Medicare Program: Changes to the Medicare Claims Appeal Procedures

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405

[CMS-4004-P]

RIN 0938-AL67

Medicare Program: Changes to the Medicare Claims Appeal Procedures

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

Under sections 1869 and 1879 of the Social Security Act (the Act), Medicare beneficiaries and, under certain circumstances, providers and suppliers of health care services, may appeal adverse determinations regarding claims for benefits under Medicare Part A and Part B. Section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 amends section 1869 of the Act to substantially revise the Medicare claim appeals process. The statute mandates a series of structural and procedural changes to the existing appeals process, including: The establishment of a uniform process for handling all Medicare Part A and Part B appeals; revised time limits for filing appeals; reduced decision-making time frames throughout all levels of the Medicare administrative appeals system; the introduction of new entities known as qualified independent contractors (QICs) to conduct reconsiderations of contractors' initial determinations or redeterminations; and the establishment of the right to an expedited determination when an individual disagrees with a provider's decision to discharge the individual or terminate services.

This proposed rule sets forth the regulations that would be needed to implement the new statutory provisions.

DATES:

We will consider comments if we receive them at the appropriate address, as provided below, no later than 5 p.m. on January 14, 2003.

ADDRESSES:

In commenting, please refer to file code CMS-4004-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission or e-mail. Mail written comments (one original and three copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4004-P, P.O. Box 8017, Baltimore, MD 21244-8017.

Please allow sufficient time for mailed comments to be timely received in the event of delivery delays.

If you prefer, you may deliver (by hand or courier) your written comments (one original and three copies) to one of the following addresses:

Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, or

Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.

(Because access to the interior of the HHH Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for commenters wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and could be considered late.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section below.

FOR FURTHER INFORMATION CONTACT:

Michele Edmondson (410) 786-6478 (for issues relating to appeal rights). Jennifer Eichhorn (410) 786-9531 (for issues relating to initial determinations and redeterminations). Arrah Tabe (410) 786-7129 (for issues relating to QIC reconsiderations). Jennifer Collins (410) 786-1404 (for issues relating to ALJ hearings and DAB reviews). Rhonda Greene-Bruce (410) 786-7579 (for issues relating to expedited determinations).

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

Timely comments will be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone (410) 786-7197.

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Note:

The former name of the Centers for Medicare & Medicaid Services (CMS) was the Health Care Financing Administration (HCFA). The terms CMS and HCFA can be used interchangeably.

Since the Social Security Administration (SSA) became an independent agency in 1995 pursuant to Public Law 103-296, it has continued to provide CMS with support for the administration of the Medicare Parts A and B programs pursuant to a Memorandum of Understanding between SSA and DHHS. That support has involved, among other duties, continuing to provide hearings and decisions in Medicare appeals using SSA administrative law judges (ALJs) as well as utilizing SSA offices to forward various Medicare-related paperwork to CMS. While CMS has greatly appreciated SSA's assistance over the years in these areas, at this time CMS is considering taking over these Medicare responsibilities. Our hope is to have this in place on or before October 1, 2003. Until such time as CMS may take over the function, SSA will continue to provide Medicare claimants with the valuable assistance that it has traditionally provided. Thereafter, CMS will assume such responsibilities. CMS will provide appropriate notice to the public as to when such responsibilities will be assumed and also as to the procedures Medicare claimants will follow in dealing with CMS rather than SSA. Therefore, references in this NPRM to SSA, including SSA, ALJs, and field offices, should be read as references to SSA assistance to CMS up to the point in time when CMS takes over the SSA responsibilities.

I. Background

A. Overview of Existing Medicare Program

The original Medicare program consists of two parts. Part A, known as the hospital insurance program, covers

certain care provided to inpatients in hospitals, critical access hospitals, skilled nursing facilities (SNFs), as well as hospice care and some home health care. Part B, the supplementary medical insurance program, covers certain physicians' services, outpatient hospital care, and other medical services that are not covered under Part A. In addition to the original Medicare program, beneficiaries may elect to receive health care coverage under Part C of Medicare, the Medicare+Choice (M+C) program. Under the M+C program, an individual is entitled to those items and services (other than hospice care) for which benefits are available under Part A and Part B. An M+C plan may provide additional health care items and services that are not covered under the original Medicare program.

