[Federal Register Volume 59, Number 35 (Tuesday, February 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3608]
[[Page Unknown]]
[Federal Register: February 22, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
42 CFR Part 421
[BPO-111-P]
RIN 0938-AG06
Medicare Program; Intermediary and Carrier Functions
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This proposed rule would bring certain sections of the
regulations concerning Medicare fiscal intermediaries and carriers into
conformity with the appropriate sections of Title XVIII of the Social
Security Act. The rule would distinguish between those functions which
applicable statutory authorities require to be included in agreements
with fiscal intermediaries and those functions that, while not required
to be performed by organizations that have entered into intermediary
agreements with the Secretary pursuant to section 1816 of the Social
Security Act, may be included in such agreements at our discretion.
We would require that the intermediary agreements include, as
functions, requirements that intermediaries determine proper payment
amounts and pay bills. All other functions would be optional. We
propose that all functions for carriers are optional. These changes
would provide us with the flexibility to transfer functions from one
intermediary or carrier to another or to otherwise limit the functions
an intermediary or carrier performs when we determine to do so would
result in more effective and efficient program administration.
In addition, we propose a number of technical or clarifying
revisions concerning carrier payment on a fee schedule basis and the
distinction between nonrenewal and termination of intermediary
agreements and carrier contracts.
DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on April
25, 1994.
ADDRESSES: Mail written comments to the following address: Health Care
Financing Administration, Department of Health and Human Services,
Attention: BPO-111-P, P.O. Box 26676, Baltimore, MD 21207.
If you prefer, you may deliver your comments to one of the
following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard,
Baltimore, Maryland 21207.
Due to staffing and resource limitations, we cannot accept
facsimile (FAX) transmissions. In commenting, please refer to file code
BPO-111-P. Comments received timely will be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, in room 309-G of the
Department's offices at 200 Independence Avenue, SW., Washington, DC,
on Monday through Friday of each week from 8:30 a.m. to 5 p.m. (phone:
(410) 966-7411).
FOR FURTHER INFORMATION CONTACT: Alan Bromberg, (410) 966-7441
SUPPLEMENTARY INFORMATION:
I. Background
Intermediary Agreements and Carrier Contracts--Under sections
1816(a) and 1842(a) of the Social Security Act (the Act), public or
private organizations and agencies may participate in the
administration of the Medicare program under agreements or contracts
entered into with us (on the Secretary's behalf). These Medicare
contractors are known as fiscal intermediaries (section 1816(a) of the
Act) and carriers (section 1842(a) of the Act). With certain
exceptions, intermediaries perform bill processing and benefit payment
functions for part A of the program (Hospital Insurance) and carriers
perform claims processing and benefit payment functions for part B of
the program (Supplementary Medical Insurance).
Our regulations at 42 CFR 421.100, Intermediary functions, require
that the agreement between us and a fiscal intermediary specify the
functions the intermediary is to perform. In addition to any items
specified by us unique to that intermediary, the regulations require
that all intermediaries perform activities relating to Medicare
coverage, fiscal management, provider audits, utilization patterns,
resolution of cost report disputes, and reconsideration of
determinations. In addition, the regulations require that all
intermediaries furnish information and reports, undertake dual
intermediary responsibilities for service to provider-based Home Health
Agencies (HHAs) and provider-based hospices, and comply with all
applicable laws and regulations and with any other terms and conditions
included in their agreements.
Similarly, our regulations at 42 CFR 421.200, Carrier functions,
require that the contract between HCFA and a part B carrier specify the
functions the carrier is to perform. In addition to any items specified
by us unique to that carrier, the regulations require that all part B
carriers perform activities relating to Medicare coverage, payment on a
cost basis, payment on a charge basis, fiscal management, provider
audits, utilization patterns and hearings to part B beneficiaries. In
addition, the regulations require that all carriers furnish information
and reports, maintain and make available records, and comply with any
other terms and conditions included in their contracts.
For both intermediaries and carriers, our regulations at 42 CFR
421.5, General provisions, state that HCFA has the authority not to
renew a part A agreement or a part B Contract when it expires. Our
regulations at 42 CFR 421.126, Termination of agreements, provide the
Secretary with the authority to terminate fiscal intermediary
agreements in certain circumstances, while the regulations at 42 CFR
421.205, Termination by the Secretary, give the Secretary similar
authority to terminate carrier contracts.
