fee schedule payment is made only if a 
teaching physician is present during the key portion of any service or 
procedure for which payment is sought.
    (1) In the case of surgical, high-risk, or other complex procedures, 
the teaching physician must be present during all critical portions of 
the procedure and immediately available to furnish services during the 
entire service or procedure.
    (i) In the case of surgery, the teaching physician's presence is not 
required during opening and closing of the surgical field.
    (ii) In the case of procedures performed through an endoscope, the 
teaching physician must be present during the entire viewing.
    (2) In the case of evaluation and management services, the teaching 
physician must be present during the portion of the service that 
determines the level of service billed. (However, in the case of 
evaluation and management services furnished in hospital outpatient 
departments and certain other ambulatory settings, the requirements of 
Sec. 415.174 apply.)
    (b) Documentation. Except for services furnished as set forth in 
Secs. 415.174 (concerning an exception for services furnished in 
hospital outpatient and certain other ambulatory settings), 415.176 
(concerning renal dialysis services), and 415.184 (concerning 
psychiatric services), the medical records must document the teaching 
physician was present at the time the service is furnished. The presence 
of the teaching physician during procedures may be demonstrated by the 
notes in the medical records made by a physician, resident, or nurse. In 
the case of evaluation and management procedures, the teaching physician 
must personally

[[Page 199]]

document his or her participation in the service in the medical records.
    (c) Payment level. In the case of services such as evaluation and 
management for which there are several levels of service codes available 
for reporting purposes, the appropriate payment level must reflect the 
extent and complexity of the service when fully furnished by the 
teaching physician.



Sec. 415.174  Exception: Evaluation and management services furnished 
in certain centers.

    (a) In the case of certain evaluation and management codes of lower 
and mid-level complexity (as specified by CMS in program instructions), 
carriers may make physician fee schedule payment for a service furnished 
by a resident without the presence of a teaching physician. For the 
exception to apply, all of the following conditions must be met:
    (1) The services must be furnished in a center that is located in an 
outpatient department of a hospital or another ambulatory care entity in 
which the time spent by residents in patient care activities is included 
in determining intermediary payments to a hospital under Secs. 413.75 
through 413.83.
    (2) Any resident furnishing the service without the presence of a 
teaching physician must have completed more than 6 months of an approved 
residency program.
    (3) The teaching physician must not direct the care of more than 
four residents at any given time and must direct the care from such 
proximity as to constitute immediate availability. The teaching 
physician must--
    (i) Have no other responsibilities at the time;
    (ii) Assume management responsibility for those beneficiaries seen 
by the residents;
    (iii) Ensure that the services furnished are appropriate;
    (iv) Review with each resident during or immediately after each 
visit, the beneficiary's medical history, physical examination, 
diagnosis, and record of tests and therapies; and
    (v) Document the extent of the teaching physician's participation in 
the review and direction of the services furnished to each beneficiary.
    (4) The range of services furnished by residents in the center 
includes all of the following:
    (i) Acute care for undifferentiated problems or chronic care for 
ongoing conditions.
    (ii) Coordination of care furnished by other physicians and 
providers.
    (iii) Comprehensive care not limited by organ system, or diagnosis.
    (5) The patients seen must be an identifiable group of individuals 
who consider the center to be the continuing source of their health care 
and in which services are furnished by residents under the medical 
direction of teaching physicians.
    (b) Nothing in paragraph (a) of this section may be construed as 
providing a basis for the coverage of services not determined to be 
covered under Medicare, such as routine physical checkups.

[60 FR 63178, Dec. 8, 1995, as amended at 61 FR 59554, Nov. 22, 1996; 70 
FR 47490, Aug. 12, 2005]



Sec. 415.176  Renal dialysis services.

    In the case of renal dialysis services, physicians who are not paid 
under the physician monthly capitation payment method (as described in 
Sec. 414.314 of this chapter) must meet the requirements of 
Secs. 415.170 and 415.172 (concerning physician fee schedule payment for 
services of teaching physicians).



Sec. 415.178  Anesthesia services.

    (a) General rule. (1) For services furnished prior to January 1, 
2010, an unreduced physician fee schedule payment may be made if a 
physician is involved in a single anesthesia procedure involving an 
anesthesia resident. In the case of anesthesia services, the teaching 
physician must be present during all critical portions of the procedure 
and immediately available to furnish services during the entire service 
or procedure. The teaching physician cannot receive an unreduced fee if 
he or she performs services involving other patients during the period 
the anesthesia resident is furnishing services in a single case. 
Additional rules for payment of anesthesia services involving residents 
are specified in Sec. 414.46(c)(1)(iii) of this chapter.

[[Page 200]]

    (2) For services furnished on or after January 1, 2010, payment made 
under Sec. 414.46(e) of this chapter if the teaching anesthesiologist 
(or different teaching anesthesiologists in the same anesthesia group 
practice) is present during all critical or key portions of the 
anesthesia service or procedure involved; and the teaching 
anesthesiologist (or another anesthesiologist with whom the teaching 
anesthesiologist has entered into an arrangement) is immediately 
available to furnish anesthesia services during the entire procedure.
    (b) Documentation. Documentation must indicate the teaching 
physician's presence during all critical or key portions of the 
anesthesia procedure and the immediate availability of another teaching 
anesthesiologist.

[74 FR 62014, Nov. 25, 2009]



Sec. 415.180  Teaching setting requirements for the interpretation of 
diagnostic radiology and other diagnostic tests.

    (a) General rule. Physician fee schedule payment is made for the 
interpretation of diagnostic radiology and other diagnostic tests if the 
interpretation is performed or reviewed by a physician other than a 
resident.
    (b) Documentation. Documentation must indicate that the physician 
personally performed the interpretation or reviewed the resident's 
interpretation with the resident.



Sec. 415.184  Psychiatric services.

    To qualify for physician fee schedule payment for psychiatric 
services furnished under an approved GME program, the physician must 
meet the requirements of Secs. 415.170 and 415.172, including 
documentation, except that the requirement for the presence of the 
teaching physician during the service in which a resident is involved 
may be met by observation of the service by use of a one-way mirror, 
video equipment, or similar device.



Sec. 415.190  Conditions of payment: Assistants at surgery in 
teaching hospitals.

    (a) Basis, purpose, and scope. This section describes the conditions 
under which Medicare pays on a fee schedule basis for the services of an 
assistant at surgery in a teaching hospital. This section is based on 
section 1842(b)(7)(D)(I) of the Act and applies only to hospitals with 
an approved GME residency program. Except as specified in paragraph (c) 
of this section, fee schedule payment is not available for assistants at 
surgery in hospitals with--
    (1) A training program relating to the medical specialty required 
for the surgical procedure; and
    (2) A resident in a training program relating to the specialty 
required for the surgery available to serve as an assistant at surgery.
    (b) Definition. Assistant at surgery means a physician who actively 
assists the physician in charge of a case in performing a surgical 
procedure.
    (c) Conditions for payment for assistants at surgery. Payment on a 
fee schedule basis is made for the services of an assistant at surgery 
in a teaching hospital only if the services meet one of the following 
conditions:
    (1) Are required as a result of exceptional medical circumstances.
    (2) Are complex medical procedures performed by a team of 
physicians, each performing a discrete, unique function integral to the 
performance of a complex medical procedure that requires the special 
skills of more than one physician.
    (3) Constitute concurrent medical care relating to a medical 
condition that requires the presence of, and active care by, a physician 
of another specialty during surgery.
    (4) Are medically required and are furnished by a physician who is 
primarily engaged in the field of surgery, and the primary surgeon does 
not use interns and residents in the surgical procedures that the 
surgeon performs (including preoperative and postoperative care).
    (5) Are not related to a surgical procedure for which CMS determines 
that assistants are used less than 5 percent of the time.



                     Subpart E_Services of Residents



Sec. 415.200  Services of residents in approved GME programs.

    (a) General rules. Services furnished in hospitals by residents in 
approved

[[Page 201]]

GME programs are specifically excluded from being paid as ``physician 
services'' defined in Sec. 414.2 of this chapter and are payable as 
hospital services. This exclusion applies whether or not the resident is 
licensed to practice under the laws of the State in which he or she 
performs the service. The payment methodology for services of residents 
in hospitals and hospital-based providers is set forth in Secs. 413.75 
through 413.83 of this chapter.
    (b) Exception. For low and mid-level evaluation and management 
services furnished under certain conditions in centers located in 
hospital outpatient departments and other ambulatory settings, see 
Sec. 415.174.
    (c) Definitions. See Sec. 415.152 for definitions of terms used in 
this subpart E.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.202  Services of residents not in approved GME programs.

    (a) General rules. For services of a physician employed by a 
hospital who is authorized to practice only in a hospital setting and 
for the services of a resident who is not in any approved GME program, 
payment is made to the hospital on a Part B reasonable cost basis 
regardless of whether the services are furnished to hospital inpatients 
or outpatients.
    (b) Payment. For services described in paragraph (a) of this 
section, payment is made under Part B by reducing the reasonable costs 
of furnishing the services by the beneficiary deductible and paying 80 
percent of the remaining amount. No payment is made for other costs of 
unapproved programs, such as administrative costs related to teaching 
activities of physicians.



Sec. 415.204  Services of residents in skilled nursing facilities and
home health agencies.

    (a) Medicare Part A payment. Payment is made under Medicare Part A 
for interns' and residents' services furnished in the following settings 
that meet the specified requirements:
    (1) Skilled nursing facility. Payment to a participating skilled 
nursing facility may include the cost of services of an intern or 
resident who is in an approved GME program in a hospital with which the 
skilled nursing facility has a transfer agreement that provides, in 
part, for the transfer of patients and the interchange of medical 
records.
    (2) Home health agency. A participating home health agency may 
receive payment for the cost of the services of an intern or resident 
who is under an approved GME program of a hospital with which the home 
health agency is affiliated or under common control if these services 
are furnished as part of the home health visits for a Medicare 
beneficiary. (Nevertheless, see Secs. 413.75 through 413.83 of this 
chapter for the costs of approved GME programs in hospital-based 
providers.)
    (b) Medicare Part B payment. Medical services of a resident of a 
hospital that are furnished by a skilled nursing facility or home health 
agency are paid under Medicare Part B if payment is not provided under 
Medicare Part A. Payment is made under Part B for a resident's services 
by reducing the reasonable costs of furnishing the services by the 
beneficiary deductible and paying 80 percent of the remaining amount.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.206  Services of residents in nonprovider settings.

    Patient care activities of residents in approved GME programs that 
are furnished in nonprovider settings are payable in one of the 
following two ways:
    (a) Direct GME payments. If the conditions in Sec. 413.78 regarding 
patient care activities and training of residents are met, the time 
residents spend in nonprovider settings such as clinics, nursing 
facilities, and physician offices in connection with approved GME 
programs is included in determining the number of full-time equivalency 
residents in the calculation of a teaching hospital's resident count. 
The teaching physician rules on carrier payments in Secs. 415.170 
through 415.184 apply in these teaching settings.
    (b) Physician fee schedule. (1) Services furnished by a resident in 
a nonprovider setting are covered as physician services and payable 
under the physician fee schedule if the following requirements are met:

[[Page 202]]

    (i) The resident is fully licensed to practice medicine, osteopathy, 
dentistry, or podiatry in the State in which the service is performed.
    (ii) The time spent in patient care activities in the nonprovider 
setting is not included in a teaching hospital's full-time equivalency 
resident count for the purpose of direct GME payments.
    (2) Payment may be made regardless of whether a resident is 
functioning within the scope of his or her GME program in the 
nonprovider setting.
    (3) If fee schedule payment is made for the resident's services in a 
nonprovider setting, payment must not be made for the services of a 
teaching physician.
    (4) The carrier must apply the physician fee schedule payment rules 
set forth in subpart A of part 414 of this chapter to payments for 
services furnished by a resident in a nonprovider setting.

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



Sec. 415.208  Services of moonlighting residents.

    (a) Definition. For purposes of this section, the term services of 
moonlighting residents refers to services that licensed residents 
perform that are outside the scope of an approved GME program.
    (b) Services in GME program hospitals. (1) The services of residents 
to inpatients of hospitals in which the residents have their approved 
GME program are not covered as physician services and are payable under 
Secs. 413.75 through 413.83 regarding direct GME payments.
    (2) Services of residents that are not related to their approved GME 
programs and are performed in an outpatient department or emergency 
department of a hospital in which they have their training program are 
covered as physician services and payable under the physician fee 
schedule if all of the following criteria are met:
    (i) The services are identifiable physician services and meet the 
conditions for payment of physician services to beneficiaries in 
providers in Sec. 415.102(a).
    (ii) The resident is fully licensed to practice medicine, 
osteopathy, dentistry, or podiatry by the State in which the services 
are performed.
    (iii) The services performed can be separately identified from those 
services that are required as part of the approved GME program.
    (3) If the criteria specified in paragraph (b)(2) of this section 
are met, the services of the moonlighting resident are considered to 
have been furnished by the individual in his or her capacity as a 
physician, rather than in the capacity of a resident. The carrier must 
review the contracts and agreements for these services to ensure 
compliance with the criteria specified in paragraph (b)(2) of this 
section.
    (4) No payment is made for services of a ``teaching physician'' 
associated with moonlighting services, and the time spent furnishing 
these services is not included in the teaching hospital's full-time 
equivalency count for the indirect GME payment (Sec. 412.105 of this 
chapter) and for the direct GME payment (Secs. 413.75 through 413.83 of 
this chapter).
    (c) Other settings. Moonlighting services of a licensed resident in 
an approved GME program furnished outside the scope of that program in a 
hospital or other setting that does not participate in the approved GME 
program are payable under the physician fee schedule as set forth in 
Sec. 415.206(b)(1).

[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]



PART 416_AMBULATORY SURGICAL SERVICES--Table of Contents



              Subpart A_General Provisions and Definitions

Sec.
416.1  Basis and scope.
416.2  Definitions.

              Subpart B_General Conditions and Requirements

416.25  Basic requirements.
416.26  Qualifying for an agreement.
416.30  Terms of agreement with CMS.
416.35  Termination of agreement.

               Subpart C_Specific Conditions for Coverage

416.40  Condition for coverage--Compliance with State licensure law.

[[Page 203]]

416.41  Condition for coverage--Governing body and management.
416.42  Condition for coverage--Surgical services.
416.43  Conditions for coverage--Quality assessment and performance 
          improvement.
416.44  Condition for coverage--Environment.
416.45  Condition for coverage--Medical staff.
416.46  Condition for coverage--Nursing services.
416.47  Condition for coverage--Medical records.
416.48  Condition for coverage--Pharmaceutical services.
416.49  Condition for coverage--Laboratory and radiologic services.
416.50  Condition for coverage--Patient rights.
416.51  Conditions for coverage--Infection control.
416.52  Conditions for coverage--Patient admission, assessment and 
          discharge.
416.54  Condition for coverage--Emergency preparedness.

  Subpart D_Scope of Benefits for Services Furnished Before January 1, 
                                  2008

416.60  General rules.
416.61  Scope of facility services.
416.65  Covered surgical procedures.
416.75  Performance of listed surgical procedures on an inpatient 
          hospital basis.
416.76  Applicability.

  Subpart E_Prospective Payment System for Facility Services Furnished 
                         Before January 1, 2008

416.120  Basis for payment.
416.121  Applicability.
416.125  ASC facility services payment rate.
416.130  Publication of revised payment methodologies.
416.140  Surveys.

   Subpart F_Coverage, Scope of ASC Services, and Prospective Payment 
      System for ASC Services Furnished on or After January 1, 2008

416.160  Basis and scope
416.161  Applicability of this subpart
416.163  General rules
416.164  Scope of ASC services
416.166  Covered surgical procedures
416.167  Basis of payment
416.171  Determination of payment rates for ASC services
416.172  Adjustments to national payment rates
416.173  Publication of revised payment methodologies and payment rates
416.178  Limitations on administrative and judicial review
416.179  Payment and coinsurance reduction for devices replaced without 
          cost or when full or partial credit is received.

 Subpart G_Adjustment in Payment Amounts for New Technology Intraocular 
             Lenses Furnished by Ambulatory Service Centers

416.180  Basis and scope.
416.185  Process for establishing a new class of new technology IOLs.
416.190  Request for review of payment amount.
416.195  Determination of membership in new classes of new technology 
          IOLs.
416.200  Payment adjustment.

  Subpart H_Requirements Under the Ambulatory Surgical Center Quality 
                        Reporting (ASCQR) Program

416.300  Basis and scope of subpart.
416.305  Participation and withdrawal requirements under the ASCQR 
          Program.
416.310  Data collection and submission requirements under the ASCQR 
          Program.
416.315  Public reporting of data under the ASCQR Program.
416.320  Retention and removal of quality measures under the ASCQR 
          Program.
416.325  Measure maintenance under the ASCQR Program.
416.330  Reconsiderations under the ASCQR Program.

    Authority: Secs. 1102, 1138, and 1871 of the Social Security Act (42 
U.S.C. 1302, 1320b-8, and 1395hh) and section 371 of the Public Health 
Service Act (42 U.S.C. 273).

    Source: 47 FR 34094, Aug. 5, 1982, unless otherwise noted.



              Subpart A_General Provisions and Definitions



Sec. 416.1  Basis and scope.

    (a) Statutory basis. (1) Section 1832(a)(2)(F)(i) of the Act 
provides for Medicare Part B coverage of facility services furnished in 
connection with surgical procedures specified by the Secretary under 
section 1833(i)(1) of the Act.
    (2) Section 1833(i)(1)(A) of the Act requires the Secretary to 
specify the surgical procedures that can be performed safely on an 
ambulatory basis in an ambulatory surgical center.
    (3) Sections 1833(i)(2)(A) and (D) and 1833(a)(1)(G) of the Act 
specify the amounts to be paid for facility services

[[Page 204]]

furnished in connection with the specified surgical procedures when they 
are performed in an ASC.
    (4) Section 1833(i)(2)(C) of the Act provides that if the Secretary 
has not updated amounts for ASC facility services furnished during a 
fiscal year through 2005 or a calendar year beginning with 2006, the 
amounts shall be increased by the percentage increase in the Consumer 
Price Index for all urban consumers as estimated by the Secretary for 
the 12-month period ending with the midpoint of the year involved, 
except that, in fiscal year 2005, the last quarter of calendar year 
2005, and each of the calendar years 2006 through 2009, the increase 
shall be zero percent.
    (5) Section 1833(i)(2)(E) of the Act provides that, with respect to 
surgical procedures furnished on or after January 1, 2007, and before 
the effective date of the implementation of a revised payment system, 
the payment amount shall be the lesser of the ASC payment rate 
established under section 1833(i)(2)(A) of the Act or the prospective 
payment rate for hospital outpatient department services established 
under section 1833(t)(3)(D) of the Act. The lesser payment amount shall 
be determined prior to application of any geographic adjustment.
    (b) Scope. This part sets forth--
    (1) The conditions that an ASC must meet in order to participate in 
the Medicare program;
    (2) The scope of covered services; and
    (3) The conditions for Medicare payment for facility services.

[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, 1991, as amended at 71 
FR 68226, Nov. 24, 2006]



Sec. 416.2  Definitions.

    As used in this part:
    Ambulatory surgical center or ASC means any distinct entity that 
operates exclusively for the purpose of providing surgical services to 
patients not requiring hospitalization and in which the expected 
duration of services would not exceed 24 hours following an admission. 
The entity must have an agreement with CMS to participate in Medicare as 
an ASC, and must meet the conditions set forth in subparts B and C of 
this part.
    ASC services means, for the period before January 1, 2008, facility 
services that are furnished in an ASC, and beginning January 1, 2008, 
means the combined facility services and covered ancillary services that 
are furnished in an ASC in connection with covered surgical procedures.
    Covered ancillary services means items and services that are 
integral to a covered surgical procedure performed in an ASC as provided 
in Sec. 416.164(b), for which payment may be made under Sec. 416.171 in 
addition to the payment for the facility services.
    Covered surgical procedures means those surgical procedures 
furnished before January 1, 2008, that meet the criteria specified in 
Sec. 416.65 and those surgical procedures furnished on or after January 
1, 2008, that meet the criteria specified in Sec. 416.166.
    Facility services means for the period before January 1, 2008, 
services that are furnished in connection with covered surgical 
procedures performed in an ASC, and beginning January 1, 2008, means 
services that are furnished in connection with covered surgical 
procedures performed in an ASC as provided in Sec. 416.164(a) for which 
payment is included in the ASC payment established under Sec. 416.171 
for the covered surgical procedure.

[56 FR 8843, Mar. 1, 1991; 56 FR 23022, May 20, 1991, as amended at 71 
FR 68226, Nov. 24, 2006; 72 FR 42544, Aug. 2, 2007; 73 FR 68811, Nov. 
18, 2008]



              Subpart B_General Conditions and Requirements



Sec. 416.25  Basic requirements.

    Participation as an ASC is limited to facilities that--
    (a) Meet the definition in Sec. 416.2; and
    (b) Have in effect an agreement obtained in accordance with this 
subpart.

[56 FR 8843, Mar. 1, 1991]



Sec. 416.26  Qualifying for an agreement.

    (a) Deemed compliance. CMS may deem an ASC to be in compliance with 
any or all of the conditions set forth in subpart C of this part if--
    (1) The ASC is accredited by a national accrediting body, or 
licensed by a State agency, that CMS determines provides reasonable 
assurance that the conditions are met;

[[Page 205]]

    (2) In the case of deemed status through accreditation by a national 
accrediting body, where State law requires licensure, the ASC complies 
with State licensure requirements; and
    (3) The ASC authorizes the release to CMS, of the findings of the 
accreditation survey.
    (b) Survey of ASCs. (1) Unless CMS deems the ASC to be in compliance 
with the conditions set forth in subpart C of this part, the State 
survey agency must survey the facility to ascertain compliance with 
those conditions, and report its findings to CMS.
    (2) CMS surveys deemed ASCs on a sample basis as part of CMS's 
validation process.
    (c) Acceptance of the ASC as qualified to furnish ambulatory 
surgical services. If CMS determines, after reviewing the survey agency 
recommendation and other evidence relating to the qualification of the 
ASC, that the facility meets the requirements of this part, it sends to 
the ASC--
    (1) Written notice of the determination; and
    (2) Two copies of the ASC agreement.
    (d) Filing of agreement by the ASC. If the ASC wishes to participate 
in the program, it must--
    (1) Have both copies of the ASC agreement signed by its authorized 
representative; and
    (2) File them with CMS.
    (e) Acceptance by CMS. If CMS accepts the agreement filed by the 
ASC, returns to the ASC one copy of the agreement, with a notice of 
acceptance specifying the effective date.
    (f) Appeal rights. If CMS refuses to enter into an agreement or if 
CMS terminates an agreement, the ASC is entitled to a hearing in 
accordance with part 498 of this chapter.