Under the original Medicare program, a beneficiary may generally obtain health services from any institution, agency, or person qualified to participate in the Medicare program that undertakes to provide the service to the individual. After the care is provided, the provider or supplier (or, in some cases, a beneficiary) would submit a claim for benefits under the Medicare program to the appropriate government contractor, either a fiscal intermediary (for all Part A claims and certain Part B claims) or a carrier (for most claims under Part B). If the claim is for an item or service that falls within a Medicare benefit category, is reasonable and necessary for the individual, and is not otherwise excluded by statute or regulation, then the contractor would pay the claim. However, the Medicare program does not cover all health care expenses. If the Medicare contractor determines that the medical care is not covered under the Medicare program, it denies the claim. In fiscal year 2001, Medicare contractors adjudicated over 930 million initial claims and approximately 6.7 million claim appeals.

When a contractor denies a claim, it notifies the provider, supplier and/or beneficiary of the denial and offers the opportunity to appeal this decision. The existing appeals procedures for original Medicare are set forth in regulations at 42 CFR part 405, subparts G and H. Separate procedures for appealing determinations made under the M+C program are set forth at subpart M of part 422. After an appellant has exhausted the administrative appeals procedures offered under the Medicare program, the Medicare statute provides the opportunity for a dissatisfied individual to seek review in Federal court.

The regulations in part 405 subpart G, beginning at § 405.700, describe reconsiderations and appeals under Medicare Part A. When a Medicare contractor makes a determination with respect to a Part A claim, the beneficiary, or the provider, in some circumstances, may appeal the determination. (Consistent with section 1861(u) of the Act and 400.202, the term “provider” generally includes hospitals, SNFs, home health agencies (HHAs), comprehensive outpatient rehabilitation facilities (CORFs), and hospices.) The contractor then reconsiders the initial determination. If the contractor upholds the original determination, the appellant may request a hearing before an Administrative Law Judge (ALJ), provided that the amount in controversy is at least $100. (ALJs are employed by the Social Security Administration (SSA), but they adjudicate Medicare appeals under a Memorandum of Understanding between SSA and the Department of Health and Human Services (DHHS.) If the appellant is dissatisfied with the ALJ's decision, he or she may request review by the Departmental Appeals Board (DAB). The component within the DAB that is responsible for Medicare claim appeals is the Medicare Appeals Council (MAC). (Note that although the Medicare appeals regulations in part 405 contain some limited provisions regarding ALJ and MAC proceedings, these proceedings are generally governed by existing SSA regulations at 20 CFR part 404, subparts J.) MAC decisions constitute the final decision of the Secretary of DHHS (the Secretary) and may be appealed to Federal court. In each case, the lower level of appeal must be exhausted before the appeal can be elevated to the next level.

Medicare Part B appeal procedures are set forth in part 405 subpart H (§ 405.800

et seq

.). Under these regulations, beneficiaries and suppliers that accept assignment for Medicare claims may appeal to a Medicare contractor for a review of the contractor's initial determination that a claim should not be paid, either in full or in part. (The term “supplier” is also defined at § 400.202 and means a physician or other practitioner, or an entity other than a “provider,” that furnished health care services under Medicare.) If the contractor's review results in a continued denial of the claim, and the amount in controversy is at least $100, the appellant may request a 2nd level appeal known as a “fair hearing.” If the hearing officer upholds the denial, the appellant may request a hearing before an ALJ, provided that the amount in controversy is at least $500. Subsequent aspects of the appeals process for a Part B claim are identical to those described above for a Part A claim.

Quality improvement organizations (QIOs), formerly known as peer review organizations, also make certain types of Medicare determinations, mostly involving inpatient hospital discharges under sections 1154 and 1155 of the Act. These decisions are also subject to ALJ hearings, if the amount in controversy is at least $200. Judicial review is also available if the amount in controversy is $2000. Regulations for these appeals are currently found at 42 CFR part 478. Finally, note that appeals under Medicare Part C are also subject to adjudication by ALJs and the MAC, although these appeals follow an entirely separate path before the ALJ level.