II. Proposed Changes to the Regulations
As noted earlier, our regulations at Sec. 421.100 for
intermediaries and Sec. 421.200 for carriers specify a list of
functions that must, at a minimum, be included in all intermediary
agreements and carrier contracts. These requirements far exceed those
of the statute. Section 1816(a) of the Social Security Act requires
only that an intermediary agreement provide for determination of the
amount of payments to be made to providers and for the making of such
payments. Section 1816(a) permits, but does not require, an
intermediary agreement to include provisions for the intermediary to
provide consultative services to providers to enable them to establish
and maintain fiscal records or to otherwise qualify as providers and,
for those providers to which it makes payments, to serve as a channel
of communications between us and the providers, to make audits of the
records of the providers, and to perform such other functions as are
necessary.
We believe that section 1816(a) mandates only that an intermediary
agreement include the functions currently required by Sec. 421.100
paragraph (a) (Coverage) and paragraph (b) (Fiscal management) of the
regulations. We believe that the other functions (Sec. 421.100
paragraphs (c) through (i)) that the regulations currently require to
be included in all intermediary agreements are not required by statute
and the mandatory inclusion of them in all agreements limits our
ability to efficiently and effectively administer the Medicare program.
Paragraph (a) of section 1842 of the Act, which pertains to carrier
contracts, requires that the contracts must provide for some or all of
the functions listed in that paragraph, but does not specify any
functions which must be included in a carrier contract. As in the case
of intermediary agreements, our experience has been that mandatory
inclusion of a long list of functions in all contracts restricts our
ability to administer the carrier contracts with optimum efficiency and
effectiveness. We believe that the requirements of the regulations for
both intermediaries and carriers should be brought into conformity with
the statutory requirements. Moreover, we believe that such action would
substantially enhance the efficient and effective administration of the
Medicare program by giving both HCFA and the contractor community more
flexibility in their approaches to the performance of intermediary and
carrier functions.
We further believe that intermediaries and carriers would benefit
from the ability to enter voluntarily into regional arrangements for
the performance of some functions. Intermediaries and carriers have
shown interest in entering into agreements with other contractors in
their regions to shift the performance of a given function to a single
intermediary or carrier that is able to perform the function with the
greatest efficiency or at the least cost, while another function might
in turn be shifted to a second contractor. For example, one
intermediary in a region might perform medical review for the entire
region, while another would assume the audit function. Under the
existing requirement that all intermediaries and carriers perform all
functions, such arrangements are not permitted, except through
subcontracts, which must be awarded through the competitive procurement
process and which leave the final responsibility for the performance of
the function with the original contractor. The proposed change in the
regulations would provide the intermediaries and carriers with the
ability to enter into arrangements to transfer formally the entire
responsibility for performance of a function to other intermediaries
and carriers, subject to our approval.
The change would also simplify the process of our paying the
intermediary or carrier actually performing the function. Under a
subcontracting arrangement, we pay the contractor that subcontracts out
the function and that entity, in turn, pays the subcontractor which is
actually doing the work. Under the proposed change, we would make
direct payment to the intermediary or carrier performing the function.
Our conclusion is that the existing regulations, which state that
intermediary agreements and carrier contracts must include all of the
functions cited, are not only inconsistent with applicable statutory
authority, but also are too restrictive. They deny us the flexibility
to improve the administration of the Medicare program by removing some
of the functions from an intermediary's agreement or a carrier's
contract and transferring them to another intermediary or carrier where
either we or the contractors themselves determine that such action
would be more efficient than having every intermediary and carrier
perform all functions specified in the regulations.
We are proposing to redesignate Sec. 421.100, Intermediary
functions, as Sec. 421.101, Optional intermediary functions. In a new
Sec. 421.100, Required intermediary functions, we would specify that
all agreements must include the functions of coverage (current content
of Sec. 421.100(a)) and fiscal management (current Sec. 421.100(b)). We
believe these functions are required to be included in all agreements
by section 1816(a) of the Act. In the redesignated Sec. 421.101,
Optional intermediary functions, we would indicate that the
intermediary agreement may include the functions currently contained in
Sec. 421.100(c) through 421.100(i). That is, the cumulative effect of
the change would be to separate the two required functions that must be
in all intermediary agreements from the remaining functions that may or
may not be included.
In Sec. 421.200, Carrier functions, we would change the word
``must'' to ``may'' in the first sentence, making all the functions
listed for inclusion in carrier contracts optional. This change would
reflect section 1842(a) of the Act, which does not list specific
functions that must be included.
Our use of the term ``optional'' does not mean that some functions
might not be performed in some jurisdictions. All functions will
continue to be performed in all intermediary and carrier jurisdictions.