[56 FR 8843, Mar. 1, 1991]



Sec. 416.30  Terms of agreement with CMS.

    As part of the agreement under Sec. 416.26 the ASC must agree to the 
following:
    (a) Compliance with coverage conditions. The ASC agrees to meet the 
conditions for coverage specified in subpart C of this part and to 
report promptly to CMS any failure to do so.
    (b) Limitation on charges to beneficiaries. \1\ The ASC agrees to 
charge the beneficiary or any other person only the applicable 
deductible and coinsurance amounts for facility services for which the 
beneficiary--
---------------------------------------------------------------------------

    \1\ For facility services furnished before July 1987, the ASC had to 
agree to make no charge to the beneficiary, since those services were 
not subject to the part B deductible and coinsurance provisions.
---------------------------------------------------------------------------

    (1) Is entitled to have payment made on his or her behalf under this 
part; or
    (2) Would have been so entitled if the ASC had filed a request for 
payment in accordance with Sec. 410.165 of this chapter.
    (c) Refunds to beneficiaries. (1) The ASC agrees to refund as 
promptly as possible any money incorrectly collected from beneficiaries 
or from someone on their behalf.
    (2) As used in this section, money incorrectly collected means sums 
collected in excess of those specified in paragraph (b) of this section. 
It includes amounts collected for a period of time when the beneficiary 
was believed not to be entitled to Medicare benefits if--
    (i) The beneficiary is later determined to have been entitled to 
Medicare benefits; and
    (ii) The beneficiary's entitlement period falls within the time the 
ASC's agreement with CMS is in effect.
    (d) Furnishing information. The ASC agrees to furnish to CMS, if 
requested, information necessary to establish payment rates specified in 
Secs. 416.120-416.130 in the form and manner that CMS requires.
    (e) Acceptance of assignment. The ASC agrees to accept assignment 
for all facility services furnished in connection with covered surgical 
procedures. For purposes of this section, assignment means an assignment 
under Sec. 424.55 of this chapter of the right to receive payment under 
Medicare Part B and payment under Sec. 424.64 of this chapter (when an 
individual dies before assigning the claim).
    (f) ASCs operated by a hopsital. In an ASC operated by a hospital--
    (1) The agreement is made effective on the first day of the next 
Medicare cost reporting period of the hospital that operates the ASC; 
and

[[Page 206]]

    (2) The ASC participates and is paid only as an ASC.
    (3) Costs for the ASC are treated as a non-reimbursable cost center 
on the hopsital's cost report.
    (g) Additional provisions. The agreement may contain any additional 
provisions that CMS finds necessary or desirable for the efficient and 
effective administration of the Medicare program.

[47 FR 34094, Aug. 5, 1982, as amended at 51 FR 41351, Nov. 14, 1986; 56 
FR 8844, Mar. 1, 1991; 74 FR 60680, Nov. 20, 2009]



Sec. 416.35  Termination of agreement.

    (a) Termination by the ASC--(1) Notice to CMS. An ASC that wishes to 
terminate its agreement must send CMS written notice of its intent.
    (2) Date of termination. The notice may state the intended date of 
termination which must be the first day of a calendar month.
    (i) If the notice does not specify a date, or the date is not 
acceptable to CMS, CMS may set a date that will not be more than 6 
months from the date on the ASC's notice of intent.
    (ii) CMS may accept a termination date that is less than 6 months 
after the date on the ASC's notice if it determines that to do so would 
not unduly disrupt services to the community or otherwise interfere with 
the effective and efficient administration of the Medicare program.
    (3) Voluntary termination. If an ASC ceases to furnish services to 
the community, that shall be deemed to be a voluntary termination of the 
agreement by the ASC, effective on the last day of business with 
Medicare beneficiaries.
    (b) Termination by CMS--(1) Cause for termination. CMS may terminate 
an agreement if it determines that the ASC--
    (i) No longer meets the conditions for coverage as specified under 
Sec. 416.26; or
    (ii) Is not in substantial compliance with the provisions of the 
agreement, the requirements of this subpart, and other applicable 
regulations of subchapter B of this chapter, or any applicable 
provisions of title XVIII of the Act.
    (2) Notice of termination. CMS sends notice of termination to the 
ASC at least 15 days before the effective date stated in the notice.
    (3) Appeal by the ASC. An ASC may appeal the termination of its 
agreement in accordance with the provisions set forth in part 498 of 
this chapter.
    (c) Effect of termination. Payment is not available for ASC services 
furnished on or after the effective date of termination.
    (d) Notice to the public. Prompt notice of the date and effect of 
termination is given to the public by--
    (1) The ASC, after CMS has approved or set a termination date; or
    (2) CMS, when it has terminated the agreement.
    (e) Conditions for reinstatement after termination of agreement by 
CMS. When an agreement with an ASC is terminated by CMS, the ASC may not 
file another agreement to participate in the Medicare program unless 
CMS--
    (1) Finds that the reason for the termination of the prior agreement 
has been removed; and
    (2) Is assured that the reason for the termination will not recur.

[47 FR 34094, Aug. 5, 1982, as amended at 52 FR 22454, June 12, 1987; 56 
FR 8844, Mar. 1, 1991; 61 FR 40347, Aug. 2, 1996; 82 FR 38515, Aug. 14, 
2017]



               Subpart C_Specific Conditions for Coverage



Sec. 416.40  Condition for coverage--Compliance with State licensure law.

    The ASC must comply with State licensure requirements.



Sec. 416.41  Condition for coverage--Governing body and management.

    The ASC must have a governing body that assumes full legal 
responsibility for determining, implementing, and monitoring policies 
governing the ASC's total operation. The governing body has oversight 
and accountability for the quality assessment and performance 
improvement program, ensures that facility policies and programs are 
administered so as to provide quality health care in a safe environment, 
and develops and maintains a disaster preparedness plan.
    (a) Standard: Contract services. When services are provided through 
a contract with an outside resource, the

[[Page 207]]

ASC must assure that these services are provided in a safe and effective 
manner.
    (b) Standard: Hospitalization. (1) The ASC must have an effective 
procedure for the immediate transfer, to a hospital, of patients 
requiring emergency medical care beyond the capabilities of the ASC.
    (2) This hospital must be a local, Medicare-participating hospital 
or a local, nonparticipating hospital that meets the requirements for 
payment for emergency services under Sec. 482.2 of this chapter.
    (3) The ASC must--
    (i) Have a written transfer agreement with a hospital that meets the 
requirements of paragraph (b)(2) of this section; or
    (ii) Ensure that all physicians performing surgery in the ASC have 
admitting privileges at a hospital that meets the requirements of 
paragraph (b)(2) of this section.

[73 FR 68811, Nov. 18, 2008, as amended at 81 FR 64022, Sept. 16, 2016]



Sec. 416.42  Condition for coverage--Surgical services.

    Surgical procedures must be performed in a safe manner by qualified 
physicians who have been granted clinical privileges by the governing 
body of the ASC in accordance with approved policies and procedures of 
the ASC.
    (a) Standard: Anesthetic risk and evaluation. (1) A physician must 
examine the patient immediately before surgery to evaluate the risk of 
anesthesia and of the procedure to be performed.
    (2) Before discharge from the ASC, each patient must be evaluated by 
a physician or by an anesthetist as defined at Sec. 410.69(b) of this 
chapter, in accordance with applicable State health and safety laws, 
standards of practice, and ASC policy, for proper anesthesia recovery.
    (b) Standard: Administration of anesthesia. Anesthetics must be 
administered by only--
    (1) A qualified anesthesiologist; or
    (2) A physician qualified to administer anesthesia, a certified 
registered nurse anesthetist (CRNA), or an anesthesiologist's assistant 
as defined in Sec. 410.69(b) of this chapter, or a supervised trainee in 
an approved educational program. In those cases in which a non-physician 
administers the anesthesia, unless exempted in accordance with paragraph 
(c) of this section, the anesthetist must be under the supervision of 
the operating physician, and in the case of an anesthesiologist's 
assistant, under the supervision of an anesthesiologist.
    (c) Standard: State exemption. (1) An ASC may be exempted from the 
requirement for physician supervision of CRNAs as described in paragraph 
(b)(2) of this section, if the State in which the ASC is located submits 
a letter to CMS signed by the Governor, following consultation with the 
State's Boards of Medicine and Nursing, requesting exemption from 
physician supervision of CRNAs. The letter from the Governor must attest 
that he or she has consulted with State Boards of Medicine and Nursing 
about issues related to access to and the quality of anesthesia services 
in the State and has concluded that it is in the best interests of the 
State's citizens to opt-out of the current physician supervision 
requirement, and that the opt-out is consistent with State law.
    (2) The request for exemption and recognition of State laws, and the 
withdrawal of the request may be submitted at any time, and are 
effective upon submission.

[57 FR 33899, July 31, 1992, as amended at 66 FR 56768, Nov. 13, 2001; 
73 FR 68812, Nov. 18, 2008; 79 FR 27153, May 12, 2014]



Sec. 416.43  Conditions for coverage--Quality assessment and performance improvement.

    The ASC must develop, implement and maintain an ongoing, data-driven 
quality assessment and performance improvement (QAPI) program.
    (a) Standard: Program scope. (1) The program must include, but not 
be limited to, an ongoing program that demonstrates measurable 
improvement in patient health outcomes, and improves patient safety by 
using quality indicators or performance measures associated with 
improved health outcomes and by the identification and reduction of 
medical errors.
    (2) The ASC must measure, analyze, and track quality indicators, 
adverse patient events, infection control and

[[Page 208]]

other aspects of performance that includes care and services furnished 
in the ASC.
    (b) Standard: Program data. (1) The program must incorporate quality 
indicator data, including patient care and other relevant data regarding 
services furnished in the ASC.
    (2) The ASC must use the data collected to--
    (i) Monitor the effectiveness and safety of its services, and 
quality of its care.
    (ii) Identify opportunities that could lead to improvements and 
changes in its patient care.
    (c) Standard: Program activities. (1) The ASC must set priorities 
for its performance improvement activities that--
    (i) Focus on high risk, high volume, and problem-prone areas.
    (ii) Consider incidence, prevalence, and severity of problems in 
those areas.
    (iii) Affect health outcomes, patient safety, and quality of care.
    (2) Performance improvement activities must track adverse patient 
events, examine their causes, implement improvements, and ensure that 
improvements are sustained over time.
    (3) The ASC must implement preventive strategies throughout the 
facility targeting adverse patient events and ensure that all staff are 
familiar with these strategies.
    (d) Standard: Performance improvement projects. (1) The number and 
scope of distinct improvement projects conducted annually must reflect 
the scope and complexity of the ASC's services and operations.
    (2) The ASC must document the projects that are being conducted. The 
documentation, at a minimum, must include the reason(s) for implementing 
the project, and a description of the project's results.
    (e) Standard: Governing body responsibilities. The governing body 
must ensure that the QAPI program--
    (1) Is defined, implemented, and maintained by the ASC.
    (2) Addresses the ASC's priorities and that all improvements are 
evaluated for effectiveness.
    (3) Specifies data collection methods, frequency, and details.
    (4) Clearly establishes its expectations for safety.
    (5) Adequately allocates sufficient staff, time, information systems 
and training to implement the QAPI program.

[73 FR 68812, Nov. 18, 2008]



Sec. 416.44  Condition for coverage--Environment.

    The ASC must have a safe and sanitary environment, properly 
constructed, equipped, and maintained to protect the health and safety 
of patients.
    (a) Standard: Physical environment. The ASC must provide a 
functional and sanitary environment for the provision of surgical 
services.
    (1) Each operating room must be designed and equipped so that the 
types of surgery conducted can be performed in a manner that protects 
the lives and assures the physical safety of all individuals in the 
area.
    (2) The ASC must have a separate recovery room and waiting area.
    (b) Standard: Safety from fire. (1) Except as otherwise provided in 
this section, the ASC must meet the provisions applicable to Ambulatory 
Health Care Occupancies, regardless of the number of patients served, 
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).
    (2) 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 an ASC, 
but only if the waiver will not adversely affect the health and safety 
of the patients.
    (3) The provisions of the Life Safety Code do not apply in a State 
if CMS finds that a fire and safety code imposed by State law adequately 
protects patients in an ASC.
    (4) An ASC may place alcohol-based hand rub dispensers in its 
facility if the dispensers are installed in a manner that adequately 
protects against inappropriate access.

[[Page 209]]

    (5) When a sprinkler system is shut down for more than 10 hours, the 
ASC 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) Beginning July 5, 2017, an ASC must be in compliance with 
Chapter 21.3.2.1, Doors to hazardous areas.
    (c) Standard: Building Safety. Except as otherwise provided in this 
section, the ASC must meet the applicable provisions and must proceed in 
accordance with the 2012 edition of 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).
    (1) Chapters 7, 8, 12, and 13 of the adopted Health Care Facilities 
Code do not apply to an ASC.
    (2) If application of the Health Care Facilities Code required under 
paragraph (c) of this section would result in unreasonable hardship for 
the ASC, 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 patients.
    (d) Standard: Emergency equipment. The ASC medical staff and 
governing body of the ASC coordinates, develops, and revises ASC 
policies and procedures to specify the types of emergency equipment 
required for use in the ASC's operating room. The equipment must meet 
the following requirements:
    (1) Be immediately available for use during emergency situations.
    (2) Be appropriate for the facility's patient population.
    (3) Be maintained by appropriate personnel.
    (e) Standard: Emergency personnel. Personnel trained in the use of 
emergency equipment and in cardiopulmonary resuscitation must be 
available whenever there is a patient in the ASC.
    (f) 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.
    (vii) NFPA 101, Life Safety Code, 2012 edition, issued August 11, 
2011;
    (viii) TIA 12-1 to NFPA 101, issued August 11, 2011.
    (ix) TIA 12-2 to NFPA 101, issued October 30, 2012.
    (x) TIA 12-3 to NFPA 101, issued October 22, 2013.
    (xi) TIA 12-4 to NFPA 101, issued October 22, 2013.
    (2) [Reserved]

[47 FR 34094, Aug. 5, 1982, amended at 53 FR 11508, Apr. 7, 1988; 54 FR 
4026, Jan. 27, 1989; 68 FR 1385, Jan. 10, 2003; 69 FR 18803, Apr. 9, 
2004; 70 FR 15237, Mar. 25, 2005; 71 FR 55339, Sept. 22, 2006; 77 FR 
29030, May 16, 2012; 81 FR 26896, May 4, 2016; 81 FR 42548, June 30, 
2016]



Sec. 416.45  Condition for coverage--Medical staff.

    The medical staff of the ASC must be accountable to the governing 
body.
    (a) Standard: Membership and clinical privileges. Members of the 
medical staff must be legally and professionally qualified for the 
positions to which they are appointed and for the performance of 
privileges granted. The ASC grants privileges in accordance with

[[Page 210]]

recommendations from qualified medical personnel.
    (b) Standard: Reappraisals. Medical staff privileges must be 
periodically reappraised by the ASC. The scope of procedures performed 
in the ASC must be periodically reviewed and amended as appropriate.
    (c) Standard: Other practitioners. If the ASC assigns patient care 
responsibilities to practitioners other than physicians, it must have 
established policies and procedures, approved by the governing body, for 
overseeing and evaluating their clinical activities.



Sec. 416.46  Condition for coverage--Nursing services.

    The nursing services of the ASC must be directed and staffed to 
assure that the nursing needs of all patients are met.
    (a) Standard: Organization and staffing. Patient care 
responsibilities must be delineated for all nursing service personnel. 
Nursing services must be provided in accordance with recognized 
standards of practice. There must be a registered nurse available for 
emergency treatment whenever there is a patient in the ASC.
    (b) [Reserved]



Sec. 416.47  Condition for coverage--Medical records.

    The ASC must maintain complete, comprehensive, and accurate medical 
records to ensure adequate patient care.
    (a) Standard: Organization. The ASC must develop and maintain a 
system for the proper collection, storage, and use of patient records.
    (b) Standard: Form and content of record. The ASC must maintain a 
medical record for each patient. Every record must be accurate, legible, 
and promptly completed. Medical records must include at least the 
following:
    (1) Patient identification.
    (2) Significant medical history and results of physical examination.
    (3) Pre-operative diagnostic studies (entered before surgery), if 
performed.
    (4) Findings and techniques of the operation, including a 
pathologist's report on all tissues removed during surgery, except those 
exempted by the governing body.
    (5) Any allergies and abnormal drug reactions.
    (6) Entries related to anesthesia administration.
    (7) Documentation of properly executed informed patient consent.
    (8) Discharge diagnosis.



Sec. 416.48  Condition for coverage--Pharmaceutical services.

    The ASC must provide drugs and biologicals in a safe and effective 
manner, in accordance with accepted professional practice, and under the 
direction of an individual designated responsible for pharmaceutical 
services.
    (a) Standard: Administration of drugs. Drugs must be prepared and 
administered according to established policies and acceptable standards 
of practice.
    (1) Adverse reactions must be reported to the physician responsible 
for the patient and must be documented in the record.
    (2) Blood and blood products must be administered by only physicians 
or registered nurses.
    (3) Orders given orally for drugs and biologicals must be followed 
by a written order, signed by the prescribing physician.
    (b) [Reserved]



Sec. 416.49  Condition for coverage--Laboratory and radiologic services.

    (a) Standard: Laboratory services. If the ASC performs laboratory 
services, it must meet the requirements of part 493 of this chapter. If 
the ASC does not provide its own laboratory services, it must have 
procedures for obtaining routine and emergency laboratory services from 
a certified laboratory in accordance with part 493 of this chapter. The 
referral laboratory must be certified in the appropriate specialties and 
subspecialties of service to perform the referred tests in accordance 
with the requirements of Part 493 of this chapter.
    (b) Standard: Radiologic services. (1) Radiologic services may only 
be provided when integral to procedures offered by the ASC and must meet 
the requirements specified in Sec. 482.26(b), (c)(2), and (d)(2) of this 
chapter.
    (2) If radiologic services are utilized, the governing body must 
appoint an individual qualified in accordance with

[[Page 211]]

State law and ASC policies who is responsible for assuring all 
radiologic services are provided in accordance with the requirements of 
this section.

[73 FR 68812, Nov. 18, 2008, as amended at 79 FR 27153, May 12, 2014]



Sec. 416.50  Condition for coverage--Patient rights.

    The ASC must inform the patient or the patient's representative or 
surrogate of the patient's rights and must protect and promote the 
exercise of these rights, as set forth in this section. The ASC must 
also post the written notice of patient rights in a place or places 
within the ASC likely to be noticed by patients waiting for treatment or 
by the patient's representative or surrogate, if applicable.
    (a) Standard: Notice of Rights. An ASC must, prior to the start of 
the surgical procedure, provide the patient, the patient's 
representative, or the patient's surrogate with verbal and written 
notice of the patient's rights in a language and manner that ensures the 
patient, the representative, or the surrogate understand all of the 
patient's rights as set forth in this section. The ASC's notice of 
rights must include the address and telephone number of the State agency 
to which patients may report complaints, as well as the Web site for the 
Office of the Medicare Beneficiary Ombudsman.
    (b) Standard: Disclosure of physician financial interest or 
ownership. The ASC must disclose, in accordance with Part 420 of this 
subchapter, and where applicable, provide a list of physicians who have 
financial interest or ownership in the ASC facility. Disclosure of 
information must be in writing.
    (c) Standard: Advance directives. The ASC must comply with the 
following requirements:
    (1) Provide the patient or, as appropriate, the patient's 
representative with written information concerning its policies on 
advance directives, including a description of applicable State health 
and safety laws and, if requested, official State advance directive 
forms.
    (2) Inform the patient or, as appropriate, the patient's 
representative of the patient's right to make informed decisions 
regarding the patient's care.
    (3) Document in a prominent part of the patient's current medical 
record, whether or not the individual has executed an advance directive.
    (d) Standard: Submission and investigation of grievances. The ASC 
must establish a grievance procedure for documenting the existence, 
submission, investigation, and disposition of a patient's written or 
verbal grievance to the ASC. The following criteria must be met:
    (1) All alleged violations/grievances relating, but not limited to, 
mistreatment, neglect, verbal, mental, sexual, or physical abuse, must 
be fully documented.
    (2) All allegations must be immediately reported to a person in 
authority in the ASC.
    (3) Only substantiated allegations must be reported to the State 
authority or the local authority, or both.
    (4) The grievance process must specify timeframes for review of the 
grievance and the provisions of a response.
    (5) The ASC, in responding to the grievance, must investigate all 
grievances made by a patient, the patient's representative, or the 
patient's surrogate regarding treatment or care that is (or fails to be) 
furnished.
    (6) The ASC must document how the grievance was addressed, as well 
as provide the patient, the patient's representative, or the patient's 
surrogate with written notice of its decision. The decision must contain 
the name of an ASC contact person, the steps taken to investigate the 
grievance, the result of the grievance process and the date the 
grievance process was completed.
    (e) Standard: Exercise of rights and respect for property and 
person. (1) The patient has the right to the following:
    (i) Be free from any act of discrimination or reprisal.
    (ii) Voice grievances regarding treatment or care that is (or fails 
to be) provided.
    (iii) Be fully informed about a treatment or procedure and the 
expected outcome before it is performed.
    (2) If a patient is adjudged incompetent under applicable State laws 
by a court of proper jurisdiction, the rights of the patient are 
exercised by the person appointed under State law to act on the 
patient's behalf.