B. Changes to the Appeals Process Under BIPA 2000

Section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), Public Law 106-554, amends section 1869 of the Act to require revisions to the Medicare appeals process. Among the major changes required by the BIPA amendments are—

• Establishing a uniform process for handling Medicare Part A and B appeals, including the introduction of a new level of appeal for Part A claims.

• Revising the time frames for filing a request for a Part A and Part B appeal.

• Imposing a 30-day timeframe for certain “redeterminations” made by the contractors who made the initial determination.

• Requiring the establishment of a new appeals entity, the qualified independent contractor (QIC), to conduct “reconsiderations” of contractors' initial determinations (including redeterminations) and allowing appellants to escalate cases to an ALJ hearing, if reconsiderations are not completed within 30 days.

• Establishing a uniform amount in controversy threshold of $100 for appeals at the ALJ Level.

• Imposing 90-day time limits for conducting ALJ and MAC appeals and allowing appellants to escalate a case to the next level of appeal if ALJs or the MAC do not meet their deadlines.

• Imposing “de novo” review when the MAC reviews an ALJ decision made after a hearing.

Revised section 1869 also requires that the Secretary establish a process by which an individual may obtain an expedited determination if he/she

receives a notice from a provider of services that the provider plans to terminate services or discharge the individual from the provider. Currently, this right to an expedited review only exists with respect to hospital discharges (under sections 1154 and 1155 of the Act).

The statute specifies that the new appeals provisions are effective for initial determinations made on or after October 1, 2002. As this proposed rule demonstrates, we are making significant efforts to ensure that the public has an opportunity to comment on the procedures used to implement section 521 and to ensure that a rule is in place for implementing section 521. However, as noted in the CMS ruling published October 7, 2002 (67 FR 62478-62482) on this subject, this rulemaking effort is greatly complicated by the possibility of further changes to the statutory appeals provisions. We need to ensure that this statutory mandate will not risk disruptions to other fundamental functions of the Medicare program, such as processing and payment of Medicare claims. Thus, we seek comments on this proposed rule so that we can be in the best possible position for implementation.

Rather than listing here all the detailed provisions of section 521 of BIPA, we will discuss the individual provisions in detail below in the context of the proposed implementing regulations. However, for the convenience of the reader, we are providing below a detailed chart illustrating the current appeals procedures for both Part A and B claims and the new procedures that are required by BIPA:

BILLING CODE 4120-01-P

EP15NO02.000

BILLING CODE 4120-01-P

C. Codification of Regulations

As noted above, the current regulations governing Medicare administrative appeals are set forth in 42 CFR part 405, subparts G and H. These regulations will continue to be needed for an indefinite transition period until all appeals resulting from initial determinations before the implementation of the new procedures required under BIPA are completed. We are considering what rules should apply during the transition period and whether it would be possible or prudent to operate dual appeals systems depending on the date of an initial claim determination. Clearly, the new BIPA provisions make possible a largely uniform set of appeals procedures that can be applied both for part A and B of Medicare. Therefore, this proposed rule would establish a new subpart I of part 405 that will set forth in one location the administrative appeals requirements for Medicare carriers, Fiscal Intermediaries (FIs) and QICs. We note that BIPA section 521 (see 1869(a)(1)(C)) also requires that certain determinations made by QIOs under section 1154(a)(2) be subject to the revised appeals process under section 1869, therefore, we anticipate publishing a separate proposed rule to accommodate needed changes to the existing regulations at 42 CFR parts 476 and 478 regarding QIO determinations and appeals. (In addition, we note that the changes set forth here do not apply for purposes of Part C of Medicare, that is, the Medicare+Choice program. We also intend to address necessary changes to 42 CFR part 422 in future rulemaking.)