``Optional'' in this case means only that HCFA will have the option of
determining whether a given function should be performed in a specific
jurisdiction by the intermediary or carrier which normally serves that
jurisdiction and therefore included in that intermediary's agreement or
carrier's contract, or should be performed by some other intermediary
or carrier.
In Sec. 421.200, we propose to add payment on a fee schedule basis
as a new function which may be performed by carriers. While the
original carrier functions included payment on a cost basis and on a
charge basis, recent statutory changes and corresponding changes in the
regulations have shifted some classes of physician and Medicare
suppliers to payment according to fee schedules. However, Sec. 421.200
has never been updated to recognize these changes. Accordingly, the
addition of payment on a fee schedule basis as a function which may be
included in carrier contracts will bring this section of the
regulations into conformity with current statutory provisions for
Medicare part B payment.
In addition, 42 CFR 421.5(d) states that, notwithstanding any of
the provisions of part 421, HCFA has the authority not to renew an
agreement or contract when its term expires. Section 421.126(b) allows
the Secretary to terminate intermediary agreements under certain
circumstances, while Sec. 421.205 gives the Secretary the authority to
terminate carrier contracts at any time for cause. The distinction
between the termination and nonrenewal of an agreement or contract is
important because the right of an intermediary or carrier to a hearing
applicable to terminations does not apply to nonrenewals. Consequently,
we are proposing to revise Secs. 421.5, 421.126, and 421.205 to make
certain that the distinction between nonrenewals and terminations is
clear. The proposed changes are not substantive. They are meant to
reflect existing statutory and regulatory requirements, as well as
HCFA's longstanding policy and practice, as expressed in the standard
intermediary agreements and carrier contracts.
The objective of these proposed changes is to make the regulations
fully consistent with the relevant statutory authority and to provide,
as necessary, clarification of the distinction between contract
nonrenewals and terminations. In addition, the change to the
regulations concerning mandatory and optional functions will provide us
with the flexibility to shift non-mandatory functions among
intermediaries and carriers so that the Medicare program may be
administered in the most efficient and effective manner possible. We
anticipate using the authority granted us by this change sparingly. Any
transfer or consolidation of functions will be determined on a case-by-
case basis, and, prior to taking action in any specific case, we will
closely study the situation to determine whether the benefits to the
effective administration of the Medicare program warrant the action. It
is not our intent at this time to shift functions from intermediaries
and carriers to any entities except other intermediaries and carriers.
III. Response to Comments
Because of the large number of items of correspondence we normally
receive on a proposed rule, we are not able to acknowledge or respond
to them individually. However, we will consider all comments that we
receive by the date and time specified in the ``DATES'' section of this
preamble, and we will respond to them in the preamble to the final
rule.
IV. Collection of Information Requirement
This rule contains no information collection requirements.
Consequently, this rule need not be reviewed by the Office of
Management and Budget under the authority of the Paperwork Reduction
Act of 1980 (44 U.S.C. 3501 et seq.).
V. Regulatory Impact Statement
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612) unless the Secretary certifies that a proposed rule would
not have a significant economic impact on a substantial number of small
entities. For purposes of the RFA, intermediaries and carriers are not
considered to be small entities that will be affected as a result of
these regulations. Individuals and States are not included in the
definition of a small entity.
Also, section 1102(b) of the Act requires the Secretary to prepare
a regulatory impact analysis if a proposed rule may have a significant
impact on the operations of a substantial number of small rural
hospitals. This analysis must conform to the provisions of section 603
of the RFA. For purposes of section 1102(b) of the Act, we consider a
small rural hospital as a hospital that is located outside of a
Metropolitan Statistical Area and has fewer than 50 beds.
This proposed rule would potentially affect the 47 Medicare part A
intermediaries and 33 part B carriers with agreements or contracts with
HCFA to make payments to Medicare providers and beneficiaries for
covered services and to perform certain other functions currently
described in Sec. 421.100 for intermediaries and Sec. 421.200 for
carriers. Under this proposed rule, we would have authority to redefine
intermediary agreement and carrier contract requirements and remove
functions from some contractors and transfer them to other contractors.
We would also be able to consolidate some tasks under one contractor in
regions where several contractors are all performing the same functions
simultaneously.
The proposed rule would also add payment on a fee schedule basis as
a function which may be included in carrier contracts and distinguishes
between contract nonrenewals and terminations. This proposed rule would
make the regulations more consistent with the relevant statutory
authority and promote the more effective and efficient administration
of the Medicare program. Service to beneficiaries and Medicare
providers would not be disrupted in the affected regions.