[[Page 212]]

    (3) If a State court has not adjudged a patient incompetent, any 
legal representative or surrogate designated by the patient in 
accordance with State law may exercise the patient's rights to the 
extent allowed by State law.
    (f) Standard: Privacy and safety. The patient has the right to--
    (1) Personal privacy.
    (2) Receive care in a safe setting.
    (3) Be free from all forms of abuse or harassment.
    (g) Standard: Confidentiality of clinical records. The ASC must 
comply with the Department's rules for the privacy and security of 
individually identifiable health information, as specified at 45 CFR 
parts 160 and 164.

[73 FR 68812, Nov. 18, 2008, as amended at 76 FR 65889, Oct. 24, 2011]



Sec. 416.51  Conditions for coverage--Infection control.

    The ASC must maintain an infection control program that seeks to 
minimize infections and communicable diseases.
    (a) Standard: Sanitary environment. The ASC must provide a 
functional and sanitary environment for the provision of surgical 
services by adhering to professionally acceptable standards of practice.
    (b) Standard: Infection control program. The ASC must maintain an 
ongoing program designed to prevent, control, and investigate infections 
and communicable diseases. In addition, the infection control and 
prevention program must include documentation that the ASC has 
considered, selected, and implemented nationally recognized infection 
control guidelines. The program is--
    (1) Under the direction of a designated and qualified professional 
who has training in infection control;
    (2) An integral part of the ASC's quality assessment and performance 
improvement program; and
    (3) Responsible for providing a plan of action for preventing, 
identifying, and managing infections and communicable diseases and for 
immediately implementing corrective and preventive measures that result 
in improvement.

[73 FR 68813, Nov. 18, 2008]



Sec. 416.52  Conditions for coverage--Patient admission, assessment and discharge.

    The ASC must ensure each patient has the appropriate pre-surgical 
and post-surgical assessments completed and that all elements of the 
discharge requirements are completed.
    (a) Standard: Admission and pre-surgical assessment. (1) Not more 
than 30 days before the date of the scheduled surgery, each patient must 
have a comprehensive medical history and physical assessment completed 
by a physician (as defined in section 1861(r) of the Act) or other 
qualified practitioner in accordance with applicable State health and 
safety laws, standards of practice, and ASC policy.
    (2) Upon admission, each patient must have a pre-surgical assessment 
completed by a physician or other qualified practitioner in accordance 
with applicable State health and safety laws, standards of practice, and 
ASC policy that includes, at a minimum, an updated medical record entry 
documenting an examination for any changes in the patient's condition 
since completion of the most recently documented medical history and 
physical assessment, including documentation of any allergies to drugs 
and biologicals.
    (3) The patient's medical history and physical assessment must be 
placed in the patient's medical record prior to the surgical procedure.
    (b) Standard: Post-surgical assessment. (1) The patient's post-
surgical condition must be assessed and documented in the medical record 
by a physician, other qualified practitioner, or a registered nurse 
with, at a minimum, post-operative care experience in accordance with 
applicable State health and safety laws, standards of practice, and ASC 
policy.
    (2) Post-surgical needs must be addressed and included in the 
discharge notes.
    (c) Standard: Discharge. The ASC must--
    (1) Provide each patient with written discharge instructions and 
overnight supplies. When appropriate, make a followup appointment with 
the physician,

[[Page 213]]

and ensure that all patients are informed, either in advance of their 
surgical procedure or prior to leaving the ASC, of their prescriptions, 
post-operative instructions and physician contact information for 
followup care.
    (2) Ensure each patient has a discharge order, signed by the 
physician who performed the surgery or procedure in accordance with 
applicable State health and safety laws, standards of practice, and ASC 
policy.
    (3) Ensure all patients are discharged in the company of a 
responsible adult, except those patients exempted by the attending 
physician.

[73 FR 68813, Nov. 18, 2008]



Sec. 416.54  Condition for coverage--Emergency preparedness.

    The Ambulatory Surgical Center (ASC) must comply with all applicable 
Federal, State, and local emergency preparedness requirements. The ASC 
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 ASC must develop and maintain an emergency 
preparedness plan that must be reviewed, and updated at least annually. 
The plan must do 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, the 
type of services the ASC 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 ASC's efforts to 
contact such officials and, when applicable, of its participation in 
collaborative and cooperative planning efforts.
    (b) Policies and procedures. The ASC 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) A system to track the location of on-duty staff and sheltered 
patients in the ASC's care during an emergency. If on-duty staff or 
sheltered patients are relocated during the emergency, the ASC must 
document the specific name and location of the receiving facility or 
other location.
    (2) Safe evacuation from the ASC, which includes the following:
    (i) Consideration of care and treatment 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.
    (3) A means to shelter in place for patients, staff, and volunteers 
who remain in the ASC.
    (4) A system of medical documentation that does the following:
    (i) Preserves patient information.
    (ii) Protects confidentiality of patient information.
    (iii) Secures and maintains the availability of records.
    (5) The use of volunteers in an emergency and other staffing 
strategies, including the process and role for integration of State and 
Federally designated health care professionals to address surge needs 
during an emergency.
    (6) The role of the ASC under a waiver declared by the Secretary, in 
accordance with section 1135 of the Act, in the provision of care and 
treatment at an alternate care site identified by emergency management 
officials.
    (c) Communication plan. The ASC 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

[[Page 214]]

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) Patients' physicians.
    (iv) 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) ASC's staff.
    (ii) Federal, State, tribal, regional, and local emergency 
management agencies.
    (4) A method for sharing information and medical documentation for 
patients under the ASC's care, as necessary, with other health care 
providers to maintain the continuity of care.
    (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 ASC's needs, and its 
ability to provide assistance, to the authority having jurisdiction, the 
Incident Command Center, or designee.
    (d) Training and testing. The ASC 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 ASC must do all of the following:
    (i) Initial training in emergency preparedness policies and 
procedures to all new and existing staff, individuals providing on-site 
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 ASC must conduct exercises to test the emergency 
plan at least annually. The ASC must do the following:
    (i) Participate in a full-scale exercise that is community-based or 
when a community-based exercise is not accessible, individual, facility-
based. If the ASC experiences an actual natural or man-made emergency 
that requires activation of the emergency plan, the ASC is exempt from 
engaging in an community-based or individual, facility-based full-scale 
exercise for 1 year following the onset of the actual event.
    (ii) Conduct an additional exercise that may include, but is not 
limited to the following:
    (A) A second full-scale exercise that is individual, facility-based.
    (B) A tabletop exercise that includes 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.
    (iii) Analyze the ASC's response to and maintain documentation of 
all drills, tabletop exercises, and emergency events and revise the 
ASC's emergency plan, as needed.
    (e) Integrated healthcare systems. If an ASC is part of a healthcare 
system consisting of multiple separately certified healthcare facilities 
that elects to have a unified and integrated emergency preparedness 
program, the ASC may choose to participate in the healthcare system's 
coordinated emergency preparedness program. If elected, the unified and 
integrated emergency preparedness program must--
    (1) Demonstrate that each separately certified facility within the 
system actively participated in the development of the unified and 
integrated emergency preparedness program.
    (2) Be developed and maintained in a manner that takes into account 
each separately certified facility's unique

[[Page 215]]

circumstances, patient populations, and services offered.
    (3) Demonstrate that each separately certified facility is capable 
of actively using the unified and integrated emergency preparedness 
program and is in compliance.
    (4) Include a unified and integrated emergency plan that meets the 
requirements of paragraphs (a)(2), (3), and (4) of this section. The 
unified and integrated emergency plan must also be based on and include 
the following:
    (i) A documented community-based risk assessment, utilizing an all-
hazards approach.
    (ii) A documented individual facility-based risk assessment for each 
separately certified facility within the health system, utilizing an 
all-hazards approach.
    (5) Include integrated policies and procedures that meet the 
requirements set forth in paragraph (b) of this section, a coordinated 
communication plan and training and testing programs that meet the 
requirements of paragraphs (c) and (d) of this section, respectively.

[81 FR 64022, Sept. 16, 2016]



  Subpart D_Scope of Benefits for Services Furnished Before January 1, 
                                  2008



Sec. 416.60  General rules.

    (a) The services payable under this part are facility services 
furnished to Medicare beneficiaries, by a participating facility, in 
connection with covered surgical procedures specified in Sec. 416.65.
    (b) The surgical procedures, including all preoperative and post-
operative services that are performed by a physician, are covered as 
physician services under part 410 of this chapter.

[56 FR 8844, Mar. 1, 1991]



Sec. 416.61  Scope of facility services.

    (a) Included services. Facility services include, but are not 
limited to--
    (1) Nursing, technician, and related services;
    (2) Use of the facilities where the surgical procedures are 
performed;
    (3) Drugs, biologicals, surgical dressings, supplies, splints, 
casts, and appliances and equipment directly related to the provision of 
surgical procedures;
    (4) Diagnostic or therapeutic services or items directly related to 
the provision of a surgical procedure;
    (5) Administrative, recordkeeping and housekeeping items and 
services; and
    (6) Materials for anesthesia.
    (7) Intra-ocular lenses (IOLs).
    (8) Supervision of the services of an anesthetist by the operating 
surgeon.
    (b) Excluded services. Facility services do not include items and 
services for which payment may be made under other provisions of part 
405 of this chapter, such as physicians' services, laboratory, X-ray or 
diagnostic procedures (other than those directly related to performance 
of the surgical procedure), prosthetic devices (except IOLs), ambulance 
services, leg, arm, back and neck braces, artificial limbs, and durable 
medical equipment for use in the patient's home. In addition, they do 
not include anesthetist services furnished on or after January 1, 1989.

[56 FR 8844, Mar. 1, 1991, as amended at 57 FR 33899, July 31, 1992]



Sec. 416.65  Covered surgical procedures.

    Effective for services furnished before January 1, 2008, covered 
surgical procedures are those procedures that meet the standards 
described in paragraphs (a) and (b) of this section and are included in 
the list published in accordance with paragraph (c) of this section.
    (a) General standards. Covered surgical procedures are those 
surgical and other medical procedures that--
    (1) Are commonly performed on an inpatient basis in hospitals, but 
may be safely performed in an ASC;
    (2) Are not of a type that are commonly performed, or that may be 
safely performed, in physicians' offices;
    (3) Are limited to those requiring a dedicated operating room (or 
suite), and generally requiring a post-operative recovery room or short-
term (not overnight) convalescent room; and
    (4) Are not otherwise excluded under Sec. 411.15 of this chapter.
    (b) Specific standards. (1) Covered surgical procedures are limited 
to those that do not generally exceed--

[[Page 216]]

    (i) A total of 90 minutes operating time; and
    (ii) A total of 4 hours recovery or convalescent time.
    (2) If the covered surgical procedures require anesthesia, the 
anesthesia must be--
    (i) Local or regional anesthesia; or
    (ii) General anesthesia of 90 minutes or less duration.
    (3) Covered surgical procedures may not be of a type that--
    (i) Generally result in extensive blood loss;
    (ii) Require major or prolonged invasion of body cavities;
    (iii) Directly involve major blood vessels; or
    (iv) Are generally emergency or life-threatening in nature.
    (c) Publication of covered procedures. CMS will publish in the 
Federal Register a list of covered surgical procedures and revisions as 
appropriate.

[47 FR 34094, Aug. 5, 1982, as amended at 71 FR 68226, Nov. 24, 2006]



Sec. 416.75  Performance of listed surgical procedures on an inpatient
hospital basis.

    The inclusion of any procedure as a covered surgical procedure under 
Sec. 416.65 does not preclude its coverage in an inpatient hospital 
setting under Medicare.



Sec. 416.76  Applicability.

    The provisions of this subpart apply to facility services furnished 
before January 1, 2008.

[71 FR 68226, Nov. 24, 2006]



  Subpart E_Prospective Payment System for Facility Services Furnished 
                         Before January 1, 2008



Sec. 416.120  Basis for payment.

    The basis for payment depends on where the services are furnished.
    (a) Hospital outpatient department. Payment is in accordance with 
part 419 of this chapter.
    (b) [Reserved]
    (c) ASC--(1) General rule. Payment is based on a prospectively 
determined rate. This rate covers the cost of services such as supplies, 
nursing services, equipment, etc., as specified in Sec. 416.61. The rate 
does not cover physician services or other medical services covered 
under part 410 of this chapter (for example, X-ray services or 
laboratory services) which are not directly related to the performance 
of the surgical procedures. Those services may be billed separately and 
paid on a reasonable charge basis.
    (2) Single and multiple surgical procedures. (i) If one covered 
surgical procedure is furnished to a beneficiary in an operative 
session, payment is based on the prospectively determined rate for that 
procedure.
    (ii) If more than one surgical procedure is furnished in a single 
operative session, payment is based on--
    (A) The full rate for the procedure with the highest prospectively 
determined rate; and
    (B) One half of the prospectively determined rate for each of the 
other procedures.
    (3) Deductibles and coinsurance. Part B deductible and coinsurance 
amounts apply as specified in Sec. 410.152 (a) and (i) of this chapter.

[56 FR 8844, Mar. 1, 1991; 56 FR 23022, May 20, 1991, as amended at 71 
FR 68226, Nov. 24, 2006]



Sec. 416.121  Applicability.

    The provisions of this subpart apply to facility services furnished 
before January 1, 2008.

[71 FR 68226, Nov. 24, 2006]



Sec. 416.125  ASC facility services payment rate.

    (a) The payment rate is based on a prospectively determined standard 
overhead amount per procedure derived from an estimate of the costs 
incurred by ambulatory surgical centers generally in providing services 
furnished in connection with the performance of that procedure.
    (b) The payment must be substantially less than would have been paid 
under the program if the procedure had been performed on an inpatient 
basis in a hospital.
    (c) For services furnished on or after January 1, 2007, and before 
the effective date of implementation of a revised payment system, the 
ASC payment rate for a surgical procedure is the

[[Page 217]]

lesser of the ASC payment rate established under paragraph (a) of this 
section or the prospective payment rate for the procedure established 
under Sec. 419.32 of this chapter. The lesser payment amount is 
determined prior to application of any geographic adjustment.

[56 FR 8844, Mar. 1, 1991, as amended at 71 FR 68226, Nov. 24, 2006]



Sec. 416.130  Publication of revised payment methodologies.

    Whenever CMS proposes to revise the payment rate for ASCs, CMS 
publishes a notice in the Federal Register describing the revision. The 
notice also explains the basis on which the rates were established. 
After reviewing public comments, CMS publishes a notice establishing the 
rates authorized by this section. In setting these rates, CMS may adopt 
reasonable classifications of facilities and may establish different 
rates for different types of surgical procedures.

[47 FR 34094, Aug. 5, 1982, as amended at 56 FR 8844, Mar. 1, 1991]



Sec. 416.140  Surveys.

    (a) Timing, purpose, and procedures. (1) No more often than once a 
year, CMS conducts a survey of a randomly selected sample of 
participating ASCs to collect data for analysis or reevaluation of 
payment rates.
    (2) CMS notifies the selected ASCs by mail of their selection and of 
the form and content of the report the ASCs are required to submit 
within 60 days of the notice.
    (3) If the facility does not submit an adequate report in response 
to CMS's survey request, CMS may terminate the agreement to participate 
in the Medicare program as an ASC.
    (4) CMS may grant a 30-day postponement of the due date for the 
survey report if it determines that the facility has demonstrated good 
cause for the delay.
    (b) Requirements for ASCs. ASCs must--
    (1) Maintain adequate financial records, in the form and containing 
the data required by CMS, to allow determination of the payment rates 
for covered surgical procedures furnished to Medicare beneficiaries 
under this subpart.
    (2) Within 60 days of a request from CMS submit, in the form and 
detail as may be required by CMS, a report of--
    (i) Their operations, including the allowable costs actually 
incurred for the period and the actual number and kinds of surgical 
procedures furnished during the period; and
    (ii) Their customary charges for each surgical procedure furnished 
for the period.

[47 FR 34094, Aug. 5, 1982, as amended at 56 FR 8845, Mar. 1, 1991]



   Subpart F_Coverage, Scope of ASC Services, and Prospective Payment 
      System for ASC Services Furnished on or After January 1, 2008

    Source: 72 FR 42545, Aug. 2, 2007, unless otherwise noted.



Sec. 416.160  Basis and scope.

    (a) Statutory basis. (1) Section 1833(i)(2)(D) of the Act requires 
the Secretary to implement a revised payment system for payment of 
surgical services furnished in ASCs. The statute requires that, in the 
year such system is implemented, the system shall be designed to result 
in the same amount of aggregate expenditures for such services as would 
be made if there was no requirement for a revised payment system. The 
revised payment system shall be implemented no earlier than January 1, 
2006, and no later than January 1, 2008. The statute provides that the 
Secretary may implement a reduction in any annual update for failure to 
report on quality measures as specified by the Secretary. The statute 
also requires that, for CY 2011 and each subsequent year, any annual 
update to the ASC payment system, after application of any reduction in 
the annual update for failure to report on quality measures as specified 
by the Secretary, be reduced by a productivity adjustment. There shall 
be no administrative or judicial review under section 1869 of the Act, 
section 1878 of the Act, or otherwise of the classification system, the 
relative weights, payment amounts,

[[Page 218]]

and the geographic adjustment factor, if any, of the revised payment 
system.
    (2) Section 1833(a)(1)(G) of the Act provides that, beginning with 
the implementation date of a revised payment system for ASC facility 
services furnished in connection with a surgical procedure pursuant to 
section 1833(i)(1)(A) of the Act, the amount paid shall be 80 percent of 
the lesser of the actual charge for such services or the amount 
determined by the Secretary under the revised payment system.
    (3) Section 1833(i)(1)(A) of the Act requires the Secretary to 
specify the surgical procedures that can be performed safely on an 
ambulatory basis in an ASC.
    (4) Section 1834(d) of the Act specifies that, when screening 
colonoscopies or screening flexible sigmoidoscopies are performed in an 
ASC or hospital outpatient department, payment shall be based on the 
lesser of the amount under the fee schedule that would apply to such 
services if they were performed in a hospital outpatient department in 
an area or the amount under the fee schedule that would apply to such 
services if they were performed in an ambulatory surgical center in the 
same area. Section 1834(d) of the Act also specifies that, in the case 
of screening flexible sigmoidoscopy and screening colonoscopy services, 
the payment amounts must not exceed the payment rates established for 
the related diagnostic services.
    (5) Section 1833(a)(1) of the Act requires 100 percent payment for 
preventive services described in section 1861(ww)(2) of the Act 
(excluding electrocardiograms) to which the United States Preventive 
Services Task Force (USPSTF) has given a grade of A or B for any 
indication or population. Section 1833(b)(1) of the Act also specifies 
that the Part B deductible shall not apply with respect to preventive 
services described in section 1861(ww)(2) of the Act (excluding 
electrocardiograms) to which the USPSTF has given a grade of A or B for 
any indication or population.
    (b) Scope. This subpart sets forth--
    (1) The scope of ASC services and the criteria for determining the 
covered surgical procedures for which Medicare provides payment for the 
associated facility services and covered ancillary services;
    (2) The basis of payment for facility services and for covered 
ancillary services furnished in an ASC in connection with a covered 
surgical procedure;
    (3) The methodologies by which Medicare determines payment amounts 
for ASC services.

[72 FR 42545, Aug. 2, 2007, as amended at 75 FR 72264, Nov. 24, 2010; 77 
FR 68558, Nov. 15, 2012]



Sec. 416.161  Applicability of this subpart.

    The provisions of this subpart apply to ASC services furnished on or 
after January 1, 2008.



Sec. 416.163  General rules.

    (a) Payment is made under this subpart for ASC services specified in 
Secs. 416.164(a) and (b) furnished to Medicare beneficiaries by a 
participating ASC in connection with covered surgical procedures as 
determined by the Secretary in accordance with Sec. 416.166.
    (b) Payment for physicians' services and payment for anesthetists' 
services are made in accordance with part 414 of this subchapter.
    (c) Payment for items and services other than physicians' and 
anesthetists' services, as specified in Sec. 416.164(c), is made in 
accordance with Sec. 410.152 of this subchapter.



Sec. 416.164  Scope of ASC services.

    (a) Included facility services. ASC services for which payment is 
packaged into the ASC payment for a covered surgical procedure under 
Sec. 416.166 include, but are not limited to--
    (1) Nursing, technician, and related services;
    (2) Use of the facility where the surgical procedures are performed;
    (3) Any laboratory testing performed under a Clinical Laboratory 
Improvement Amendments of 1988 (CLIA) certificate of waiver;
    (4) Drugs and biologicals for which separate payment is not allowed 
under the hospital outpatient prospective payment system (OPPS);
    (5) Medical and surgical supplies not on pass-through status under 
subpart G of part 419 of this subchapter;
    (6) Equipment;

[[Page 219]]

    (7) Surgical dressings;
    (8) Implanted prosthetic devices, including intraocular lenses 
(IOLs), and related accessories and supplies not on pass-through status 
under subpart G of part 419 of this subchapter;
    (9) Implanted DME and related accessories and supplies not on pass-
through status under subpart G of part 419 of this subchapter;
    (10) Splints and casts and related devices;
    (11) Radiology services for which separate payment is not allowed 
under the OPPS and other diagnostic tests or interpretive services that 
are integral to a surgical procedure, except certain diagnostic tests 
for which separate payment is allowed under the OPPS;
    (12) Administrative, recordkeeping and housekeeping items and 
services;
    (13) Materials, including supplies and equipment for the 
administration and monitoring of anesthesia; and
    (14) Supervision of the services of an anesthetist by the operating 
surgeon.
    (b) Covered ancillary services. Ancillary items and services that 
are integral to a covered surgical procedure, as defined in 
Sec. 416.166, and for which separate payment is allowed include:
    (1) Brachytherapy sources;
    (2) Certain implantable items that have pass-through status under 
the OPPS;
    (3) Certain items and services that CMS designates as contractor-
priced, including, but not limited to, the acquisition or procurement of 
corneal tissue for corneal transplant procedures;
    (4) Certain drugs and biologicals for which separate payment is 
allowed under the OPPS;
    (5) Certain radiology services and certain diagnostic tests for 
which separate payment is allowed under the OPPS.
    (c) Excluded services. ASC services do not include items and 
services outside the scope of ASC services for which payment may be made 
under part 414 of this subchapter in accordance with Sec. 410.152, 
including, but not limited to--
    (1) Physicians' services (including surgical procedures and all 
preoperative and postoperative services that are performed by a 
physician);
    (2) Anesthetists' services;
    (3) Radiology services (other than those integral to performance of 
a covered surgical procedure);
    (4) Diagnostic procedures (other than those directly related to 
performance of a covered surgical procedure);
    (5) Ambulance services;
    (6) Leg, arm, back, and neck braces other than those that serve the 
function of a cast or splint;
    (7) Artificial limbs;
    (8) Nonimplantable prosthetic devices and DME.