We are also proposing to include in new subpart I the provisions needed to govern Medicare claims appeals to ALJs and the MAC. The existing ALJ regulations are quite voluminous and are intended primarily to apply to appeals of SSA disability cases, rather than to Medicare appeals. The need for the Medicare program to establish its own regulations for these upper level appeals has been recognized by many parties, including, most recently, the Office of the Inspector General in its January 2002 report: “Medicare Administrative Appeals—The Potential Impact of BIPA,” OEI-04-01-00290. Many of these provisions will effectively carry over the existing requirements with respect to appeals to the ALJ and the MAC, rather than implementing substantive changes. However, both the firm time frames for ALJ and DAB decisions and the opportunity for escalation of cases are provisions that apply only to Medicare claims, and not to SSA disability cases—presenting another compelling argument to take this opportunity to codify the ALJ and MAC requirements for Medicare administrative appeals within the Medicare regulations at Title 42 of the Code of Federal Regulations. Thus, the new subpart I will codify in one location key regulations governing all aspects of Medicare claim appeals, beginning with the statutory requirements that apply to initial determinations and proceeding through all four levels of the administrative appeals process. For the convenience of the reader, regulations contained in existing subparts G and H of part 405 that have not been affected by the changes mandated in section 521 of BIPA generally will be repeated in the new subpart. However, we note that we are not carrying over regulations that deal with challenges to coverage policy (such as §§ 405.732 or 405.860 concerning the review of national coverage decisions), which instead will be dealt with in the regulations implementing section 522 of BIPA concerning the new procedures for appealing coverage policies to ALJs and the DAB. Since we are not eliminating regulations contained in existing subparts G and H, we also will not reflect provisions in subpart I that deal with appeals of carrier decisions that supplier standards are not met, or appeals of a categorization of a device as experimental or investigational (see §§ 405.874-75 and 405.753).

II. General Provisions of the Proposed Rule

A. Overview

Clearly, the changes introduced by section 521 of BIPA are aimed at introducing greater efficiency and accuracy into the Medicare appeals system. The Secretary is equally committed to these goals. However, the introduction of QICs and the establishment of drastically reduced mandatory time frames for appeals decisions do not in themselves provide remedies to the longstanding problems that Congress intended to address in the new BIPA appeals provisions. To make these changes work, we need to examine carefully how the effects of changes at a given level of the appeals process may affect the entire appeals system, as well as to determine how to allocate the limited Medicare resources available to effectuate the changes to the appeals system.

In developing the proposals below, we have carefully considered how best to achieve these goals within the BIPA construct, keeping in mind the limited resources likely available for appeals system changes. We are also acutely aware of the possibility that the volume of appeals could increase significantly with the implementation of BIPA. (The OIG pointed out three reasons that such increases are likely, including the attractiveness of a speedier system, with drastically reduced time frames, the increased control given to appellants through the new escalation provisions, and the reductions in the required amounts in controversy to appeal a denied claim.) We also needed to consider the fact that, although the existing appeals provisions were designed primarily for beneficiary appeals, the overwhelming majority of appeals are now filed by providers and suppliers. We have attempted to reflect this reality by proposing changes that will work efficiently for appellants with some knowledge and experience of the Medicare appeals procedures, while at times incorporating exceptions for beneficiary appellants.

Outlined below are the proposed changes to the Medicare appeals regulations needed to implement section 521 of BIPA. Our general approach is to explain briefly the new statutory provisions, and to point out significant differences with the law or regulations that have been in effect prior to BIPA. For proposed regulations that are substantively unchanged from existing requirements, we have merely consolidated the current regulatory requirements into unified provisions that apply for both Medicare Part A and Part B appeals, consistent with the BIPA approach. In doing so, we have made some editorial changes to increase the clarity and simplicity of the regulations, to the extent that this is possible given the inherent complexity of appeals regulations. The discussion that follows touches only briefly, if at all, on sections of the proposed regulations that do not set forth substantive changes to the existing appeals procedures.

B. Statutory Basis, Definitions, and General Procedures (§§ 405.900-405.902)

Proposed subpart I begins with a brief section (§ 405.900) that sets forth the general statutory authority for the ensuing provisions and establishes that the scope of the subpart is to establish the regulations needed to implement the provisions of section 1869 of the Act concerning initial determinations and appeals. Consistent with section 1869(a)(1) of the Act, § 405.900 (b) specifies that the Secretary shall make initial determinations with respect to whether an individual is entitled to benefits under Medicare Part A or B and with respect to the amount of benefits

available under those parts. Section 405.902 would set forth the definitions for terms used in subpart I that we believe may need clarification. These definitions provide the generally applied meaning for terms that are used throughout the subpart.