Implementing this proposed rule would not create any additional
expenses but should enable the Medicare program to realize savings in
administrative costs. At present, we are unable to estimate the
potential dollar amount of these savings.
We evaluated the potential impact of these regulations changes on
intermediaries and carriers for purposes of determining whether a
regulatory flexibility analysis is required. We believe that the
effects or the changes will be minimal. Almost all of the present
contractors have been performing the functions for a number of years
and have developed efficiencies that would argue against our needlessly
altering their functions. Therefore, it is not our intention to use the
flexibility of this regulation to make wholesale changes.
Consequently, we have determined, and the Secretary certifies, that
this proposed rule would not result in a significant impact on a
substantial number of small entities. Similarly, the Secretary
certifies that it would not have a significant effect on the operations
of a substantial number of small rural hospitals. Therefore, we are not
preparing analyses for either the RFA or section 1102(b) of the Act.
In accordance with the provisions of Executive Order 12866 this
regulation was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 421
Administrative practice and procedure, Health facilities, Health
professions, Medicare, Reporting and recordkeeping requirements.
42 CFR part 421 would be amended as set forth below.
PART 421--INTERMEDIARIES AND CARRIERS
1. The authority citation for part 421 continues to read as
follows:
Authority: Secs. 1102, 1815, 1816, 1833, 1834 (a) and (h), 1842,
1861(u), 1871, 1874, and 1875 of the Social Security Act (42 U.S.C.
1302, 1395g, 1395h, 1395l, 1395m (a) and (h), 1395u, 1395x(u),
1395hh, 1395kk, and 1395ll), and 42 U.S.C. 1395b-1.
2. Section 421.5(d) is revised to read as follows:
Sec. 421.5 General provisions.
* * * * *
(d) Nonrenewal of agreement or contract. Notwithstanding any of the
provisions of this part, HCFA has the authority to nonrenew an
agreement or contract when its term expires. An intermediary or carrier
has the authority to nonrenew an agreement or contract when its term
expires. The notice and hearing requirements for the termination of an
agreement or contract set forth in Secs. 421.126, 421.128, and 421.205
do not apply to such nonrenewal of an agreement or contract. An
intermediary or carrier also has the authority to nonrenew an agreement
or contract when its term expires.
* * * * *
3. Section 421.100 is redesignated as Sec. 421.101 and revised to
read as follows:
Sec. 421.101 Optional intermediary functions.
An agreement between HCFA and an intermediary may specify the
optional functions to be performed by the intermediary, which may
include, but are not necessarily limited to, the following:
(a) Provider audits. The intermediary must audit the records of
providers of services as necessary to assure proper payments.
(b) Utilization patterns. The intermediary must assist providers
to--
(1) Develop procedures relating to utilization practices;
(2) Make studies of the effectiveness of those procedures and
recommend methods to improve them;
(3) Evaluate the results of utilization review activity; and
(4) Assist in the application of safeguards against unnecessary
utilization of services.
(c) Resolution of cost report disputes. The intermediary must
establish and maintain procedures approved by HCFA to consider and
resolve any disputes that may result from provider dissatisfaction with
an intermediary's determinations concerning provider cost reports.
(d) Reconsideration of determinations. The intermediary must
establish and maintain procedures approved by HCFA for the
reconsideration of its determinations to deny payments to an individual
or to the provider that furnished services to the individual. The PRO
performs reconsideration of cases in which it made a determination
subject to reconsideration.
(e) Information and reports. The intermediary must furnish to HCFA
any information and reports that HCFA requests in order to carry out
its responsibilities in the administration of the Medicare program.
(f) Other terms and conditions. The intermediary must comply with
all applicable laws and regulations and with any other terms and
conditions included in its agreement.
(g) Dual intermediary responsibilities. With respect to the
responsibility for service to provider-based HHAs and provider-based
hospices, where the HHA or hospice and its parent provider will be
served by different intermediaries under Sec. 421.117 of this part, the
designated regional intermediary will process bills, make coverage
determinations and make payments to the HHAs and hospices. The
intermediary serving the parent provider will perform all fiscal
functions, including audits and settlement of the Medicare cost reports
and the HHA and hospice supplement worksheets.
4. A new Sec. 421.100 is added to subpart B to read as follows:
Sec. 421.100 Required intermediary functions.