[72 FR 42545, Aug. 2, 2007, as amended at 79 FR 67030, Nov. 10, 2014; 80 
FR 70604, Nov. 13, 2015]



Sec. 416.166  Covered surgical procedures.

    (a) Covered surgical procedures. Effective for services furnished on 
or after January 1, 2008, covered surgical procedures are those 
procedures that meet the general standards described in paragraph (b) of 
this section (whether commonly furnished in an ASC or a physician's 
office) and are not excluded under paragraph (c) of this section.
    (b) General standards. Subject to the exclusions in paragraph (c) of 
this section, covered surgical procedures are surgical procedures 
specified by the Secretary and published in the Federal Register and/or 
via the Internet on the CMS Web site that are separately paid under the 
OPPS, that would not be expected to pose a significant safety risk to a 
Medicare beneficiary when performed in an ASC, and for which standard 
medical practice dictates that the beneficiary would not typically be 
expected to require active medical monitoring and care at midnight 
following the procedure.
    (c) General exclusions. Notwithstanding paragraph (b) of this 
section, covered surgical procedures do not include those surgical 
procedures that--
    (1) Generally result in extensive blood loss;
    (2) Require major or prolonged invasion of body cavities;
    (3) Directly involve major blood vessels;
    (4) Are generally emergent or life-threatening in nature;
    (5) Commonly require systemic thrombolytic therapy;

[[Page 220]]

    (6) Are designated as requiring inpatient care under Sec. 419.22(n) 
of this subchapter;
    (7) Can only be reported using a CPT unlisted surgical procedure 
code; or
    (8) Are otherwise excluded under Sec. 411.15 of this subchapter.

[72 FR 42545, Aug. 2, 2007, as amended at 76 FR 74582, Nov. 30, 2011]



Sec. 416.167  Basis of payment.

    (a) Unit of payment. Under the ASC payment system, prospectively 
determined amounts are paid for ASC services furnished to Medicare 
beneficiaries in connection with covered surgical procedures. Covered 
surgical procedures and covered ancillary services are identified by 
codes established under the Healthcare Common Procedure Coding System 
(HCPCS). The unadjusted national payment rate is determined according to 
the methodology described in Sec. 416.171. The manner in which the 
Medicare payment amount and the beneficiary coinsurance amount for each 
ASC service is determined is described in Sec. 416.172.
    (b) Ambulatory payment classification (APC) groups and payment 
weights. (1) ASC covered surgical procedures are classified using the 
APC groups described in Sec. 419.31 of this subchapter.
    (2) For purposes of calculating ASC national payment rates under the 
methodology described in Sec. 416.171, except as specified in paragraph 
(b)(3) of this section, an ASC relative payment weight is determined 
based on the APC relative payment weight for each covered surgical 
procedure and covered ancillary service that has an applicable APC 
relative payment weight described in Sec. 419.31 of this subchapter.
    (3) Notwithstanding paragraph (b)(2) of this section, the relative 
payment weights for services paid in accordance with Sec. 416.171(d) are 
determined so that the national ASC payment rate does not exceed the 
unadjusted nonfacility practice expense amount paid under the Medicare 
physician fee schedule for such procedures under subpart B of part 414 
of this subchapter.



Sec. 416.171  Determination of payment rates for ASC services.

    (a) Standard methodology. The standard methodology for determining 
the national unadjusted payment rate for ASC services is to calculate 
the product of the applicable conversion factor and the relative payment 
weight established under Sec. 416.167(b), unless otherwise indicated in 
this section.
    (1) Conversion factor for CY 2008. CMS calculates a conversion 
factor so that payment for ASC services furnished in CY 2008 would 
result in the same aggregate amount of expenditures as would be made if 
the provisions in this Subpart F did not apply, as estimated by CMS.
    (2) Conversion factor for CY 2009 and subsequent calendar years. The 
conversion factor for a calendar year is equal to the conversion factor 
calculated for the previous year, updated as follows:
    (i) For CY 2009, the update is equal to zero percent.
    (ii) For CY 2010 and subsequent calendar years, the update is the 
Consumer Price Index for All Urban Consumers (U.S. city average) as 
estimated by the Secretary for the 12-month period ending with the 
midpoint of the year involved.
    (iii) For CY 2014 and subsequent calendar years, the Consumer Price 
Index for All Urban Consumers update determined under paragraph 
(a)(2)(ii) of this section is reduced by 2.0 percentage points for an 
ASC that fails to meet the standards for reporting of ASC quality 
measures as established by the Secretary for the corresponding calendar 
year.
    (iv) Productivity adjustment. (A) For calendar year 2011 and 
subsequent years, the Consumer Price Index for All Urban Consumers 
determined under paragraph (a)(2)(ii) of this section, after application 
of any reduction under paragraph (a)(2)(iii) of this section, is reduced 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act.
    (B) The application of the provisions of paragraph (a)(2)(iv)(A) of 
this section may result in the update being less than zero percent for a 
year, and may result in payment rates for a year being less than the 
payment rates for the preceding year.
    (b) Exception. The national ASC payment rates for the following 
items and services are not determined in accordance with paragraph (a) 
of this section

[[Page 221]]

but are paid an amount derived from the payment rate for the equivalent 
item or service set under the payment system established in part 419 of 
this subchapter as updated annually in the Federal Register and/or via 
the Internet on the CMS Web site. If a payment rate is not available, 
the following items and services are designated as contractor-priced:
    (1) Covered ancillary services specified in Sec. 416.164(b), with 
the exception of radiology services and certain diagnostic tests as 
provided in Sec. 416.164(b)(5);
    (2) The device portion of device-intensive procedures, which are 
procedures with a HCPCS code-level device offset of greater than 40 
percent when calculated according to the standard OPPS APC ratesetting 
methodology.
    (3) Procedures using certain separately paid implantable devices 
that are approved for transitional pass-through payment in accordance 
with Sec. 419.66 of this subchapter.
    (c) Transitional payment rates. (1) ASC payment rates for CY 2008 
are a transitional blend of 75 percent of the CY 2007 ASC payment rate 
for a covered surgical procedure on the CY 2007 ASC list of surgical 
procedures and 25 percent of the payment rate for the procedure 
calculated under the methodology described in paragraph (a) of this 
section.
    (2) ASC payment rates for CY 2009 are a transitional blend of 50 
percent of the CY 2007 ASC payment rate for a covered surgical procedure 
on the CY 2007 ASC list of surgical procedures and 50 percent of the 
payment rate for the procedure calculated under the methodology 
described in paragraph (a) of this section.
    (3) ASC payment rates for CY 2010 are a transitional blend of 25 
percent of the CY 2007 ASC payment rate for a covered surgical procedure 
on the CY 2007 ASC list of surgical procedures and 75 percent of the 
payment rate for the procedure calculated under the methodology 
described in paragraph (a) of this section.
    (4) The national ASC payment rate for CY 2011 and subsequent 
calendar years for a covered surgical procedure designated in accordance 
with Sec. 416.166 is the payment rates for the procedure calculated 
under the methodology described in paragraph (a) of this section.
    (5) Covered ancillary services described in Sec. 416.164(b) and 
surgical procedures identified as covered when performed in an ASC under 
Sec. 416.166 for the first time beginning on or after January 1, 2008, 
are not subject to the transitional payment rates applicable in CYs 2008 
through 2010 for ASC facility services.
    (d) Limitation on payment rates for office-based surgical procedures 
and covered ancillary radiology services and certain diagnostic tests. 
Notwithstanding the provisions of paragraph (a) of this section, for any 
covered surgical procedure under Sec. 416.166 that CMS determines is 
commonly performed in physicians' offices or for any covered ancillary 
radiology service or diagnostic test under Sec. 416.164(b)(5), excluding 
those listed in paragraphs (d)(1) and (d)(2) of this section, the 
national unadjusted ASC payment rates for these procedures and services 
will be the lesser of the amount determined under paragraph (a) of this 
section or the amount calculated at the nonfacility practice expense 
relative value units under Sec. 414.22(b)(5)(i)(B) of this chapter 
multiplied by the conversion factor described in Sec. 414.20(a)(3) of 
this chapter.
    (1) The national unadjusted ASC payment rate for covered ancillary 
radiology services that involve certain nuclear medicine procedures will 
be the amount determined under paragraph (a) of this section.
    (2) The national unadjusted ASC payment rate for covered ancillary 
radiology services that use contrast agents will be the amount 
determined under paragraph (a) of this section.
    (e) Budget neutrality. (1) For CY 2008, CMS establishes the 
conversion factor to result in budget neutrality as estimated by CMS in 
accordance with paragraph (a)(1) of this section.
    (2) For CY 2009 and subsequent calendar years, CMS adjusts the ASC 
relative payment weights under Sec. 416.167(b)(2) as needed so that any 
updates and adjustments made under

[[Page 222]]

Sec. 419.50(a) of this subchapter are budget neutral as estimated by 
CMS.

[72 FR 42545, Aug. 2, 2007, as amended at 75 FR 72264, Nov. 24, 2010; 76 
FR 74582, Nov. 30, 2011; 77 FR 277, Jan. 4, 2012; 77 FR 68558, Nov. 15, 
2012; 79 FR 67030, Nov. 10, 2014; 81 FR 79879, Nov. 14, 2016]



Sec. 416.172  Adjustments to national payment rates.

    (a) General rule. Contractors adjust the payment rates established 
for ASC services to determine Medicare program payment and beneficiary 
coinsurance amounts in accordance with paragraphs (b) through (g) of 
this section.
    (b) Lesser of actual charge or geographically adjusted payment rate. 
Payments to ASCs equal 80 percent of the lesser of--
    (1) The actual charge for the service; or
    (2) The geographically adjusted payment rate determined under this 
subpart.
    (c) Geographic adjustment--(1) General rule. Except as provided in 
paragraph (c)(2) of this section, the national ASC payment rates 
established under Sec. 416.171 for covered surgical procedures are 
adjusted for variations in ASC labor costs across geographic areas using 
wage index values, labor and nonlabor percentages, and localities 
specified by the Secretary.
    (2) Exception. The geographic adjustment is not applied to the 
payment rates set for drugs, biologicals, devices with OPPS transitional 
pass-through payment status, and brachytherapy sources.
    (d) Deductibles and coinsurance. Part B deductible and coinsurance 
amounts apply as specified in Secs. 410.152(a) and (i)(2) of this 
subchapter.
    (e) Payment reductions for multiple surgical procedures--(1) General 
rule. Except as provided in paragraph (e)(2) of this section, when more 
than one covered surgical procedure for which payment is made under the 
ASC payment system is performed during an operative session, the 
Medicare program payment amount and the beneficiary coinsurance amount 
are based on--
    (i) 100 percent of the applicable ASC payment amount for the 
procedure with the highest national unadjusted ASC payment rate; and
    (ii) 50 percent of the applicable ASC payment amount for all other 
covered surgical procedures.
    (2) Exception: Procedures not subject to multiple procedure 
discounting. CMS may apply any policies or procedures used with respect 
to multiple procedures under the prospective payment system for hospital 
outpatient department services under Part 419 of this subchapter as may 
be consistent with the equitable and efficient administration of this 
part.
    (f) Interrupted procedures. (1) Subject to the provisions of 
paragraph (f)(2) of this section, when a covered surgical procedure or 
covered ancillary service is terminated prior to completion due to 
extenuating circumstances or circumstances that threaten the well-being 
of the patient, the Medicare program payment amount and the beneficiary 
coinsurance amount are based on one of the following:
    (i) The full program and beneficiary coinsurance amounts if the 
procedure for which anesthesia is planned is discontinued after the 
induction of anesthesia or after the procedure is started;
    (ii) One-half of the full program and beneficiary coinsurance 
amounts if the procedure for which anesthesia is planned is discontinued 
after the patient is prepared for surgery and taken to the room where 
the procedure is to be performed but before the anesthesia is induced; 
or
    (iii) One-half of the full program and beneficiary coinsurance 
amounts if a covered surgical procedure or covered ancillary service for 
which anesthesia is not planned is discontinued after the patient is 
prepared and taken to the room where the service is to be provided.
    (2) Beginning CY 2016, if the covered surgical procedure is a 
device-intensive procedure, the full device portion of the ASC device-
intensive procedure is removed prior to determining the Medicare program 
payment amount and the beneficiary coinsurance amount identified in 
paragraph (f)(1)(ii) of this section.
    (g) Payment adjustment for new technology intraocular lenses 
(NTIOLs). A payment adjustment will be made for

[[Page 223]]

insertion of an IOL approved as belonging to a class of NTIOLs as 
defined in subpart G.

[72 FR 42545, Aug. 2, 2007, as amended at 80 FR 70604, Nov. 13, 2015]



Sec. 416.173  Publication of revised payment methodologies and payment rates.

    CMS publishes annually, through notice and comment rulemaking in the 
Federal Register and/or via the Internet on the CMS Web site, the 
payment methodologies and payment rates for ASC services and designates 
the covered surgical procedures and covered ancillary services for which 
CMS will make an ASC payment and other revisions as appropriate.

[76 FR 74582, Nov. 30, 2011]



Sec. 416.178  Limitations on administrative and judicial review.

    There is no administrative or judicial review under section 1869 of 
the Act, section 1878 of the Act, or otherwise of the following:
    (a) The classification system;
    (b) Relative weights;
    (c) Payment amounts; and
    (d) Geographic adjustment factors.



Sec. 416.179  Payment and coinsurance reduction for devices replaced
without cost or when full or partial credit is received.

    (a) General rule. CMS reduces the amount of payment for a covered 
surgical procedure for which CMS determines that a significant portion 
of the payment is attributable to the cost of an implanted device not on 
pass-through status under subpart G of part 419 of this subchapter when 
one of the following situations occur:
    (1) The device is replaced without cost to the ASC or the 
beneficiary;
    (2) The ASC receives full credit for the cost of a replaced device; 
or
    (3) The ASC receives partial credit for the cost of a replaced 
device but only where the amount of the device credit is greater than or 
equal to 50 percent of the cost of the new replacement device being 
implanted.
    (b) Amount of reduction to the ASC payment for the covered surgical 
procedure. (1) The amount of the reduction to the ASC payment made under 
paragraphs (a)(1) and (a)(2) of this section is calculated in the same 
manner as the device payment reduction that would be applied to the ASC 
payment for the covered surgical procedure in order to remove 
predecessor device costs so that the ASC payment amount for a device 
with pass-through status under Sec. 419.66 of this subchapter represents 
the full cost of the device, and no packaged device payment is provided 
through the ASC payment for the covered surgical procedure.
    (2) The amount of the reduction to the ASC payment made under 
paragraph (a)(3) of this section is 50 percent of the payment reduction 
that would be calculated under paragraph (b)(1) of this section.
    (c) Amount of beneficiary coinsurance. The beneficiary coinsurance 
is calculated based on the ASC payment for the covered surgical 
procedure after application of the reduction under paragraph (b) of this 
section.

[72 FR 42545, Aug. 2, 2007, as amended at 72 FR 66932, No. 27, 2007]



 Subpart G_Adjustment in Payment Amounts for New Technology Intraocular 
             Lenses Furnished by Ambulatory Service Centers

    Source: 71 FR 68226, Nov. 24, 2006, unless otherwise noted.



Sec. 416.180  Basis and scope.

    (a) Basis. This subpart implements section 141 of Public Law 103-
432, which provides for adjustments to payment amounts for new 
technology intraocular lenses (IOLs) furnished at ambulatory surgical 
centers (ASCs).
    (b) Scope. This subpart sets forth--
    (1) The process for interested parties to request that CMS review 
the appropriateness of the ASC facility fee for insertion of an IOL. 
This process includes a review of whether that payment is reasonable and 
related to the cost of acquiring a lens determined by CMS as belonging 
to a class of new technology IOLs;
    (2) Factors that CMS considers for determination of a new class of 
new technology IOLs; and

[[Page 224]]

    (3) Application of the payment adjustment.



Sec. 416.185  Process for establishing a new class of new technology IOLs.

    (a) Announcement of deadline for requests for review. CMS announces 
the deadline for each year's requests for review of a new class of new 
technology IOLs in the final rule updating the ASC payment rates for 
that calendar year.
    (b) Announcement of new classes of new technology IOLs for which 
review requests have been made and solicitation of public comments. CMS 
announces the requests for review received in a calendar year and the 
deadline for public comments regarding the requests in the proposed rule 
updating the ASC payment rates for the following calendar year. The 
deadline for submission of public comments is 30 days following the date 
of the publication of the proposed rule.
    (c) Announcement of determinations regarding requests for review. 
CMS announces its determinations for a calendar year in the final rule 
updating the ASC payment rates for the following calendar year. CMS 
publishes the codes and effective dates allowed for those lenses 
recognized by CMS as belonging to a class of new technology IOLs. New 
classes of new technology IOLs are effective 30 days following the date 
of publication of the final rule.



Sec. 416.190  Request for review of payment amount.

    (a) When requests can be submitted. A request for review of the 
appropriateness of ASC payment for insertion of an IOL that might 
qualify for a payment adjustment as belonging to a new class of new 
technology IOLs must be submitted to CMS in accordance with the annual 
published deadline.
    (b) Who may submit a request. Any individual, partnership, 
corporation, association, society, scientific or academic establishment, 
or professional or trade organization able to furnish the information 
required in paragraph (c) of this section may request that CMS review 
the appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act with respect to an IOL that meets the 
criteria of a new technology IOL under Sec. 416.195.
    (c) Content of a request. In order to be accepted by CMS for review, 
a request for review of the ASC payment amount for insertion of an IOL 
must include all the information as specified by CMS.
    (d) Confidential information. In order for CMS to invoke the 
protection allowed under Exemption 4 of the Freedom of Information Act 
(5 U.S.C. 552(b)(4)) and, with respect to trade secrets, the Trade 
Secrets Act (18 U.S.C. 1905), the requestor must clearly identify all 
information that is to be characterized as confidential.



Sec. 416.195  Determination of membership in new classes of new technology IOLs.

    (a) Factors to be considered. CMS uses the following criteria to 
determine whether an IOL qualifies for a payment adjustment as a member 
of a new class of new technology IOLs when inserted at an ASC:
    (1) The IOL is considered new. CMS will evaluate an application for 
a new technology IOL only if the IOL type has received initial FDA 
premarket approval within the 3 years prior to the new technology IOL 
application submission date.
    (2) The IOL shall have a new lens characteristic in comparison to 
currently available IOLs. The labeling, which must be approved by FDA, 
shall contain a claim of a specific clinical benefit imparted by the new 
lens characteristic.
    (3) The IOL is not described by an active or expired class of new 
technology IOLs; that is, it does not share a predominant, class-
defining characteristic associated with improved clinical outcomes with 
members of an active or expired class.
    (4) Any specific clinical benefit referred to in paragraph (a)(2) of 
this section must be supported by evidence that demonstrates that the 
IOL results in a measurable, clinically meaningful, improved outcome. 
Improved outcomes include:
    (i) Reduced risk of intraoperative or postoperative complication or 
trauma;
    (ii) Accelerated postoperative recovery;
    (iii) Reduced induced astigmatism;
    (iv) Improved postoperative visual acuity;

[[Page 225]]

    (v) More stable postoperative vision;
    (vi) Other comparable clinical advantages.
    (b) CMS determination of eligibility for payment adjustment. CMS 
reviews the information submitted with a completed request for review, 
public comments submitted timely, and other pertinent information and 
makes a determination as follows:
    (1) The IOL is eligible for a payment adjustment as a member of a 
new class of new technology IOLs.
    (2) The IOL is a member of an active class of new technology IOLs 
and is eligible for a payment adjustment for the remainder of the period 
established for that class.
    (3) The IOL does not meet the criteria for designation as a new 
technology IOL and a payment adjustment is not appropriate.

[71 FR 68226, Nov. 24, 2006, as amended at 77 FR 68558, Nov. 15, 2012; 
80 FR 70604, Nov. 13, 2015]



Sec. 416.200  Payment adjustment.

    (a) CMS establishes the amount of the payment adjustment for classes 
of new technology IOLs through proposed and final rulemaking in 
connection with ASC facility services.
    (b) CMS adjusts the payment for insertion of an IOL approved as 
belonging to a class of new technology IOLs for the 5-year period of 
time established for that class.
    (c) Upon expiration of the 5-year period of the payment adjustment, 
payment reverts to the standard rate for IOL insertion procedures 
performed in ASCs.
    (d) ASCs that furnish an IOL designated by CMS as belonging to a 
class of new technology IOLs must submit claims using billing codes 
specified by CMS to receive the new technology IOL payment adjustment.



  Subpart H_Requirements Under the Ambulatory Surgical Center Quality 
                        Reporting (ASCQR) Program

    Source: 80 FR 70604, Nov. 13, 2015, unless otherwise noted.



Sec. 416.300  Basis and scope of subpart.

    (a) Statutory basis. Section 1833(i)(2)(D)(iv) and (i)(7) of the Act 
authorizes the Secretary to implement a revised ASC payment system in a 
manner so as to provide for a 2.0 percentage point reduction in any 
annual update for an ASC's failure to report on quality measures in 
accordance with the Secretary's requirements.
    (b) Scope. This subpart contains specific requirements and standards 
for the ASCQR Program.



Sec. 416.305  Participation and withdrawal requirements under 
the ASCQR Program.