For the most part, the definitions presented here are taken directly from the statute, or from existing subparts G or H of part 405, or are essentially self-explanatory. We have not restated in subpart I definitions of terms that are already defined in part 400 of the Medicare regulations, such as “provider” or “supplier” (see § 400.202) and that have the same meaning in the appeals context. Thus, the term “supplier” encompasses physicians, other practitioners, and various entities (such as laboratories or durable medical equipment (DME) suppliers) other than providers that furnish Medicare services. Discussed below are two terms that we believe may need further clarification.

1. Assignment of Appeal Rights

Section 1869(b)(1)(C) provides that an individual's appeal rights may be assigned to the provider or supplier that furnishes the item or service in question. Our proposed definition states that “assignment of appeal rights” means the transfer by a beneficiary (the “assignor”) of his or her right to appeal an initial determination to a provider or supplier (the “assignee”). Although this definition is relatively straightforward, it is important that this term not be confused with the term “assignment,” as defined under existing § 405.802. In that context, assignment refers to the transfer of a claim for payment under Part B of Medicare from a beneficiary to a physician or other supplier. For purposes of Subpart I, the terms “assignment,” “assignor,” and assignee” are used to refer only to the transfer of appeal rights, rather than in the more traditional context of payment on an assignment-related basis. A full discussion of our proposals regarding appeal rights is presented below.

2. Party

The meaning of the term “party” also has important implications, mainly for purposes of appeal rights and notification requirements. We would simply define party as an individual or entity with standing to appeal an initial determination or subsequent administrative appeal determination. Then, we list in § 405.906(a) who would be considered a party to an initial determination. Beneficiaries are considered parties. Also, in keeping with our previous regulations, physicians or suppliers who have accepted a valid assignment executed by a beneficiary to transfer his or her claim for payment to the physician or supplier, in return for the physician or supplier's promise not to charge more for his or her services than a carrier finds to be a reasonable charge or other approved amount, would also be considered a party. A party also includes a physician liable for refund under section 1842(l) of the Act, a supplier liable for refund under sections 1834(a)(18) and 1834(j)(4) of the Act, or a provider. Additionally, § 405.906(b) identifies parties for purposes of an appeal. A provider or supplier taking assignment of appeal rights under section 1869(b)(1)(C) would be considered a party to an appeal. Also, in accordance with § 405.908, we note that for dually entitled beneficiaries, States have the right to file appeals on behalf of the beneficiary pursuant to Title XIX of the Act.

Proposed § 405.904 provides a general description of the post-BIPA appeals process, much as existing § 405.801 does for the pre-BIPA, part B process. In addition, § 405.904(b) establishes the general rule that the same appeals procedures that are available to beneficiaries, and to individuals acting as representatives of beneficiaries, are also available to a provider and supplier that is a party to a given determination. This section also explains that in some circumstances, a provider's rights to judicial review are limited, unless the beneficiary has formally assigned his or her appeal rights to the provider. Note that although beneficiary appeals and provider and supplier appeals follow identical paths, we are proposing slightly more lenient evidentiary rules for unrepresented beneficiaries or beneficiaries represented by family or friends, given their likely lack of familiarity with Medicare coverage rules and appeals procedures. We would hold State agencies, providers, suppliers, and attorneys to a higher standard based on their presumed knowledge and experience with the Medicare program. We believe that these individuals and entities are essentially “businesses” and can be held to a reasonableness standard. These proposals are discussed in detail below.

C. Appeal Rights (§§ 405.906-405.912)

Historically, providers have had limited rights to appeal Medicare initial determinations. Consistent with section 1879(d) of the Act, providers may appeal Medicare determinations only when the determination involves a finding that (i) the item or service was not covered because it constituted custodial care, was not reasonable and necessary, or for certain other reasons; and (ii) the provider knew or could reasonably be expected to know that the service in question was not covered under Medicare (that is, a finding with respect to the limitation of liability provision under section 1879 of the Act). Despite these restrictions, providers have routinely accessed the appeals process in situations where they would otherwise not have appeal rights by acting as a beneficiary's appointed representative.