An agreement between HCFA and an intermediary specifies the
functions to be performed by the intermediary, which must include the
following required functions and may include optional functions listed
in Sec. 421.101 of this part and any others agreed to by HCFA. The
required functions are:
(a) Coverage. (1) The intermediary ensures that it makes payments
only for services that are:
(i) Furnished to Medicare beneficiaries;
(ii) Covered under Medicare; and
(iii) In accordance with PRO determinations when they are services
for which the PRO has assumed review responsibility under its contract
with HCFA.
(2) The intermediary takes appropriate action to reject or adjust
the claim if--
(i) The intermediary or the PRO determines that the services
furnished were not reasonable, not medically necessary, or not
furnished in the most appropriate setting; or
(ii) The intermediary determines that the claim does not properly
reflect the kind and amount of services furnished.
(b) Fiscal management.
The intermediary must receive, disburse, and account for funds in
making Medicare payments.
5. Section 421.126 is amended by revising the heading and by adding
a new paragraph (c) to read as follows:
Sec. 421.126 Termination or nonrenewal or agreements.
* * * * *
(c) Nonrenewal by the intermediary or Secretary. (1) An
intermediary may nonrenew an agreement with the Secretary by giving the
Secretary written notice of the intermediary's intention to nonrenew
the agreement at least 90 days before the end of the current period of
the agreement.
(2) The Secretary may nonrenew an agreement with an intermediary by
giving the intermediary written notice of the Secretary's intention to
nonrenew the agreement at least 90 days before the end of the current
period of the agreement.
(3) In the event that either the Secretary or intermediary gives
notice of intention to nonrenew an agreement, the Secretary may extend
the agreement for such time and under such conditions as may be
specified in the agreement.
(4) The providers served by an intermediary whose contract is not
being renewed have the opportunity to nominate another intermediary, in
accordance with Sec. 421.104.
(5) The provisions for notice and the opportunity for a hearing in
connection with the termination of an intermediary agreement, set forth
in paragraph (b)(2) of this section and Sec. 421.128, do not apply to
any nonrenewal of an intermediary agreement.
6. Section 421.200 is amended by redesignating paragraphs (d)
through (j) as (e) through (k), respectively. The introductory text is
revised and a new paragraph (d) is added to read as follows:
Sec. 421.200 Carrier functions.
A contract between HCFA and a carrier, other than a regional DMEPOS
carrier, specifies the functions to be performed by the carrier, which
may include, but are not necessarily limited to the following:
* * * * *
(d) Payment on a fee schedule basis. If payment is on a fee
schedule basis, the carrier must assure that payments are made in
accordance with the applicable provisions of parts 414 and 415 of this
chapter.
* * * * *
7. Section 421.205 is revised to read as follows:
Sec. 421.205 Termination or nonrenewal of contracts.
(a) Termination by the carrier. A carrier may terminate its
contract at any time upon written notice to the Secretary of its
intention to terminate. Upon notice to terminate, the contract
continues for 180 days after such notice unless the Secretary decides
to terminate at an earlier date.
(b) Termination by the Secretary. (1) The Secretary may terminate a
contract with a carrier at any time if he or she determines that the
carrier has failed substantially to carry out any material terms of the
contract or has performed its functions in a manner inconsistent with
the effective and efficient administration of the Medicare Part B
program.
(2) Upon notification of the Secretary's intent to terminate the
contract, the carrier may request a hearing within 20 days after the
date of the notice of intent to terminate.
(3) The hearing procedures will be those specified in
Sec. 421.128(c).
(c) Nonrenewal by the Secretary or carrier. (1) A carrier may
nonrenew a contract with the Secretary by giving the Secretary written
notice of its intention to nonrenew the contract at least 90 days
before the end of the current period of the contract.
(2) The Secretary may nonrenew a contract with a carrier by giving
the carrier written notice of the Secretary's intention to nonrenew the
contract at least 90 days before the end of the current period of the
contract.
(3) In the event that either the Secretary or the carrier gives
notice of intention to nonrenew a contract for an additional period,
the Secretary may extend the contract for such time and under such
conditions as may be specified in the contract.
(4) The provisions for notice and the opportunity for a hearing in
connection with the termination of a carrier contract, set forth in
paragraph (b) of this section and Sec. 421.128, do not apply to the
nonrenewal of a carrier contract.
(Catalog of Federal Domestic Assistance Program No. 13.714, Medicare
Assistance Program; 13.773, Medicare--Hospital Insurance Program;
No. 93.774, Medicare-Supplemental Medical Insurance)
Dated: August 5, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: December 10, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-3608 Filed 02-18-94; 8:45 am]
BILLING CODE 4120-01-P