    (a) Participation in the ASCQR Program. Except as provided in 
paragraph (c) of this section, an ambulatory surgical center (ASC) is 
considered as participating in the ASCQR Program once the ASC submits 
any quality measure data to the ASCQR Program and has been designated as 
open in the Certification and Survey Provider Enhanced Reporting system 
for at least four months prior to the beginning of data collection for a 
payment determination.
    (b) Withdrawal from the ASCQR Program. (1) An ASC may withdraw from 
the ASCQR Program by submitting to CMS a withdrawal of participation 
form that can be found in the secure portion of the QualityNet Web site.
    (2) An ASC may withdraw from the ASCQR Program any time up to and 
including August 31 of the year preceding a payment determination.
    (3) Except as provided in paragraph (c) of this section, an ASC will 
incur a 2.0 percentage point reduction in its ASC annual payment update 
for that payment determination year and any subsequent payment 
determinations in which it is withdrawn.
    (4) An ASC will be considered as rejoining the ASCQR Program if it 
begins to submit any quality measure data again to the ASCQR Program.
    (c) Minimum case volume for program participation. ASCs with fewer 
than 240 Medicare claims (Medicare primary and secondary payer) per year 
during an annual reporting period for a payment determination year are 
not required to participate in the ASCQR

[[Page 226]]

Program for the subsequent annual reporting period for that subsequent 
payment determination year.
    (d) Indian Health Service hospital outpatient department 
participation. Beginning with the CY 2017 payment determination, Indian 
Health Service hospital outpatient departments that bill Medicare under 
the Ambulatory Surgical Center payment system are not considered ASCs 
for the purposes of the ASCQR Program. These facilities are not required 
to meet ASCQR Program requirements and will not receive payment 
reductions under the ASCQR Program.



Sec. 416.310  Data collection and submission requirements under 
the ASCQR Program.

    (a) Requirements for claims-based measures using quality data codes 
(QDCs). (1) ASCs must submit complete data on individual claims-based 
quality measures through a claims-based reporting mechanism by 
submitting the appropriate QDCs on the ASC's Medicare claims.
    (2) The data collection period for claims-based quality measures 
reported using QDCs is the calendar year 2 years prior to the payment 
determination year. Only claims for services furnished in each calendar 
year paid by the Medicare Administrative Contractor (MAC) by April 30 of 
the following year of the ending data collection time period will be 
included in the data used for the payment determination year.
    (3) For ASCQR Program purposes, data completeness for claims-based 
measures using QDCs is determined by comparing the number of Medicare 
claims (where Medicare is the primary or secondary payer) meeting 
measure specifications that contain the appropriate QDCs with the number 
of Medicare claims that meet measure specifications, but do not have the 
appropriate QDCs on the submitted Medicare claim. The minimum threshold 
for successful reporting is that at least 50 percent of Medicare claims 
meeting measure specifications contain the appropriate QDCs. ASCs that 
meet this minimum threshold are regarded as having provided complete 
data for the claims-based measures using QDCs for the ASCQR Program.
    (b) Requirements for claims-based measures not using QDCs. The data 
collection period for claims-based quality measures not using QDCs is 
paid Medicare fee-for-service claims from the calendar year 2 years 
prior to the payment determination year. Only claims for services 
furnished in each calendar year paid by the MAC by April 30 of the 
following year of the ending data collection time period will be 
included in the data used for the payment determination.
    (c) Requirements for data submitted via an online data submission 
tool--(1) Requirements for data submitted via a CMS online data 
submission tool--(i) QualityNet account for Web-based measures. ASCs 
must maintain a QualityNet account in order to submit quality measure 
data to the QualityNet Web site for all Web-based measures submitted via 
a CMS online data submission tool. A QualityNet security administrator 
is necessary to set-up such an account for the purpose of submitting 
this information.
    (ii) Data collection requirements. The data collection time period 
for quality measures for which data are submitted via a CMS online data 
submission tool is for services furnished during the calendar year 2 
years prior to the payment determination year. Beginning with the CY 
2017 payment determination year, data collected must be submitted during 
the time period of January 1 to May 15 in the year prior to the payment 
determination year.
    (2) Requirements for data submitted via a non-CMS online data 
submission tool. The data collection time period for ASC-8: Influenza 
Vaccination Coverage Among Healthcare Personnel is from October 1 of the 
year 2 years prior to the payment determination year to March 31 during 
the year prior to the payment determination year. Data collected must be 
submitted by May 15 in the year prior to the payment determination year.
    (d) Extension or exemption. CMS may grant an extension or exemption 
for the submission of information in the event of extraordinary 
circumstances beyond the control of an ASC, or a systematic problem with 
one of CMS' data

[[Page 227]]

collection systems directly or indirectly affects data submission. CMS 
may grant an extension or exemption as follows:
    (1) Upon request of the ASC. ASCs may request an extension or 
exemption within 90 days of the date that the extraordinary circumstance 
occurred. Specific requirements for submission of a request for an 
extension or exemption are available on the QualityNet Web site; or
    (2) At the discretion of CMS. CMS may grant extensions or exemptions 
to ASCs that have not requested them when CMS determines that an 
extraordinary circumstance has occurred.
    (e) Requirements for Outpatient and Ambulatory Surgery Consumer 
Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey. OAS 
CAHPS is the Outpatient and Ambulatory Surgical Center Consumer 
Assessment of Healthcare Providers and Systems survey that measures 
patient experience of care after a recent surgery or procedure at either 
a hospital outpatient department or an ambulatory surgical center. 
Ambulatory surgical centers must use an approved OAS CAHPS survey vendor 
to administer and submit OAS CAHPS data to CMS.
    (1) [Reserved]
    (2) CMS approves an application for an entity to administer the OAS 
CAHPS survey as a vendor on behalf of one or more ambulatory surgical 
centers when the applicant has met the Minimum Survey Requirements and 
Rules of Participation that can be found on the official OAS CAHPS Web 
site, and agrees to comply with the current survey administration 
protocols that can be found on the official OAS CAHPS Web site. An 
entity must be an approved OAS CAHPS Survey vendor in order to 
administer the OAS CAPHS Survey and submit data to CMS on behalf of one 
or more ambulatory surgical centers.

[80 FR 70604, Nov. 13, 2015, as amended at 81 FR 79879, Nov. 14, 2016]



Sec. 416.315  Public reporting of data under the ASCQR Program.

    Data that an ASC submitted for the ASCQR Program will be made 
publicly available on a CMS Web site after providing the ASC an 
opportunity to review the data to be made public. CMS will publicly 
display ASC data by the National Provider Identifier (NPI) when data are 
submitted by the NPI. CMS will publicly display ASC data by the CMS 
Certification Number (CCN) when data are submitted by the CCNs.



Sec. 416.320  Retention and removal of quality measures under the ASCQR Program.

    (a) General rule for the retention of quality measures. Quality 
measures adopted for an ASCQR Program measure set for a previous payment 
determination year are retained in the ASCQR Program for measure sets 
for subsequent payment determination years, except when they are 
removed, suspended, or replaced as set forth in paragraphs (b) and (c) 
of this section.
    (b) Immediate measure removal. In cases where CMS believes that the 
continued use of a measure as specified raises patient safety concerns, 
CMS will immediately remove a quality measure from the ASCQR Program and 
will promptly notify ASCs and the public of the removal of the measure 
and the reasons for its removal through the ASCQR Program ListServ and 
the ASCQR Program QualityNet Web site. CMS will confirm the removal of 
the measure for patient safety concerns in the next ASCQR Program 
rulemaking.
    (c) Measure removal, suspension, or replacement through the 
rulemaking process. Unless a measure raises specific safety concerns as 
set forth in paragraph (b) of this section, CMS will use the regular 
rulemaking process to remove, suspend, or replace quality measures in 
the ASCQR Program to allow for public comment.
    (1) Criteria for removal of quality measures. (i) CMS will use the 
following criteria to determine whether to remove a measure from the 
ASCQR Program:
    (A) Measure performance among ASCs is so high and unvarying that 
meaningful distinctions and improvements in performance can no longer be 
made (topped-out measures);
    (B) Availability of alternative measures with a stronger 
relationship to patient outcomes;
    (C) A measure does not align with current clinical guidelines or 
practice;

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    (D) The availability of a more broadly applicable (across settings, 
populations, or conditions) measure for the topic;
    (E) The availability of a measure that is more proximal in time to 
desired patient outcomes for the particular topic;
    (F) The availability of a measure that is more strongly associated 
with desired patient outcomes for the particular topic; and
    (G) Collection or public reporting of a measure leads to negative 
unintended consequences other than patient harm.
    (ii) The benefits of removing a measure from the ASCQR Program will 
be assessed on a case-by-case basis. A measure will not be removed 
solely on the basis of meeting any specific criterion.
    (2) Criteria to determine topped-out measures. For the purposes of 
the ASCQR Program, a measure is considered to be topped-out under 
paragraph (c)(1)(i)(A) of this section when it meets both of the 
following criteria:
    (i) Statistically indistinguishable performance at the 75th and 90th 
percentiles (defined as when the difference between the 75th and 90th 
percentiles for an ASC's measure is within two times the standard error 
of the full data set); and
    (ii) A truncated coefficient of variation less than or equal to 
0.10.



Sec. 416.325  Measure maintenance under the ASCQR Program.

    (a) Measure maintenance under the ASCQR Program. CMS follows 
different procedures to update the measure specifications under the 
ASCQR Program based on whether the change is substantive or 
nonsubstantive. CMS will determine what constitutes a substantive versus 
a nonsubstantive change to a measure's specifications on a case-by-case 
basis.
    (b) Substantive changes. CMS will continue to use rulemaking to 
adopt substantive updates to measures in the ASCQR Program.
    (c) Nonsubstantive changes. If CMS determines that a change to a 
measure previously adopted in the ASCQR Program is nonsubstantive, CMS 
will use a subregulatory process to revise the ASCQR Program 
Specifications Manual so that it clearly identifies the changes to that 
measure and provide links to where additional information on the changes 
can be found. When a measure undergoes subregulatory maintenance, CMS 
will provide notification of the measure specification update on the 
QualityNet Web site and in the ASCQR Program Specifications Manual, and 
will provide sufficient lead time for ASCs to implement the revisions 
where changes to the data collection systems would be necessary.



Sec. 416.330  Reconsiderations under the ASCQR Program.

    (a) Reconsiderations of ASCQR Program decisions. An ASC may request 
reconsideration of a decision by CMS that it has not met the 
requirements of the ASCQR Program for a particular payment determination 
year. An ASC must submit a reconsideration request to CMS by no later 
than the first business day on or after March 17 of the affected payment 
year.
    (b) Requirements for reconsideration requests. A reconsideration 
request must contain the following information:
    (1) The ASC CCN and related NPI(s);
    (2) The name of the ASC;
    (3) The CMS-identified reason for not meeting the requirements of 
the ASCQR Program for the affected payment determination year as 
provided in any CMS notification to the ASC;
    (4) The ASC's basis for requesting reconsideration. The ASC must 
identify its specific reason(s) for believing it met the ASCQR Program 
requirements for the affected payment determination year and should not 
be subject to the reduced ASC annual payment update;
    (5) The ASC-designated personnel contact information, including 
name, email address, telephone number, and mailing address (must include 
physical mailing address, not just a post office box); and
    (6) A copy of all materials that the ASC submitted to comply with 
the requirements of the affected ASCQR Program payment determination 
year. With regard to information on claims, ASCs are not required to 
submit copies of all submitted claims, but instead may focus on the 
specific claims at issue. For these claims, ASCs should

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submit relevant information, which could include copies of the actual 
claims at issue.
    (c) Reconsideration process. Upon receipt of a request for 
reconsideration, CMS will do the following:
    (1) Provide an email acknowledgement, using the contact information 
provided in the reconsideration request, notifying the ASC that the 
request has been received; and
    (2) Provide a formal response to the ASC contact using the 
information provided in the reconsideration request notifying the ASC of 
the outcome of the reconsideration process.
    (d) Final ASCQR Program payment determination. For an ASC that 
submits a timely reconsideration request, the reconsideration 
determination is the final ASCQR Program payment determination. For an 
ASC that does not submit a timely reconsideration request, the CMS 
determination is the final payment determination. There is no appeal of 
any final ASCQR Program payment determination.



PART 417_HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH
CARE PREPAYMENT PLANS--Table of Contents



                      Subpart A_General Provisions

Sec.
417.1  Definitions.
417.2  Basis and scope.

     Subpart B_Qualified Health Maintenance Organizations: Services

417.101  Health benefits plan: Basic health services.
417.102  Health benefits plan: Supplemental health services.
417.103  Providers of basic and supplemental health services.
417.104  Payment for basic health services.
417.105  Payment for supplemental health services.
417.106  Quality assurance program; Availability, accessibility, and 
          continuity of basic and supplemental health services.

 Subpart C_Qualified Health Maintenance Organizations: Organization and 
                                Operation

417.120  Fiscally sound operation and assumption of financial risk.
417.122  Protection of enrollees.
417.124  Administration and management.
417.126  Recordkeeping and reporting requirements.

             Subpart D_Application for Federal Qualification

417.140  Scope.
417.142  Requirements for qualification.
417.143  Application requirements.
417.144  Evaluation and determination procedures.

  Subpart E_Inclusion of Qualified Health Maintenance Organizations in 
                     Employee Health Benefits Plans

417.150  Definitions.
417.151  Applicability.
417.153  Offer of HMO alternative.
417.155  How the HMO option must be included in the health benefits 
          plan.
417.156  When the HMO must be offered to employees.
417.157  Contributions for the HMO alternative.
417.158  Payroll deductions.
417.159  Relationship of section 1310 of the Public Health Service Act 
          to the National Labor Relations Act and the Railway Labor Act.

Subpart F_Continued Regulation of Federally Qualified Health Maintenance 
                              Organizations

417.160  Applicability.
417.161  Compliance with assurances.
417.162  Reporting requirements.
417.163  Enforcement procedures.
417.164  Effect of revocation of qualification on inclusion in 
          employee's health benefit plans.
417.165  Reapplication for qualification.
417.166  Waiver of assurances.

Subparts G-I [Reserved]

         Subpart J_Qualifying Conditions for Medicare Contracts

417.400  Basis and scope.
417.401  Definitions.
417.402  Effective date of initial regulations.
417.404  General requirements.
417.406  Application and determination.
417.407  Requirements for a Competitive Medical Plan (CMP).
417.408  Contract application process.
417.410  Qualifying conditions: General rules.
417.412  Qualifying condition: Administration and management.
417.413  Qualifying condition: Operating experience and enrollment.
417.414  Qualifying condition: Range of services.
417.416  Qualifying condition: Furnishing of services.

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417.418  Qualifying condition: Quality assurance program.

  Subpart K_Enrollment, Entitlement, and Disenrollment Under Medicare 
                                Contract

417.420  Basic rules on enrollment and entitlement.
417.422  Eligibility to enroll in an HMO or CMP.
417.423  Special rules: ESRD and hospice patients.
417.424  Denial of enrollment.
417.426  Open enrollment requirements.
417.427  Extending MA and Part D program disclosure requirements to 
          section 1876 cost contract plans.
417.428  Marketing activities.
417.430  Application procedures.
417.432  Conversion of enrollment.
417.434  Reenrollment.
417.436  Rules for enrollees.
417.440  Entitlement to health care services from an HMO or CMP.
417.442  Risk HMO's and CMP's: Conditions for provision of additional 
          benefits.
417.444  Special rules for certain enrollees of risk HMOs and CMPs.
417.446  [Reserved]
417.448  Restriction on payments for services received by Medicare 
          enrollees of risk HMOs or CMPs.
417.450  Effective date of coverage.
417.452  Liability of Medicare enrollees.
417.454  Charges to Medicare enrollees.
417.456  Refunds to Medicare enrollees.
417.458  Recoupment of uncollected deductible and coinsurance amounts.
417.460  Disenrollment of beneficiaries by an HMO or CMP.
417.461  Disenrollment by the enrollee.
417.464  End of CMS's liability for payment: Disenrollment of 
          beneficiaries and termination or default of contract.

                Subpart L_Medicare Contract Requirements

417.470  Basis and scope.
417.472  Basic contract requirements.
417.474  Effective date and term of contract.
417.476  Waived conditions.
417.478  Requirements of other laws and regulations.
417.479  Requirements for physician incentive plans.
417.480  Maintenance of records: Cost HMOs and CMPs.
417.481  Maintenance of records: Risk HMOs or CMPs.
417.482  Access to facilities and records.
417.484  Requirement applicable to related entities.
417.486  Disclosure of information and confidentiality.
417.488  Notice of termination and of available alternatives: Risk 
          contract.
417.490  Renewal of contract.
417.492  Nonrenewal of contract.
417.494  Modification or termination of contract.
417.500  Intermediate sanctions for and civil monetary penalties against 
          HMOs and CMPs.

   Subpart M_Change of Ownership and Leasing of Facilities: Effect on 
                            Medicare Contract

417.520  Effect on HMO and CMP contracts.

       Subpart N_Medicare Payment to HMOs and CMPs: General Rules

417.524  Payment to HMOs or CMPs: General.
417.526  Payment for covered services.
417.528  Payment when Medicare is not primary payer.

                 Subpart O_Medicare Payment: Cost Basis

417.530  Basis and scope.
417.531  Hospice care services.
417.532  General considerations.
417.533  Part B carrier responsibilities.
417.534  Allowable costs.
417.536  Cost payment principles.
417.538  Enrollment and marketing costs.
417.540  Enrollment costs.
417.542  Reinsurance costs.
417.544  Physicians' services furnished directly by the HMO or CMP.
417.546  Physicians' services and other Part B supplier services 
          furnished under arrangements.
417.548  Provider services through arrangements.
417.550  Special Medicare program requirements.
417.552  Cost apportionment: General provisions.
417.554  Apportionment: Provider services furnished directly by the HMO 
          or CMP.
417.556  Apportionment: Provider services furnished by the HMO or CMP 
          through arrangements with others.
417.558  Emergency, urgently needed, and out-of-area services for which 
          the HMO or CMP accepts financial responsibility.
417.560  Apportionment: Part B physician and supplier services.
417.564  Apportionment and allocation of administrative and general 
          costs.
417.566  Other methods of allocation and apportionment.
417.568  Adequate financial records, statistical data, and cost finding.
417.570  Interim per capita payments.
417.572  Budget and enrollment forecast and interim reports.
417.574  Interim settlement.
417.576  Final settlement.

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                 Subpart P_Medicare Payment: Risk Basis

417.580  Basis and scope.
417.582  Definitions.
417.584  Payment to HMOs or CMPs with risk contracts.
417.585  Special rules: Hospice care.
417.588  Computation of adjusted average per capita cost (AAPCC).
417.590  Computation of the average of the per capita rates of payment.
417.592  Additional benefits requirement.
417.594  Computation of adjusted community rate (ACR).
417.596  Establishment of a benefit stabilization fund.
417.597  Withdrawal from a benefit stabilization fund.
417.598  Annual enrollment reconciliation.

                      Subpart Q_Beneficiary Appeals

417.600  Basis and scope.

                   Subpart R_Medicare Contract Appeals

417.640  Applicability.

Subparts S-T [Reserved]

                 Subpart U_Health Care Prepayment Plans

417.800  Payment to HCPPs: Definitions and basic rules.
417.801  Agreements between CMS and health care prepayment plans.
417.802  Allowable costs.
417.804  Cost apportionment.
417.806  Financial records, statistical data, and cost finding.
417.808  Interim per capita payments.
417.810  Final settlement.
417.830  Scope of regulations on beneficiary appeals.
417.832  Applicability of requirements and procedures.
417.834  Responsibility for establishing administrative review 
          procedures.
417.836  Written description of administrative review procedures.
417.838  Organization determinations.
417.840  Administrative review procedures.

    Subpart V_Administration of Outstanding Loans and Loan Guarantees

417.910  Applicability.
417.911  Definitions.
417.920  Planning and initial development.
417.930  Initial costs of operation.
417.931  [Reserved]
417.934  Reserve requirement.
417.937  Loan and loan guarantee provisions.
417.940  Civil action to enforce compliance with assurances.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public Health 
Service Act (42 U.S.C. 300e, 300e-5, and 300e-9), and 31 U.S.C. 9701.



                      Subpart A_General Provisions



Sec. 417.1  Definitions.