Another underlying principle of BIPA was the establishment of uniform appeal procedures for providers and suppliers. In keeping with this approach we believe the interests of the appeals process would be best served by ensuring that providers are afforded an equal opportunity to be heard with regard to all Medicare initial determinations. In BIPA, we believe it was the intent of the Congress to ensure that Medicare providers, physicians, and other suppliers had easier access to the Medicare administrative appeals system. As discussed below, Congress expanded the appeal rights of providers, physicians and other suppliers with regard to Medicare appeals by authorizing the assignment of appeal rights.

Therefore, in this rulemaking we are proposing to end the distinction limiting the appeal rights of providers to determinations involving the knowledge aspect of the limitation on liability provision. We propose to allow providers to file for administrative appeal of Medicare initial determinations to the same extent as beneficiaries. With this change, we would achieve consistency in our approach to appeals standing under Parts A and B.

We also would continue to maintain current appeals policies with respect to non-participating providers, physicians and other suppliers. We considered extending appeal rights to non-participating physicians and other suppliers to the same extent as providers. However, we believe that such a change would result in a negative impact on Medicare participation rates and, potentially, a contraction of beneficiary access to care. Also, we note that non-participating physicians and other suppliers may attain party status by securing an assignment of appeal rights from beneficiaries as provided in new section 1869(b)(1)(C).

In this proposed rule, we also clarify our policy with regard to the continuation of an appeal when a beneficiary-appellant dies while an appeal is in progress. Under our current

rules, a substitute entity may be entitled to receive or obligated to make payment for Medicare claims. See 42 CFR part 424 subpart E. If a person becomes financially responsible for Medicare claims under our rules, we are proposing that such person or entity may be made a party to the initial determination and have the right to continue the appeal.

We are proposing to implement these expanded appeal rights in proposed § 405.906, which would clearly identify all individuals or entities that may be a party to an initial determination. This approach identifies parties explicitly and replaces current regulations where party status is conferred to “* * * any other party whose rights with respect to the particular claim being reviewed may be affected by such review.” See 42 CFR 405.808. This standard has occasionally led to questions being raised about who should be a party to appeal. In this proposed rule we have attempted to address this issue by generally listing as a party, the individual or entity listed in § 405.906 that has standing to appeal an initial determination and/or a subsequent administrative appeal determination. We believe the list of parties is exhaustive, but welcome comments to rectify any omissions.

Proposed § 405.908 pertains to the right of a Medicaid State agency, which acts as a subrogee, to pursue an appeal on behalf of a beneficiary entitled to benefits under both Medicare and Medicaid. We do not consider a Medicaid State agency to be a party, unless the agency actually pursues a redetermination on behalf of a dually eligible beneficiary. In other words, a Medicaid State agency will not automatically be sent notices on determinations made during the administrative appeals process, nor will the agency be permitted to request reconsiderations or hearings by ALJs or the MAC, unless the agency actually files a request for redetermination for a beneficiary. If a Medicaid State agency files a redetermination it retains party status for the claim throughout the rest of the appeals process. Also, a Medicaid State agency automatically has authorization to file an appeal of a denied claim without following the process prescribed at § 405.910. Section 1912(a) of the Act provides that as a condition of eligibility for medical assistance, an individual must assign the State any rights to payment for medical care from any third party. Thus, to avoid confusion, we have drafted a separate provision acknowledging the right of a Medicaid State agency to pursue an appeal on behalf of a dually eligible individual.

Sections 1869(b)(1)(B) and (C) address provider and supplier representation and assignment issues. To the extent that these provisions represent departures from existing requirements, we believe that they warrant notice and comment rulemaking before they can be implemented. As discussed below, the new statutory provisions include several changes in the existing appointment of representative procedures, which are currently set forth at 20 CFR part 404, subpart R (the provisions that govern SSA disability insurance claims).