    As used in this part, unless the context indicates otherwise--
    Basic health services means health services described in 
Sec. 417.101(a).
    Community rating system means a system of fixing rates of payments 
for health services that meets the requirements of Sec. 417.104(a)(3).
    Comprehensive health services means as a minimum the following 
services which may be limited as to time and cost:
    (1) Physician services (Sec. 417.101(a)(1));
    (2) Outpatient services and inpatient hospital services 
(Sec. 417.101(a)(2));
    (3) Medically necessary emergency health services 
(Sec. 417.101(a)(3)); and
    (4) Diagnostic laboratory and diagnostic and therapeutic radiologic 
services (Sec. 417.101(a)(6)).
    Direct service contract means a contract for the provision of basic 
or supplemental health services or both between an HMO and (1) a health 
professional other than a member of the staff of the HMO, or (2) an 
entity other than a medical group or an IPA.
    Enrollee means an individual for whom an HMO, CMP, or HCPP assumes 
the responsibility, under a contract or agreement, for the furnishing of 
health care services on a prepaid basis.
    Full-time student means a student who is enrolled for a sufficient 
number of credit hours in a semester or other academic term to enable 
the student to complete the course of study within not more than the 
number of semesters or other academic terms normally required to 
complete that course of study on a full-time basis at the school in 
which the student is enrolled.
    Furnished, when used in connection with prepaid health care 
services, means services that are maid available to an enrollee either 
dierctly by, or under arrangements made by, the HMO, CMP, or HCPP.
    Health maintenance organization (HMO) means a legal entity that 
provides or arranges for the provision of basic and supplemental health 
services

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to its enrollees in the manner prescribed by, is organized and operated 
in the manner prescribed by, and otherwise meets the requirements of, 
section 1301 of the PHS Act and the regulations in subparts B and C of 
this part.
    Health professionals means physicians (doctors of medicine and 
doctors of osteopathy), dentists, nurses, podiatrists, optometrists, 
physicians' assistants, clinical psychologists, social workers, 
pharmacists, nutritionists, occupational therapists, physical 
therapists, and other professionals engaged in the delivery of health 
services who are licensed, practice under an institutional license, are 
certified, or practice under authority of the HMO, a medical group, 
individual practice association, or other authority consistent with 
State law.
    Individual practice association (IPA) means a partnership, 
association, corporation, or other legal entity that delivers or 
arranges for the delivery of health services and which has entered into 
written services arrangement or arrangements with health professionals, 
a majority of whom are licensed to practice medicine or osteopathy. The 
written services arrangement must provide:
    (1) That these health professionals will provide their professional 
services in accordance with a compensation arrangement established by 
the entity; and
    (2) To the extent feasible, for the sharing by these health 
professionals of health (including medical) and other records, 
equipment, and professional, technical, and administrative staff.
    Medical group means a partnership, association, corporation, or 
other group:
    (1) That is composed of health professionals licensed to practice 
medicine or osteopathy and of such other licensed health professionals 
(including dentists, optometrists, and podiatrists) as are necessary for 
the provision of health services for which the group is responsible;
    (2) A majority of the members of which are licensed to practice 
medicine or osteopathy; and
    (3) The members of which:
    (i) After the end of the 48 month period beginning after the month 
in which the HMO for which the group provides health services becomes a 
qualified HMO, as their principal professional activity (over 50 percent 
individually) engage in the coordinated practice of their profession and 
as a group responsibility have substantial responsibility (over 35 
percent in the aggregate of their professional activity) for the 
delivery of health services to enrollees of an HMO;
    (ii) Pool their income from practice as members of the group and 
distribute it among themselves according to a prearranged salary or 
drawing account or other similar plan unrelated to the provision of 
specific health services;
    (iii) Share health (including medical) records and substantial 
portions of major equipment and of professional, technical, and 
administrative staff;
    (iv) Establish an arrangement whereby an enrollee's enrollment 
status is not known to the health professional who provides health 
services to the enrollee.
    Medical group members means (1) a health professional engaged as a 
partner, associate, or shareholder in the medical group, or (2) any 
other health professional employed by the group who may be designated as 
a medical group member by the medical group.
    Medically underserved population means the population of an urban or 
rural area as described in Sec. 417.912(d).
    Nonmetropolitan area means an area no part of which is within a 
standard metropolitan statistical area as designated by the Office of 
Management and Budget and which does not contain a city whose population 
exceeds 50,000 individuals.
    Party in interest means: (1) Any director, officer, partner, or 
employee responsible for management or administration of an HMO, any 
person who is directly or indirectly the beneficial owner of more than 5 
percent of the equity of the HMO, any person who is the beneficial owner 
of a mortgage, deed of trust, note, or other interest secured by, and 
valuing more than 5 percent of the assets of the HMO, and, in the case 
of an HMO organized as a nonprofit corporation, an incorporator or 
member of the corporation under applicable State corporation law;

[[Page 233]]

    (2) Any entity in which a person described in paragraph (1):
    (i) Is an officer or director;
    (ii) Is a partner (if the entity is organized as a partnership);
    (iii) Has directly or indirectly a beneficial interest of more than 
5 percent of the equity; or
    (iv) Has a mortgage, deed of trust, note, or other interest valuing 
more than 5 percent of the assets of such entity;
    (3) Any spouse, child, or parent of an individual described in 
paragraph (1).
    Policymaking body of an HMO means a board of directors, governing 
body, or other body of individuals that has the authority to establish 
policy for the HMO.
    Qualified HMO means an HMO found by CMS to be qualified within the 
meaning of section 1310 of the PHS Act and subpart D of this part.
    Rural area means any area not listed as a place having a population 
of 2,500 or more in Document PC(1)A, ``Number of Inhabitants,'' Table 
VI, ``Population of Places,'' and not listed as an urbanized area in 
Table XI, ``Population of Urbanized Areas'' of the same document (1970 
Census or most recent update of this document, Bureau of Census, U.S. 
Department of Commerce).
    Secretary means the Secretary of Health and Human Services and any 
other officer or employee of the Department of Health and Human Services 
to whom the authority involved has been delegated.
    Service area means a geographic area, defined through zip codes, 
census tracts, or other geographic measurements, that is the area, as 
determined by CMS, within which the HMO furnishes basic and supplemental 
health services and makes them available and accessible to all its 
enrollees in accordance with Sec. 417.106(b). Facilities in which 
individuals are incarcerated are not included in the geographic service 
area of an HMO or CMP plan.
    Significant business transaction means any business transaction or 
series of transactions during any one fiscal year of the HMO, the total 
value of which exceeds the lesser of $25,000 or 5 percent of the total 
operating expenses of the HMO.
    Staff of the HMO means health professionals who are employees of the 
HMO and who--
    (1) Provide services to HMO enrollees at an HMO facility subject to 
the staff policies and operational procedures of the HMO;
    (2) Engage in the coordinated practice of their profession and 
provide to enrollees of the HMO the health services that the HMO has 
contracted to provide;
    (3) Share medical and other records, equipment, and professional, 
technical, and administrative staff of the HMO; and
    (4) Provide their professional services in accordance with a 
compensation arrangement, other than fee-for-service, established by the 
HMO. This arrangement may include, but is not limited to, fee-for-time, 
retainer or salary.
    Subscriber means an enrollee who has entered into a contractual 
relationship with the HMO or who is responsible for making payments for 
basic health services (and contracted for supplemental health services) 
to the HMO or on whose behalf these payments are made.
    Supplemental health services means the health services described in 
Sec. 417.102(a).
    Unusual or infrequently used health services means:
    (1) Those health services that are projected to involve fewer than 1 
percent of the encounters per year for the entire HMO enrollment, or,
    (2) Those health services the provision of which, given the 
enrollment projection of the HMO and generally accepted staffing 
patterns, is projected will require less than 0.25 full time equivalent 
health professionals.

[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19338, May 5, 1982; 52 
FR 22321, June 11, 1987. Redesignated at 52 FR 36746, Sept. 30, 1987. 
Redesignated and amended at 56 FR 51985, Oct. 17, 1991; 58 FR 38067, 
July 15, 1993; 60 FR 34887, July 5, 1995; 60 FR 45674, Sept. 1, 1995; 79 
FR 29955, May 23, 2014]



Sec. 417.2  Basis and scope.

    (a) Subparts B through F of this part pertain to the Federal 
qualification of HMOs under title XIII of the Public Health Service 
(PHS) Act.

[[Page 234]]

    (b) Subparts G through R of this part set forth the rules for 
Medicare contracts with, and payment to, HMOs and competitive medical 
plans (CMPs) under section 1876 of the Act and 8 U.S.C. 1611.
    (c) Subpart U of this part pertains to Medicare payment to health 
care prepayment plans under section 1833(a)(1)(A) of the Act.
    (d) Subpart V of this part applies to the administration of 
outstanding loans and loan guarantees previously granted under title 
XIII of the PHS Act.

[56 FR 51985, Oct. 17, 1991, as amended at 60 FR 45675, Sept. 1, 1995; 
80 FR 7958, Feb. 12, 2015]



     Subpart B_Qualified Health Maintenance Organizations: Services



Sec. 417.101  Health benefits plan: Basic health services.

    (a) An HMO must provide or arrange for the provision of basic health 
services to its enrollees as needed and without limitations as to time 
and cost other than those prescribed in the PHS Act and these 
regulations, as follows:
    (1) Physician services (including consultant and referral services 
by a physician), which must be provided by a licensed physician, or if a 
service of a physician may also be provided under applicable State law 
by other health professionals, an HMO may provide the service through 
these other health professionals;
    (2)(i) Outpatient services, which must include diagnostic services, 
treatment services and x-ray services, for patients who are ambulatory 
and may be provided in a non-hospital based health care facility or at a 
hospital;
    (ii) Inpatient hospital services, which must include but not be 
limited to, room and board, general nursing care, meals and special 
diets when medically necessary, use of operating room and related 
facilities, use of intensive care unit and services, x-ray services, 
laboratory, and other diagnostic tests, drugs, medications, biologicals, 
anesthesia and oxygen services, special duty nursing when medically 
necessary, radiation therapy, inhalation therapy, and administration of 
whole blood and blood plasma;
    (iii) Outpatient services and inpatient hospital services must 
include short-term rehabilitation services and physical therapy, the 
provision of which the HMO determines can be expected to result in the 
significant improvement of a member's condition within a period of two 
months;
    (3) Instructions to its enrollees on procedures to be followed to 
secure medically necessary emergency health services both in the service 
area and out of the service area;
    (4) Twenty outpatient visits per enrollee per year, as may be 
necessary and appropriate for short-term evaluative or crisis 
intervention mental health services, or both;
    (5) Diagnosis, medical treatment and referral services (including 
referral services to appropriate ancillary services) for the abuse of or 
addiction to alcohol and drugs:
    (i) Diagnosis and medical treatment for the abuse of or addiction to 
alcohol and drugs must include detoxification for alcoholism or drug 
abuse on either an outpatient or inpatient basis, whichever is medically 
determined to be appropriate, in addition to the other required basic 
health services for the treatment of other medical conditions;
    (ii) Referral services may be either for medical or for nonmedical 
ancillary services. Medical services must be a part of basic health 
services; nonmedical ancillary services (such as vocational 
rehabilitation and employment counseling) and prolonged rehabilitation 
services in a specialized inpatient or residential facility need not be 
a part of basic health services;
    (6) Diagnostic laboratory and diagnostic and therapeutic radiologic 
services in support of basic health services;
    (7) Home health services provided at an enrollee's home by health 
care personnel, as prescribed or directed by the responsible physician 
or other authority designated by the HMO; and
    (8) Preventive health services, which must be made available to 
members and must include at least the following:
    (i) A broad range of voluntary family planning services;
    (ii) Services for infertility;

[[Page 235]]

    (iii) Well-child care from birth;
    (iv) Periodic health evaluations for adults;
    (v) Eye and ear examinations for children through age 17, to 
determine the need for vision and hearing correction; and
    (vi) Pediatric and adult immunizations, in accord with accepted 
medical practice.
    (b) In addition, an HMO may include a health service described in 
Sec. 417.102 as a supplemental health service in the basic health 
services that it provides or arranges for its enrollees for a basic 
health services payment.
    (c) To the extent that a natural disaster, war, riot, civil 
insurrection, epidemic or any other emergency or similar event not 
within the control of an HMO results in the facilities, personnel, or 
financial resources of an HMO being unavailable to provide or arrange 
for the provision of a basic or supplemental health service in 
accordance with the requirements of Secs. 417.101 through 417.106 and 
Secs. 417.168 and 417.169, the HMO is required only to make a good-faith 
effort to provide or arrange for the provision of the service, taking 
into account the impact of the event. For purposes of this paragraph, an 
event is not within the control of an HMO if the HMO cannot exercise 
influence or dominion over its occurrence.
    (d) The following are not required to be provided as basic health 
services:
    (1) Corrective appliances and artificial aids;
    (2) Mental health services, except as required under section 
1302(1)(D) of the PHS Act and paragraph (a)(4) of this section;
    (3) Cosmetic surgery, unless medically necessary;
    (4) Prescribed drugs and medicines incidental to outpatient care;
    (5) Ambulance services, unless medically necessary;
    (6) Care for military service connected disabilities for which the 
enrollee is legally entitled to services and for which facilities are 
reasonably available to this enrollee;
    (7) Care for conditions that State or local law requires be treated 
in a public facility;
    (8) Dental services;
    (9) Vision and hearing care except as required by sections 
1302(1)(A) and 1302(1)(H)(vi) of the PHS Act and paragraphs (a)(1) and 
(a)(8) of this section;
    (10) Custodial or domiciliary care;
    (11) Experimental medical, surgical, or other experimental health 
care procedures, unless approved as a basic health service by the 
policymaking body of the HMO;
    (12) Personal or comfort items and private rooms, unless medically 
necessary during inpatient hospitalization;
    (13) Whole blood and blood plasma;
    (14) Long-term physical therapy and rehabilitation;
    (15) Durable medical equipment for home use (such as wheel chairs, 
surgical beds, respirators, dialysis machines); and
    (16) Health services that are unusual and infrequently provided and 
not necessary for the protection of individual health, as approved by 
CMS upon application by the HMO.
    (e) An HMO may not offer to provide or arrange for the provision of 
basic health services on a prepayment basis that do not include all the 
basic health services set forth in paragraph (a) of this section or that 
are limited as to time and cost except in a manner prescribed by this 
subpart.

[45 FR 72528, Oct. 31, 1980. Redesignated at 52 FR 36746, Sept. 30, 
1987, and amended at 58 FR 38077, July 15, 1993]



Sec. 417.102  Health benefits plan: Supplemental health services.

    (a) An HMO may provide to its enrollees any health service that is 
not included as a basic health service under Sec. 417.101(a). These 
health services may be limited as to time and cost.
    (b) An HMO must determine the level and scope of supplemental health 
services included with basic health services provided to its enrollees 
for a basic health services payment or those services offered to its 
enrollees as supplemental health services.

[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19339, May 5, 1982. 
Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 
38083, July 15, 1993]

[[Page 236]]



Sec. 417.103  Providers of basic and supplemental health services.

    (a)(1) The HMO must provide that the services of health 
professionals that are provided as basic health services will, except as 
provided in paragraph (c) of this section, be provided or arranged for 
through (i) health professionals who are staff of the HMO, (ii) a 
medical group or groups, (iii) an IPA or IPAs, (iv) physicians or other 
health professionals under direct service contracts with the HMO for the 
provision of these services, or (v) any combination of staff, medical 
group or groups, IPA or IPAs, or physicians or other health 
professionals under direct service contracts with the HMO.
    (2) A staff or medical group model HMO may have as providers of 
basic health services physicians who have also entered into written 
services arrangements with an IPA or IPAs, but only if either (i) these 
physicians number less than 50 percent of the physicians who have 
entered into arrangements with the IPA or IPAs, or (ii) if the sharing 
is 50 percent or greater, CMS approves the sharing as being consistent 
with the purposes of section 1310(b) of the PHS Act.
    (3) After the 4 year period beginning with the month following the 
month in that an HMO becomes a qualified HMO, an entity that meets the 
requirements of the definition of medical group in Sec. 417.100, except 
for subdivision (3)(i) of that definition, may be considered a medical 
group if CMS determines that the principal professional activity (over 
50 percent individually) of the entity's members is the coordinated 
practice of their profession, and if the HMO has demonstrated to the 
satisfaction of CMS that the entity is committed to the delivery of 
medical services on a prepaid group practice basis by either:
    (i) Presenting a reasonable time-phased plan for the entity to 
achieve compliance with the ``substantial responsibility'' requirement 
of subdivision (3)(i) of the definition of ``medical group'' in 
Sec. 417.100. The HMO must update the plan annually and must demonstrate 
to the satisfaction of CMS that the entity is making continuous efforts 
and progress towards compliance with the requirements of the definition 
of ``medical group,'' or
    (ii) Demonstrating that compliance by the entity with the 
``substantial responsibility'' requirement is unreasonable or 
impractical because (A) the HMO serves a non-metropolitan or rural area 
as defined in Sec. 417.100, or (B) the entity is a multi-speciality 
group that provides medical consultation upon referral on a regional or 
national basis, or (C) the majority of the residents of the HMO's 
service area are not eligible for employer-employee health benefits 
plans and the HMO has an insufficient number of enrollees to require 
utilization of at least 35 percent of the entity's services.
    (b) HMOs must have effective procedures to monitor utilization and 
to control cost of basic and supplemental health services and to achieve 
utilization goals, which may include mechanisms such as risk sharing, 
financial incentives, or other provisions agreed to by providers.
    (c) Paragraph (a) of this section does not apply to the provision of 
the services of a physician:
    (1) Which the HMO determines are unusual or infrequently used 
services; or
    (2) Which, because of an emergency, it was medically necessary to 
provide to the enrollee other than as required by paragraph (a) of this 
section; or
    (3) Which are provided as part of the inpatient hospital services by 
employees or staff of a hospital or provided by staff of other entities 
such as community mental health centers, home health agencies, visiting 
nurses' associations, independent laboratories, or family planning 
agencies.
    (d) Supplemental health services must be provided or arranged for by 
the HMO and need not be provided by providers of basic health services 
under contract with the HMO.
    (e) Each HMO must:
    (1) Pay the provider, or reimburse its enrollees for the payment of 
reasonable charges for basic health services (or supplemental health 
services that the HMO agreed to provide on a prepayment basis) for which 
its enrollees have contracted, which were medically necessary and 
immediately required to be obtained other than through the HMO

[[Page 237]]

because of an unforeseen illness, injury, or condition, as determined by 
the HMO;
    (2) Adopt procedures to review promptly all claims from enrollees 
for reimbursement for the provision of health services described in 
paragraph (e)(1) of this section, including a procedure for the 
determination of the medical necessity for obtaining the services other 
than through the HMO; and
    (3) Provide instructions to its enrollees on procedures to be 
followed to secure these health services.

(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 
Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 
95 Stat. 572-578 (42 U.S.C. 300e-300e-17)

[45 FR 72528, Oct. 31, 1980; 45 FR 77031, Nov. 21, 1980, as amended at 
47 FR 19339, May 5, 1982; 50 FR 6174, Feb. 14, 1985. Redesignated at 52 
FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 38083, July 15, 
1993]



Sec. 417.104  Payment for basic health services.

    (a) Basic health services payment. Each HMO must provide or arrange 
for the provision of basic health services for a basic health services 
payment that:
    (1) Is to be paid on a periodic basis without regard to the dates 
these services are provided;
    (2) Is fixed without regard to the frequency, extent, or kind of 
basic health services actually furnished;
    (3) Except as provided in paragraph (c) of this section, is fixed 
under a community rating system, as described in paragraph (b) of this 
section; and
    (4) May be supplemented by nominal copayments which may be required 
for the provision of specific basic health services. Each HMO may 
establish one or more copayment options calculated on the basis of a 
community rating system.
    (i) An HMO may not impose copayment charges that exceed 50 percent 
of the total cost of providing any single service to its enrollees, nor 
in the aggregate more than 20 percent of the total cost of providing all 
basic health services.
    (ii) To insure that copayments are not a barrier to the utilization 
of health services or enrollment in the HMO, an HMO may not impose 
copayment charges on any subscriber (or enrollees covered by the 
subscriber's contract with the HMO) in any calendar year, when the 
copayments made by the subscriber (or enrollees) in that calendar year 
total 200 percent of the total annual premium cost which that subscriber 
(or enrollees) would be required to pay if he (or they) were enrolled 
under an option with no copayments. This limitation applies only if the 
subscriber (or enrollees) demonstrates that copayments in that amount 
have been paid in that year.
    (b) Community rating system. Under a community rating system, rates 
of payment for health services may be determined on a per person or per 
family basis, as described in paragraph (b)(1) of this section or on a 
per group basis as described in paragraph (b)(2) of this section. An HMO 
may fix its rates of payment under the system described in paragraph 
(b)(1) or (b)(2) of this section or under both such systems, but an HMO 
may use only one such system for fixing its rates of payment for any one 
group.
    (1) A system of fixing rates of payment for health services may 
provide that the rates will be fixed on a per person or per family basis 
and may vary with the number of persons in a family. Except as otherwise 
authorized in this paragraph, these rates must be equivalent for all 
individuals and for all families of similar composition. Rates of 
payment may be based on either a schedule of rates charged to each 
subscriber group or on a per-enrollee-per-month (or per-subscriber-per-
month) revenue requirement for the HMO. In the former event, rates may 
vary from group to group if the projected total revenue from each group 
is substantially equivalent to the revenue that would be derived if the 
schedule of rates were uniform for all groups. In the latter event, the 
payments from each group of subscribers must be calculated to yield 
revenues substantially equivalent to the product of the total number of 
enrollees (or subscribers) expected to be enrolled from the group and 
the per-enrollee-per-month (or per-subscriber-per-month) revenue 
requirement for the HMO. Under the system described in this paragraph, 
rates of payment may

[[Page 238]]

not vary because of actual or anticipated utilization of services by 
individuals associated with any specific group of subscribers. These 
provisions do not preclude changes in the rates of payment that are 
established for new enrollments or re-enrollments and that do not apply 
to existing contracts until the renewal of these contracts.
    (2) A system of fixing rates of payment for health services may 
provide that the rates will be fixed for individuals and families by 
groups. Except as otherwise authorized in this paragraph, such rates 
must be equivalent for all individuals in the same group and for all 
families of similar composition in the same group. If an HMO is to fix 
rates of payment for individuals and families by groups, it must:
    (i) Classify all of the enrollees of the organization into classes 
based on factors that the HMO determines predict the differences in the 
use of health services by the individuals or families in each class and 
which have not been disapproved by CMS,
    (ii) Determine its revenue requirements for providing services to 
the enrollees of each class established under paragraph (b)(2)(i) of 
this section, and
    (iii) Fix the rates of payment for the individuals and families of a 
group on the basis of a composite of the organization's revenue 
requirements determined under paragraph (b)(2)(ii) of this section for 
providing services to them as members of the classes established under 
paragraph (b)(2)(i) of this section. CMS will review the factors used by 
each HMO to establish classes under paragraph (b)(2)(i) of this section. 
If CMS determines that any such factor may not reasonably be used to 
predict the use of the health services by individuals and families, CMS 
will disapprove the factor for that purpose.
    (3)(i) Nominal differentials in rates may be established to reflect 
differences in marketing costs and the different administrative costs of 
collecting payments from the following categories of potential 
subscribers:
    (A) Individual (non-group) subscribers (including their families).
    (B) Small groups of subscribers (100 subscribers or fewer).
    (C) Large groups of subscribers (over 100 subscribers).
    (ii) Differentials in rates may be established for subscribers 
enrolled in an HMO: (A) Under a contract with a governmental authority 
under section 1079 (``Contracts for Medical Care for Spouses and 
Children: Plans'') or section 1086 (``Contracts for Health Benefits for 
Certain Members, Former Members and their Dependents'') of title 10 
(``Armed Forces''), United States Code; or (B) under any other 
governmental program (other than the health benefits program authorized 
by chapter 89 (``Health Insurance'') of title 5 (``Government 
Organization and Employees''), United States Code; or (C) under any 
health benefits program for employees of States, political subdivisions 
of states, and other public entities.
    (4) An HMO may establish a separate community rate for separate 
regional components of the organization upon satisfactory demonstration 
to CMS of the following:
    (i) Each regional component is geographically distinct and separate 
from any other regional component; and
    (ii) Each regional component provides substantially the full range 
of basic health services to its enrollees, without extensive referral 
between components of the organization for these services, and without 
substantial utilization by any two components of the same health care 
facilities. The separate community rate for each regional component of 
the HMO must be based on the different costs of providing health 
services in the respective regions.
    (c) Exceptions to community rating requirement. (1) In the case of 
an HMO that provided comprehensive health services on a prepaid basis 
before it became a qualifed HMO, the requirement of community rating 
shall not apply to the HMO during the forty-eight month period beginning 
with the month following the month in which it became a qualifed HMO.
    (2) The requirement of community rating does not apply to the basic 
health services payment for basic health services provided an enrollee 
who is a full-time student at an accredited institution of higher 
education.
    (d) Late payment penalty. HMOs may charge a late payment penalty on 
accounts receivable that are in arrears.

[[Page 239]]

    (e) Review procedures for evaluating the community rating by class 
system under paragraph (b)(2). \1\ An HMO may establish a community 
rating system under paragraph (b)(2) of this section or revised factors 
used to establish classes after it receives written approval of the 
factors from CMS. CMS will give approval if it concludes that the 
factors can reasonably be used to predict the use of health services by 
individuals and families.
---------------------------------------------------------------------------

    \1\ Further information entitled ``Guidelines for Rating by Class'' 
may be obtained from the Office of Prepaid Health Care, Division of 
Qualification Analysis, HHS Cohen Bldg., room 4360, 330 Independence 
Ave. SW., Washington, DC 20201.
---------------------------------------------------------------------------

    (1) An HMO must make a written request to CMS, listing the factors 
to be used in the community rating by class system under paragraph 
(b)(2) of this section.
    (2) CMS will notify each HMO within 30 days of receipt of the 
request and application of one of the following:
    (i) The application is approved;
    (ii) Additional information or data are required and CMS will notify 
the HMO of its decision within 30 days from the date of receipt of this 
information or data; or
    (iii) CMS needs additional time to review the written request and 
the HMO will be notified of CMS's decision within 90 days.

(Approved by the Office of Management and Budget under control number 
0915-0051)

(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 
Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 
95 Stat. 572-578 (42 U.S.C. 300e-300e-17)

[45 FR 72528, Oct. 31, 1980, as amended at 47 FR 19339, May 5, 1982; 50 
FR 6175, Feb. 14, 1985. Redesignated at 52 FR 36746, Sept. 30, 1987, as 
amended at 56 FR 8853, Mar. 1, 1991; 58 FR 38082, 38083, July 15, 1993]



Sec. 417.105  Payment for supplemental health services.

    (a) An HMO may require supplemental health services payments, in 
addition to the basic health services payments, for the provision of 
each health service included in the supplemental health services set 
forth in Sec. 417.102 for which subscribers have contracted, or it may 
include supplemental health services in the basic health services 
provided its enrollees for a basic health services payment.
    (b) Supplemental health services payments may be made in any agreed 
upon manner, such as prepayment or fee-for-service. Supplemental health 
services payments that are fixed on a prepayment basis, however, must be 
fixed under a community rating system, unless the supplemental health 
services payment is for a supplemental health service provided an 
enrollee who is a full-time student at an accredited institution of 
higher education. In the case of an HMO that provided comprehensive 
health services on a prepaid basis before it became a qualifed HMO, the 
community rating requirement shall not apply to that HMO during the 
forty-eight month period beginning with the month following the month in 
which it became a qualifed HMO.

(Sec. 215 of the Public Health Service Act, as amended, 58 Stat. 690, 67 
Stat. 631 (42 U.S.C. 216); secs. 1301-1318, as amended, Pub. L. 97-35, 
95 Stat. 572-578 (42 U.S.C. 300e-300e-17)

[45 FR 72528, Oct. 31, 1980, as amended at 50 FR 6175, Feb. 14, 1985. 
Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38082, 
38083, July 15, 1993]



Sec. 417.106  Quality assurance program; Availability, accessibility, 
and continuity of basic and supplemental health services.

    (a) Quality assurance program. Each HMO or CMP must have an ongoing 
quality assurance program for its health services that meets the 
following conditions:
    (1) Stresses health outcomes to the extent consistent with the state 
of the art.
    (2) Provides review by physicians and other health professionals of 
the process followed in the provision of health services.
    (3) Uses systematic data collection of performance and patient 
results, provides interpretation of these data to its practitioners, and 
institutes needed change.
    (4) Includes written procedures for taking appropriate remedial 
action whenever, as determined under the quality assurance program, 
inappropriate or substandard services have been provided or services 
that ought to

[[Page 240]]

have been furnished have not been provided.
    (b) Availability and accessibility of health care services. Basic 
health services and those supplemental health services for which 
enrollees have contracted must be provided or arranged for by the HMO in 
accordance with the following rules:
    (1) Except as provided in paragraph (b)(2) of this section, the 
services must be available to each enrollee within the HMO's service 
area.
    (2) Exception. If the HMO's service area is located wholly within a 
nonmetropolitan area, the HMO may make available outside its service 
area any basic health service that is not a primary care or emergency 
care service, if the number of providers of that basic health service 
who will provide the service to the HMO's enrollees is insufficient to 
meet the demand. As used in this paragraph, primary care includes 
general practice, family practice, general internal medicine, general 
pediatrics, and general obstetrics and gynecology. An HMO that provides 
the services covered by these fields through at least a general or 
family practitioner, or a pediatrician and a general internist, is 
considered to be providing primary care.
    (3) The services must be available and accessible with reasonable 
promptness to each of the HMO's enrollees as ensured through--
    (i) Staffing patterns within generally accepted norms for meeting 
the projected enrollment needs; and
    (ii) Geographic location, hours of operation, and arrangements for 
after-hours services. (Medically necessary emergency services must be 
available 24 hours a day, 7 days a week.)
    (c) Continuity of care. The HMO must ensure continuity or care 
through arrangements that include but are not limited to the following:
    (1) Use of a health professional who is primarily responsible for 
coordinating the enrollee's overall health care.
    (2) A system of health and medical records that accumulates 
pertinent information about the enrollee's health care and makes it 
available to appropriate professionals.
    (3) Arrangements made directly or through the HMO's providers to 
ensure that the HMO or the health professional who coordinates the 
enrollee's overall health care is kept informed about the services that 
the referral resources furnish to the enrollee.
    (d) Confidentiality of health records. Each HMO must establish 
adequate procedures to ensure the confidentiality of the health and 
medical records of its enrollees.

[58 FR 38068, July 15, 1993]



 Subpart C_Qualified Health Maintenance Organizations: Organization and 
                                Operation

    Source: 58 FR 38068, July 15, 1993, unless otherwise noted.



Sec. 417.120  Fiscally sound operation and assumption of financial risk.

    (a) Fiscally sound operation--(1) General requirements. Each HMO 
must have a fiscally sound operation, as demonstrated by the following:
    (i) Total assets greater than total unsubordinated liabilities. In 
evaluating assets and liabilities, loan funds awarded or guaranteed 
under section 1306 of the PHS Act are not included as liabilities.
    (ii) Sufficient cash flow and adequate liquidity to meet obligations 
as they become due.
    (iii) A net operating surplus, or a financial plan that meets the 
requirements of paragraph (a)(2) of this section.
    (iv) An insolvency protection plan that meets the requirements of 
Sec. 417.122(b) for protection of enrollees.
    (v) A fidelity bond or bonds, procured and maintained by the HMO, in 
an amount fixed by its policymaking body but not less than $100,000 per 
individual, covering each officer and employee entrusted with the 
handling of its funds. The bond may have reasonable deductibles, based 
upon the financial strength of the HMO.
    (vi) Insurance policies or other arrangements, secured and 
maintained by the HMO and approved by CMS to insure the HMO against 
losses arising from professional liability claims, fire, theft, fraud, 
embezzlement, and other casualty risks.

[[Page 241]]

    (2) Financial plan requirement. (i) If an HMO has not earned a 
cumulative net operating surplus during the three most recent fiscal 
years, did not earn a net operating surplus during the most recent 
fiscal year or does not have positive net worth, the HMO must submit a 
financial plan satisfactory to CMS to achieve net operating surplus 
within available fiscal resources.
    (ii) This plan must include--
    (A) A detailed marketing plan;
    (B) Statements of revenue and expense on an accrual basis;
    (C) Sources and uses of funds statements; and
    (D) Balance sheets.
    (b) Assumption of financial risk. Each HMO must assume full 
financial risk on a prospective basis for the provision of basic health 
services, except that it may obtain insurance or make other arrangements 
as follows:
    (1) For the cost of providing to any enrollee basic health services 
with an aggregate value of more than $5,000 in any year.
    (2) For the cost of basic health services obtained by its enrollees 
from sources other than the HMO because medical necessity required that 
they be furnished before they could be secured through the HMO.
    (3) For not more than 90 percent of the amount by which its costs 
for any of its fiscal years exceed 115 percent of its income for that 
fiscal year.
    (4) For physicians or other health professionals, health care 
institutions, or any other combination of such individuals or 
institutions to assume all or part of the financial risk on a 
prospective basis for their furnishing of basic health services to the 
HMO's enrollees.



Sec. 417.122  Protection of enrollees.

    (a) Liability protection. (1) Each HMO must adopt and maintain 
arrangements satisfactory to CMS to protect its enrollees from incurring 
liability for payment of any fees that are the legal obligation of the 
HMO. These arrangements may include any of the following:
    (i) Contractual arrangements that prohibit health care providers 
used by the enrollees from holding any enrollee liable for payment of 
any fees that are the legal obligation of the HMO.
    (ii) Insurance, acceptable to CMS.
    (iii) Financial reserves, acceptable to CMS, that are held for the 
HMO and restricted for use only in the event of insolvency.
    (iv) Any other arrangements acceptable to CMS.
    (2) The requirements of this paragraph do not apply to an HMO if CMS 
determines that State law protects the HMO enrollees from liability for 
payment of any fees that are the legal obligation of the HMO.
    (b) Protection against loss of benefits if the HMO becomes 
insolvent. The insolvency protection plan required under Sec. 417.120(a) 
must provide for continuation of benefits as follows:
    (1) For all enrollees, for the duration of the contract period for 
which payment has been made.
    (2) For enrollees who are in an inpatient facility on the date of 
insolvency, until they are discharged from the facility.



Sec. 417.124  Administration and management.

    (a) General requirements. Each HMO must have administrative and 
managerial arrangements satisfactory to CMS, as demonstrated by at least 
the following:
    (1) A policymaking body that exercises oversight and control over 
the HMO's policies and personnel to ensure that management actions are 
in the best interest of the HMO and its enrollees.
    (2) Personnel and systems sufficient for the HMO to organize, plan, 
control and evaluate the financial, marketing, health services, quality 
assurance program, administrative and management aspects of the HMO.
    (3) At a minimum, management by an executive whose appointment and 
removal are under the control of the HMO's policymaking body.
    (b) Full and fair disclosure--(1) Basic rule. Each HMO must prepare 
a written description of the following:
    (i) Benefits (including limitations and exclusions).
    (ii) Coverage (including a statement of conditions on eligibility 
for benefits).
    (iii) Procedures to be followed in obtaining benefits and a 
description of

[[Page 242]]

circumstances under which benefits may be denied.
    (iv) Rates.
    (v) Grievance procedures.
    (vi) Service area.
    (vii) Participating providers.
    (viii) Financial condition including at least the following most 
recently audited information: Current assets, other assets, total 
assets; current liabilities, long term liabilities; and net worth.
    (2) Requirements for the description. (i) The description must be 
written in a way that can be easily understood by the average person who 
might enroll in the HMO.
    (ii) The description of benefits and coverage may be in general 
terms if reference is made to a detailed statement of benefits and 
coverage that is available without cost to any person who enrolls in the 
HMO or to whom the opportunity for enrollment is offered.
    (iii) The HMO must provide the description to any enrollee or person 
who is eligible to elect the HMO option and who requests the material 
from the HMO or the administrator of a health benefits plan. For 
purposes of this requirement, ``administrator'' (of a health benefits 
plan) has the meaning it is given in the Employment Retirement Income 
Security Act of 1974 (ERISA) at 29 U.S.C. 1002(16)(A).
    (iv) If the HMO provides health services through individual practice 
associations (IPAs), the HMO must specify the number of member 
physicians by specialty, and a listing of the hospitals where HMO 
enrollees will receive basic and supplemental health services.
    (v) If the HMO provides health services other than through IPAs, the 
HMO must specify, for each ambulatory care facility, the facility's 
address, days and hours of operation, and the number of physicians by 
specialty, and a listing of the hospitals where HMO enrollees will 
receive basic and supplemental health services.
    (c) Broadly representative enrollment. (1) Each HMO must offer 
enrollment to persons who are broadly representative of the various age, 
social, and income groups within its service area.
    (2) If an HMO has a medically underserved population located in its 
service area, not more than 75 percent of its enrollees may be from the 
medically underserved population unless the area in which that 
population resides is a rural area.
    (d) Health status and enrollment. (1) The HMO may not, on the basis 
of health status, health care needs, or age of the individual--
    (i) Expel or refuse to reenroll any enrollee; or
    (ii) Refuse to enroll individual members of a group.
    (2) For purposes of this paragraph, a ``group'' is composed of 
individuals who enroll in the HMO under a contract or other arrangement 
that covers two or more subscribers. Examples of groups are employees 
who enroll under a contract between their employer and the HMO, or 
members of an organization that arranges coverage for its membership.
    (3) Nothing in this subpart prohibits an HMO from requiring that, as 
a condition for continued eligibility for enrollment, enrolled dependent 
children, upon reaching a specified age, convert to individual 
enrollment, consistent with paragraph (e) of this section.
    (e) Conversion of enrollment. (1) Each HMO must offer individual 
enrollment to the following:
    (i) Each enrollee (and his or her enrolled dependents) leaving a 
group.
    (ii) Each enrollee who would otherwise cease to be eligible for HMO 
enrollment because of his or her age, or the death or divorce of an 
enrollee.
    (2) The individual enrollment offered must meet the conditions of 
subpart B of this part and this subpart C.
    (3) The HMO is not required to offer individual enrollment except to 
the enrollees specified in this paragraph.
    (4) The HMO must offer the enrollment on the same terms and 
conditions that it makes available to other nongroup enrollees.
    (f) [Reserved]
    (g) Grievance procedures. Each HMO must have and use meaningful 
procedures for hearing and resolving grievances between the HMO's 
enrollees and the HMO, including the HMO staff and medical groups and 
IPAs that furnish services. These procedures must ensure that:

[[Page 243]]

    (1) Grievances and complaints are transmitted in a timely manner to 
appropriate HMO decisionmaking levels that have authority to take 
corrective action; and
    (2) Appropriate action is taken promptly, including a full 
investigation if necessary and notification of concerned parties as to 
the results of the HMO's investigation.
    (h) Certification of institutional providers. Each HMO must ensure 
that its affiliated institutional providers meet one of the following 
conditions:
    (1) In the case of hospitals, are either accredited by the Joint 
Commission on Accreditation of Health Care Organizations, or certified 
by Medicare.
    (2) In the case of laboratories, are either CLIA-exempt, or have in 
effect a valid certificate of one of the following types, issued by CMS 
in accordance with section 353 of the PHS Act and part 493 of this 
chapter:
    (i) Registration certificate.
    (ii) Certificate.
    (iii) Certificate of waiver.
    (iv) Certificate of accreditation.
    (3) In the case of other affiliated institutional providers, are 
certified for participation in Medicare and Medicaid in accordance with 
part 405, 416, 418, 488, or 491 of this chapter, as appropriate.

[58 FR 38068, July 15, 1993, as amended at 59 FR 49843, Sept. 30, 1994]



Sec. 417.126  Recordkeeping and reporting requirements.

    (a) General reporting and disclosure requirements. Each HMO must 
have an effective procedure to develop, compile, evaluate, and report to 
CMS, to its enrollees, and to the general public, at the times and in 
the manner that CMS requires, and while safeguarding the confidentiality 
of the doctor-patient relationship, statistics and other information 
with respect to the following:
    (1) The cost of its operations.
    (2) The patterns of utilization of its services.
    (3) The availability, accessibility, and acceptability of its 
services.
    (4) To the extent practical, developments in the health status of 
its enrollees.
    (5) Information demonstrating that the HMO has a fiscally sound 
operation.
    (6) Other matters that CMS may require.
    (b) Significant business transactions. Each HMO must report to CMS 
annually, within 120 days of the end of its fiscal year (unless for good 
cause shown, CMS authorizes an extension of time), the following:
    (1) A description of significant business transactions (as defined 
in paragraph (c) of this section) between the HMO and a party in 
interest.
    (2) With respect to those transactions--
    (i) A showing that the costs of the transactions listed in paragraph 
(c) of this section do not exceed the costs that would be incurred if 
these transactions were with someone who is not a party in interest; or
    (ii) If they do exceed, a justification that the higher costs are 
consistent with prudent management and fiscal soundness requirements.
    (3) A combined financial statement for the HMO and a party in 
interest if either of the following conditions is met:
    (i) Thirty-five percent or more of the costs of operation of the HMO 
go to a party in interest.
    (ii) Thirty-five percent or more of the revenue of a party in 
interest is from the HMO.
    (c) ``Significant business transaction'' defined. As used in 
paragraph (b) of this section--
    (1) Business transaction means any of the following kinds of 
transactions:
    (i) Sale, exchange or lease of property.
    (ii) Loan of money or extension of credit.
    (iii) Goods, services, or facilities furnished for a monetary 
consideration, including management services, but not including--
    (A) Salaries paid to employees for services performed in the normal 
course of their employment; or
    (B) Health services furnished to the HMO's enrollees by hospitals 
and other providers, and by HMO staff, medical groups, or IPAs, or by 
any combination of those entities.

[[Page 244]]

    (2) Significant business transaction means any business transaction 
or series of transactions of the kind specified in paragraph (c)(1) of 
this section that, during any fiscal year of the HMO, have a total value 
that exceeds $25,000 or 5 percent of the HMO's total operating expenses, 
whichever is less.
    (d) Requirements for combined financial statements. (1) The combined 
financial statements required by paragraph (b)(3) of this section must 
display in separate columns the financial information for the HMO and 
each of these parties in interest.
    (2) Inter-entity transactions must be eliminated in the consolidated 
column.
    (3) These statements must have been examined by an independent 
auditor in accordance with generally accepted accounting principles, and 
must include appropriate opinions and notes.
    (4) Upon written request from an HMO showing good cause, CMS may 
waive the requirement that its combined financial statement include the 
financial information required in this paragraph (d) with respect to a 
particular entity.
    (e) Reporting and disclosure under ERISA. (1) For any employees' 
health benefits plan that includes an HMO in its offerings, the HMO must 
furnish, upon request, the information the plan needs to fulfill its 
reporting and disclosure obligations (with respect to the particular 
HMO) under the Employee Retirement Income Security Act of 1974 (ERISA).
    (i) The HMO must furnish the information to the employer or the 
employer's designee, or to the plan administrator, as the term 
``administrator'' is defined in ERISA.
    (ii) Loan of money or extension of credit.
    (iii) Goods, services, or facilities furnished for a monetary 
consideration, including management services, but not including--
    (A) Salaries paid to employees for services performed in the normal 
course of their employment; or
    (B) Health services furnished to the HMO's enrollees by hospitals 
and other providers, and by HMO staff, medical groups, or IPAs, or by 
any combination of those entities.
    (2) Significant business transaction means any business transaction 
or series of transactions of the kind specified in paragraph (c)(1) of 
this section that, during any fiscal year of the HMO, have a total value 
that exceeds $25,000 or 5 percent of the HMO's total operating expenses, 
whichever is less.
    (d) Requirements for combined financial statements. (1) The combined 
financial statements required by paragraph (b)(3) of this section must 
display in separate columns the financial information for the HMO and 
each of these parties in interest.
    (2) Inter-entity transactions must be eliminated in the consolidated 
column.
    (3) These statements must have been examined by an independent 
auditor in accordance with generally accepted accounting principles, and 
must include appropriate opinions and notes.
    (4) Upon written request from an HMO showing good cause, CMS may 
waive the requirement that its combined financial statement include the 
financial information required in this paragraph (d) with respect to a 
particular entity.
    (e) Reporting and disclosure under ERISA. (1) For any employees' 
health benefits plan that includes an HMO in its offerings, the HMO must 
furnish, upon request, the information the plan needs to fulfill its 
reporting and disclosure obligations (with respect to the particular 
HMO) under the Employee Retirement Income Security Act of 1974 (ERISA).
    (2) The HMO must furnish the information to the employer or the 
employer's designee, or to the plan administrator, as the term 
``administrator'' is defined in ERISA.



             Subpart D_Application for Federal Qualification



Sec. 417.140  Scope.

    This subpart sets forth--
    (a) The requirements for--
    (1) Entities that seek qualification as HMOs under title XIII of the 
PHS Act; and
    (2) HMOs that seek--
    (i) Qualification for their regional components; or
    (ii) Expansion of their service areas;

[[Page 245]]

    (b) The procedures that CMS follows to make determinations; and
    (c) Other related provisions, including application fees.

[59 FR 49836, Sept. 30, 1994]



Sec. 417.142  Requirements for qualification.

    (a) General rules. (1) An entity seeking qualification as an HMO 
must meet the requirements and provide the assurances specified in 
paragraphs (b) through (f) of this section, as appropriate.
    (2) CMS determines whether the entity is an HMO on the basis of the 
entity's application and any additional information and investigation 
(including site visits) that CMS may require.
    (3) CMS may determine that an entity is any of the following:
    (i) An operational qualified HMO.
    (ii) A preoperational qualified HMO.
    (iii) A transitional qualified HMO.
    (b) Operational qualified HMO. CMS determines that an entity is an 
operational qualified HMO if--
    (1) CMS finds that the entity meets the requirements of subparts B 
and C of this part.
    (2) The entity, within 30 days of CMS's determination, provides 
written assurances, satisfactory to CMS, that it--
    (i) Provides and will provide basic health services (and any 
supplemental health services included in any contract) to its enrollees;
    (ii) Provides and will provide these services in the manner 
prescribed in sections 1301(b) and 1301(c) of the PHS Act and subpart B 
of this part;
    (iii) Is organized and operated and will continue to be organized 
and operated in the manner prescribed in section 1301(c) of the PHS Act 
and subpart C of this part;
    (iv) Under arrangements that safeguard the confidentiality of 
patient information and records, will provide access to CMS and the 
Comptroller General or any of their duly authorized representatives for 
the purpose of audit, examination or evaluation to any books, documents, 
papers, and records of the entity relating to its operation as an HMO, 
and to any facilities that it operates; and
    (v) Will continue to comply with any other assurances that it has 
given to CMS.
    (c) Preoperational qualified HMO. (1) CMS may determine that an 
entity is a preoperational qualified HMO if it provides, within 30 days 
of CMS's determination, satisfactory assurances that it will become 
operational within 60 days following that determination and will, when 
it becomes operational, meet the requirements of subparts B and C of 
this part.
    (2) Within 30 days after receiving notice that the entity has begun 
operation, CMS determines whether it is an operational qualified HMO. In 
the absence of this determination, the entity is not an operational 
qualified HMO even though it becomes operational.
    (d) Transitional qualified HMO: General rules--(1) Basic 
requirements. CMS may determine that an entity is a transitional 
qualified HMO if the entity--
    (i) Meets the requirements of paragraph (d)(2) through (d)(4) of 
this section; and
    (ii) Provides the assurances specified in paragraphs (d)(5) through 
(d)(7) of this section within 30 days of CMS's determination.
    (2) Organization and operation. The entity is organized and operated 
in accordance with subpart C of this part, except that it need not--
    (i) Assume full financial risk for the provision of basic health 
services as required by Sec. 417.120(b); or
    (ii) Comply with the limitations that are imposed on insurance by 
Sec. 417.120(b)(1).
    (3) Range of services. The entity is currently providing the 
following services on a prepaid basis:
    (i) Physician services.
    (ii) Outpatient services and inpatient hospital services. (The 
entity need not provide or pay for hospital inpatient or outpatient 
services that it can show are being provided directly, through 
insurance, or under arrangements, by other entities.)
    (iii) Medically necessary emergency services.
    (iv) Diagnostic laboratory services and diagnostic and therapeutic 
radiologic services.

[[Page 246]]


These services must meet the requirement of Sec. 417.101, but may be 
limited in time and cost without regard to the constraints imposed by 
Sec. 417.101(a).
    (4) Payment for services--(i) General rule. The entity pays for 
basic health services in accordance with Sec. 417.104, except that it 
need not comply with the copayments limitations imposed by 
Sec. 417.104(a)(4).
    (ii) Determination of payment rates. In determining payment rates, 
the entity need not comply with the community rating requirements of 
Secs. 417.104(b) and 417.105(b).
    (5) Contracts in effect on the date of CMS's determination. The 
entity gives assurances that it will meet the following conditions with 
respect to its group and individual contracts that are in effect on the 
date of CMS's determination, and which are renewed or renegotiated 
during the period approved by CMS under paragraph (d)(6) of this 
section:
    (i) Continue to provide services in accordance with paragraph (d)(3) 
of this section.
    (ii) Continue to be organized and operated and to pay for basic 
health services in accordance with paragraphs (d)(2) and (d)(4) of this 
section, respectively.
    (6) Time-phased plan. The entity gives assurances as follows:
    (i) It will implement a time-phased plan acceptable to CMS that--
    (A) May not extend for more than 3 years from the date of CMS's 
determination; and
    (B) Specifies definite steps for meeting, at the time of renewal of 
each group or individual contract, all the requirements of subparts B 
and C of this part.
    (ii) Upon completion of this time-phased plan, it will--
    (A) Provide basic and supplemental services to all of its enrollees; 
and
    (B) Be organized and operated, and provide services, in accordance 
with subparts B and C of this part.
    (7) Contracts entered into after the date of CMS's determination. 
The entity gives assurances that, with respect to any group or 
individual contract entered into after the date of CMS's determination, 
it will--
    (i) Be organized and operated in accordance with subpart C of this 
part; and
    (ii) Provide basic health services and any supplemental health 
services included in the contract, in accordance with subpart B of this 
part.
    (e) Failure to sign assurances timely. If CMS determines that an 
entity meets the requirements for qualification and the entity fails to 
sign its assurances within 30 days following the date of the 
determination, CMS gives the entity written notice that its application 
is considered withdrawn and that it is not a qualified HMO.
    (f) Qualification of regional components. An HMO that has more than 
one regional component is considered qualified for those regional 
components for which assurances have been signed in accordance with this 
section.
    (g) Special rules: Enrollees entitled to Medicare or Medicaid. For 
an HMO that accepts enrollees entitled to Medicare or Medicaid, the 
following rules apply:
    (1) The requirements of titles XVIII and XIX of the Act, as 
appropriate, take precedence over conflicting requirements of sections 
1301(b) and 1301(c) of the PHS Act.
    (2) The HMO must, with respect to its enrollees entitled to Medicare 
or Medicaid, comply with the applicable requirement of title XVIII or 
XIX, including those that pertain to--
    (i) Deductibles and coinsurance;
    (ii) Enrollment mix and enrollment practices;
    (iii) State plan rules on copayment options; and
    (iv) Grievance procedures.
    (3) An HMO that complies with paragraph (g)(2) of this section may 
obtain and retain Federal qualification if, for its other enrollees, the 
HMO meets the requirements of sections 1301(b) and 1301(c) of the PHS 
Act and implementing regulations in this subpart D and in subparts B and 
C of this part.
    (h) Special rules: Enrollees under the Federal employee health 
benefits program (FEHBP). An HMO that accepts enrollees under the FEHBP 
(Chapter 89 of title 5 of the U.S.C.) may obtain and retain Federal 
qualification if, for its other enrollees, it complies with the 
requirements of section 1301(b) and

[[Page 247]]

1301(c) of the PHS Act and implementing regulations in this subpart D 
and subparts B and C of this part.

[59 FR 49836, Sept. 30, 1994]



Sec. 417.143  Application requirements.

    (a) General requirements. This section sets forth application 
requirements for entities that seek qualification as HMOs; HMOs that 
seek expansion of their service areas; and HMOs that seek qualification 
of their regional components as HMOs.
    (b) Completion of an application form. (1) In order to receive a 
determination concerning whether an entity is a qualified HMO, an 
individual authorized to act for the entity (the applicant) must 
complete an application form provided by CMS.
    (2) The authorized individual must describe thoroughly how the 
entity meets, or will meet, the requirements for qualified HMOs 
described in the PHS Act and in subparts B and C of this part, this 
subpart D, and 417.168 and 417.169 of subpart F.
    (c) Collection of an application fee. In accordance with the 
requirements of 31 U.S.C. 9701, Fees and charges for Government services 
and things of value, CMS determines the amount of the application fee 
that must be submitted with each type of application.
    (1) The fee is reasonably related to the Federal government's cost 
of qualifying an entity and may vary based on the type of application.
    (2) Each type of application has one set fee rather than a charge 
based on the specific cost of each determination. (For example, each 
Federally qualified HMO applicant seeking Federal qualification of one 
of its regional components as an HMO is charged the same amount, unless 
the amount of the fee has been changed under paragraph (f) of this 
section.)
    (d) Application fee amounts. The application fee amounts for 
applications completed on or after July 13, 1987 are as follows:
    (1) $18,400 for an entity seeking qualification as an HMO or 
qualification of a regional component of an HMO.

If, in the case of an HMO seeking qualification of a regional component, 
CMS determines that there is no need for a site visit, $8,000 will be 
returned to the applicant.
    (2) $6,900 for an HMO seeking expansion of its service area.
    (3) $3,100 for a CMP seeking qualification as an HMO.
    (e) Refund of an application fee. CMS refunds an application fee 
only if the entity withdraws its application within 10 working days 
after receipt by CMS. Application fees are not returned in any other 
circumstance, even if qualification or certification is denied.
    (f) Procedure for changing the amount of an application fee. If CMS 
determines that a change in the amount of a fee is appropriate, CMS 
issues a notice of proposed rulemaking in the Federal Register to 
announce the proposed new amount.
    (g) New application after denial. An entity may not submit another 
application under this subpart for the same type of determination for 
four full months after the date of the notice in which CMS denied the 
application.
    (h) Disclosure of application information under the Freedom of 
Information Act. An applicant submitting material that he or she 
believes is protected from disclosure under 5 U.S.C. 552, the Freedom of 
Information Act, or because of exceptions provided in 45 CFR part 5, the 
Department's regulations providing exceptions to disclosure, should 
label the material ``privileged'' and include an explanation of the 
applicability of an exception described in 45 CFR part 5.

[52 FR 22321, June 11, 1987. Redesignated at 52 FR 36746, Sept. 30, 
1987, as amended at 58 FR 38077, July 15, 1993]



Sec. 417.144  Evaluation and determination procedures.

    (a) Basis for evaluation and determination. (1) CMS evaluates an 
application for Federal qualification on the basis of information 
contained in the application itself and any additional information that 
CMS obtains through on-site visits, public hearings, and any other 
appropriate procedures.
    (2) If the application is incomplete, CMS notifies the entity and 
allows 60 days from the date of the notice for the entity to furnish the 
missing information.

[[Page 248]]

    (3) After evaluating all relevant information, CMS determines 
whether the entity meets the applicable requirements of Secs. 417.142 
and 417.143.
    (b) Notice of determination. CMS notifies each entity that applies 
for qualification under this subpart of its determination and the basis 
for the determination. The determination may be granting of 
qualification, intent to deny, or denial.
    (c) Intent to deny. (1) If CMS finds that the entity does not appear 
to meet the requirements for qualification and appears to be able to 
meet those requirements within 60 days, CMS gives the entity notice of 
intent to deny qualification and a summary of the basis for this 
preliminary finding.
    (2) Within 60 days from the date of the notice, the entity may 
respond in writing to the issues or other matters that were the basis 
for CMS's preliminary finding, and may revise its application to remedy 
any defects identified by CMS.
    (d) Denial and reconsideration of denial. (1) If CMS denies an 
application for qualification under this subpart, CMS gives the entity 
written notice of the denial and an opportunity to request 
reconsideration of that determination.
    (2) A request for reconsideration must--
    (i) Be submitted in writing, within 60 days following the date of 
the notice of denial;
    (ii) Be addressed to the CMS officer or employee who denied the 
application; and
    (iii) Set forth the grounds upon which the entity requests 
reconsideration, specifying the material issues of fact and of law upon 
which the entity relies.
    (3) CMS bases its reconsideration upon the record compiled during 
the qualification review proceedings, materials submitted in support of 
the request for reconsideration, and other relevant materials available 
to CMS.
    (4) CMS gives the entity written notice of the reconsidered 
determination and the basis for the determination.
    (e) Information on qualified HMOs--(1) Federal Register notices. In 
quarterly Federal Register notices, CMS gives the names, addresses, and 
service areas of newly qualified HMOs and describes the expanded service 
areas of other qualified HMOs.
    (2) Listings. A cumulative list of qualified HMOs is available from 
the following office, which is open from 8:30 a.m. to 5 p.m., Monday 
through Friday: Office of Managed Care, room 4360, Cohen Building, 400 
Independence Avenue SW., Washington, DC 20201.

[59 FR 49837, Sept. 30, 1994]



  Subpart E_Inclusion of Qualified Health Maintenance Organizations in 
                     Employee Health Benefits Plans

    Source: 45 FR 72517, Oct. 31, 1980, unless otherwise noted. 
Redesignated at 52 FR 36746, Sept. 30, 1987.



Sec. 417.150  Definitions.

    As used in this subpart, unless the context indicates otherwise--
    Agreement means a collective bargaining agreement.
    Bargaining representative means an individual or entity designated 
or selected, under any applicable Federal, State, or local law, or 
public entity collective bargaining agreement, to represent employees in 
collective bargaining, or any other employee representative designated 
or selected under any law.
    Carrier means a voluntary association, corporation, partnership, or 
other organization that is engaged in providing, paying for, or 
reimbursing all or part of the cost of health benefits under group 
insurance policies or contracts, medical or hospital service agreements, 
enrollment or subscription contracts, or similar group arrangements, in 
consideration of premiums or other periodic charges payable to the 
carrier.
    Collective bargaining agreement means an agreement entered into 
between an employing entity and the bargaining representative of its 
employees.
    Contract means an employer-employee or public entity-employee 
contract, or a contract for health benefits.
    Designee means any person or entity authorized to act on behalf of 
an employing entity or a group of employing

[[Page 249]]

entities to offer the option of enrollment in a qualified health 
maintenance organization to their eligible employees.
    Eligible employee means an employee who meets the employer's 
requirements for participation in the health benefits plan.
    Employee means any individual employed by an employer or public 
entity on a full-time or part-time basis.
    Employer has the meaning given that term in section 3(d) of the Fair 
Labor Standards Act of 1938, except that it--
    (1) Includes non-appropriated fund instrumentalities of the United 
States Government; and
    (2) Excludes the following:
    (i) The governments of the United States, the District of Columbia 
and the territories and possessions of the United States, the 50 States 
and their political subdivisions, and any agencies or instrumentalities 
of any of the foregoing, including the United States Postal Service and 
Postal Rate Commission.
    (ii) Any church, or convention or association of churches, and any 
organization operated, supervised, or controlled by a church, or 
convention or association of churches that meets the following 
conditions:
    (A) Is an organization that is described in section 501(c)(3) of the 
Internal Revenue Code of 1954.
    (B) Does not discriminate, in the employment, compensation, 
promotion or termination of employment of any personnel, or in the 
granting of staff and other privileges to physicians or other health 
personnel, on the grounds that the individuals obtain health care 
through HMOs, or participate in furnishing health care through HMOs.
    Employing entity means an employer or public entity.
    Employing entity-employee contract means a legally enforceable 
agreement (other than a collective bargaining agreement) between an 
employing entity and its employees for the provision of, or payment for, 
health benefits for its employees, or for its employees and their 
eligible dependents.
    Group enrollment period means the period of at least 10 working days 
each calendar year during which each eligible employee is given the 
opportunity to select among the alternatives included in a health 
benefits plan.
    Health benefits contract means a contract or other agreement between 
an employing entity or a designee and a carrier for the provision of, or 
payment for, health benefits to eligible employees or to eligible 
employees and their eligible dependents.
    Health benefits plan means any arrangement, to provide or pay for 
health services, that is offered to eligible employees, or to eligible 
employees and their eligible dependents, by or on behalf of an employing 
entity.
    Public entity means the 50 states, Puerto Rico, Guam, the Virgin 
Islands, the Northern Mariana Islands and American Samoa and their 
political subdivisions, the District of Columbia, and any agency or 
instrumentality of the foregoing, and political subdivisions include 
counties, parishes, townships, cities, municipalities, towns, villages, 
and incorporated villages.
    Qualified HMO means an HMO that has in effect a determination, made 
under subpart D of this part, that the HMO is an operational, 
preoperational, or transitional qualified HMO.
    To offer a health benefits plan means to make participation in a 
health benefits plan available to eligible employees, or to eligible 
employees and their eligible dependents regardless of whether the 
employing entity makes a financial contribution to the plan on behalf of 
these employees, directly or indirectly, for example, through payments 
on any basis into a health and welfare trust fund.

[45 FR 72517, Oct. 31, 1980, as amended at 47 FR 19341, May 5, 1982. 
Redesignated at 52 FR 36746, Sept. 30, 1987, as amended at 58 FR 38077, 
July 15, 1993; 59 FR 49837, 49843, Sept. 30, 1994]



Sec. 417.151  Applicability.

    (a) Basic rule. Effective October 24, 1995, \1\ this subpart applies 
to any employing entity that offers a health benefits plan to its 
employees, meets the

[[Page 250]]

conditions specified in paragraphs (b) through (e) of this section, and 
elects to include one or more qualified HMOs in the health plan 
alternatives it offers its employees.
---------------------------------------------------------------------------

    \1\ Before October 24, 1995, an employing entity that met the 
conditions specified in Sec. 417.151 was required to include one or more 
qualified HMOs, if it received from at least one qualified HMO a written 
request for inclusion and that request met the timing, content, and 
procedural requirements specified in Sec. 417.152.
---------------------------------------------------------------------------

    (b) Number of employees. During any calendar quarter of the 
preceding calendar year, the employer or public entity employed an 
average of not less than 25 employees.
    (c) Minimum wage. During any calendar quarter of the preceding 
calendar year, the employer was required to pay the minimum wage 
specified in section 6 of the Fair Labor Standards Act of 1938, or would 
have been required to pay that wage but for section 13(a) of that Act.
    (d) Federal assistance under section 317 of the PHS Act. The public 
entity has a pending application for, or is receiving, assistance under 
section 317 of the PHS Act.
    (e) Employees in HMO's service area. At least 25 of the employing 
entity's employees reside within the HMO's service area.

[59 FR 49838, Sept. 30, 1994, as amended at 61 FR 27287, May 31, 1996]



Sec. 417.153  Offer of HMO alternative.

    (a) Basic rule. An employing entity that is subject to this subpart 
and that elects to include one or more qualified HMOs must offer the HMO 
alternative in accordance with this section.
    (b) Employees to whom the HMO option must be offered. Each employing 
entity must offer the option of enrollment in a qualified HMO to each 
eligible employee and his or her eligible dependents who reside in the 
HMO's service area.
    (c) Manner of offering the HMO option. (1) For employees who are 
represented by a bargaining representative, the option of enrollment in 
a qualified HMO--
    (i) Must first be presented to the bargaining representative; and
    (ii) If the representative accepts the option, must then be offered 
to each represented employee.
    (2) For employees not represented by a bargaining representative, 
the option must be offered directly to those employees.

[59 FR 49839, Sept. 30, 1994, as amended at 61 FR 27287, May 31, 1996]



Sec. 417.155  How the HMO option must be included in the health benefits plan.

    (a) HMO access to employees--(1) Purpose and timing--(i) Purpose. 
The employing entity must provide each HMO included in its health 
benefits plan fair and reasonable access to all employees specified in 
Sec. 417.153(b), so that the HMO can explain its program in accordance 
with Sec. 417.124(b).
    (ii) Timing. The employing entity must provide access beginning at 
least 30 days before, and continuing during, the group enrollment 
period.
    (2) Nature of access. (i) Access must include, at a minimum, 
opportunity to distribute educational literature, brochures, 
announcements of meetings, and other relevant printed materials that 
meet the requirements of Sec. 417.124(b).
    (ii) Access may not be more restrictive or less favorable than the 
access the employing entity provides to other offerors of options 
included in the health benefits plan, whether or not those offerors 
elect to avail themselves of that access.
    (b) Review of HMO offering materials. (1) The HMO must give the 
employing entity or designee opportunity to review, revise, and approve 
HMO educational and offering materials before distribution.
    (2) Revisions must be limited to correcting factual errors and 
misleading or ambiguous statements, unless--
    (i) The HMO and the employing entity agree otherwise; or
    (ii) Other revisions are required by law.
    (3) The employing entity or designee must complete revision of the 
materials promptly so as not to delay or otherwise interfere with their 
use during the group enrollment period.
    (c) Group enrollment period; prohibition of restrictions; effective 
date of HMO coverage--(1) Prohibition of restrictions. If an employing 
entity or designee includes the option of enrollment in a qualified HMO 
in the health benefits plan offered to its eligible employees,

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it must provide a group enrollment period before the effective date of 
HMO coverage. The employing entity may not impose waiting periods as a 
condition of enrollment in the HMO or of transfer from HMO to non-HMO 
coverage, or exclusions, or limitations based on health status.
    (2) Effective date of coverage. Unless otherwise agreed to by the 
employing entity, or designee, and the HMO, coverage under the HMO 
contract for employees selecting the HMO option begins on the day the 
non-HMO contract expires or is renewed without lapse.
    (3) Coordination of benefits. Nothing in this subpart precludes the 
uniform application of coordination of benefits agreements between the 
HMOs and the other carriers that are included in the health benefits 
plan.
    (d) Continued eligibility for ``free-standing'' health benefits--(1) 
Basic requirement. At the request of a qualified HMO, the employing 
entity or its designee must provide that employees selecting the option 
of HMO membership will not, because of this selection, lose their 
eligibility for free-standing dental, optical, or prescription drug 
benefits for which they were previously eligible or would be eligible if 
selecting a non-HMO option and that are not included in the services 
provided by the HMO to its enrollees as part of the HMO prepaid benefit 
package.
    (2) ``Free-standing'' defined. For purposes of this paragraph, the 
term ``free-standing'' refers to a benefit that--
    (i) Is not integrated or incorporated into a basic health benefits 
package or major medical plan, and
    (ii) Is--
    (A) Offered by a carrier other than the one offering the basic 
health benefits package or major medical plan; or
    (B) Subject to a premium separate from the premium for the basic 
health benefits package or major medical plan.
    (3) Examples of the employing entity's obligation with respect to 
the continued eligibility. (i) The health benefits plan includes a free-
standing dental benefit. The HMO does not offer any dental coverage as 
part of its health services provided to members on a prepaid basis. The 
employing entity must provide that employees who select the HMO option 
continue to be eligible for dental coverage. (If the dental coverage is 
not optional for employees selecting the non-HMO option, nothing in this 
regulation requires that the coverage be made optional for employees 
selecting the HMO option. Conversely, if this coverage is optional for 
employees selecting the non-HMO option, nothing in this regulation 
requires that the coverage be mandatory for employees selecting the non-
HMO option.) -
    (ii) The non-HMO option provides free-standing coverage for optical 
services (such as refraction and the provision of eyeglasses), and the 
HMO does not. The employing entity must provide that employees who 
select the HMO option continue to be eligible for optical coverage.
    (iii) The non-HMO option includes dental coverage in its major 
medical package, with a common deductible applied to dental as well as 
non-dental benefits. The HMO provides no dental coverage as part of its 
pre-paid health services. Because the dental coverage is not free-
standing, the employing entity is not required to provide that employees 
who select the HMO option continue to be eligible for dental coverage, 
but is free to