Proposed § 405.910 incorporates and modifies several of the current provisions in 20 CFR part 404, subpart R, and 42 CFR part 405, subparts G and H, as they relate to the representation of parties. The proposed provisions would eliminate the need for incorporation of the existing SSA regulations as they apply to appeals. Note that under our existing regulations at §§ 405.701 and 405.801, the appointment of representative provisions set forth in 20 CFR part 404 also apply for purposes of initial determinations. This proposed rule would not change the applicability of those provisions with respect to initial determinations; however, we are considering the extent to which the new provisions should also apply to initial determinations and welcome comments on whether we should apply these provisions uniformly.

Since entities or individuals other than beneficiaries may wish to have someone represent their interests in the appeals process, we have defined a representative as an individual authorized by a party, or under State law, to act on the party's behalf in dealing with any levels of the appeals process. Representatives do not have independent party status and may only take action on behalf of the individual or entity they represent. We note that a party may not designate, as an authorized representative, any individual or entity that has been suspended, or otherwise prohibited by law, from participating in the Medicare program.

We have received numerous requests for clarification on how individuals or entities must make out valid appointments consistent with the Privacy Act. An agency that maintains a system of records must “establish appropriate administrative * * * safeguards to ensure the * * * confidentiality of records and to protect against any anticipated threats or hazards to their security or integrity * * * which could result in substantial harm, embarrassment, inconvenience, or unfairness to any individual on whom the information is maintained.” The Privacy Act of 1974, as amended, 5 U.S.C. 552a(e)(10). As is the case under existing procedures, we want to emphasize that in order to be valid, an appointment must be in writing, and signed by both the party making the appointment and the individual agreeing to accept such appointment. However, to ensure consistency in these proposed provisions, we also would make a change in the case of attorney representatives. Under current regulations, only the party making the appointment needs to sign a statement authorizing the representation. In the case of an attorney representative, the attorney does not have to sign a notice of appointment. Instead, in the absence of information to the contrary, an attorney's assertion that he or she has such authority is accepted as evidence of the attorney's authority to represent the party. In establishing procedures that comply with the Privacy Act, we would now require that attorneys also sign a statement to represent a party.

We appreciate that the signature requirements might be perceived as burdensome; however, we believe that a representative's signature is important because it ensures that adjudicators are sharing and disseminating confidential medical information with the appropriate individuals. In addition, it indicates that the individual whom the party has appointed does in fact accept the role and responsibilities associated with being a representative.

We propose to establish a time frame governing the duration of representation. Even under the BIPA time frames, we recognize that there may be substantial lapses in time between a party's request for an appeal at any given stage of this multi-tiered appeals process, and receipt of a final decision. Thus, we propose that under § 405.910(e) the appointment (1) shall be valid for the life of an individual appeal, and (2) for purposes of appeals of other initial determinations, the authorization shall be considered valid for one year from its original effectuation. For example, if a party makes a valid appointment on January 1, 2003, the representative would be authorized to request multiple appeals on the party's behalf until January 1, 2004. Suppose that a representative requests a redetermination of a denied claim on November 1, 2003 and the contractor affirms the denial on November 30, 2003. Since a party has up to 180 days to file a request for a reconsideration, if the representative files an appeal on March 15, 2004, the appointment of representation would still be valid for purposes of this individual appeal because the rights

associated with it have not expired. However, the representative would not be able to initiate any new appeals on other claims because the appointment would have been valid only through January 1, 2004.

We believe that it would be too burdensome to require representatives to renew representation documentation once an appeal has been undertaken; however, we also believe that a representative's ability to file appeals of future claims should continue for an indefinite period of time. While we propose that representation documentation shall be renewed at least annually (for purposes of filing new appeals), we welcome comments on whether another time frame would be more appropriate.

Prior to its amendment by BIPA, section 1869(b)(1)(D) required the Secretary to apply the provisions of section 206(a) governing the representation of beneficiaries. New section 1869(b)(1)(B)(iv) removes section 206(a)(4), which permits the award of attorney fees (not to exceed 25 percent) from a claimant's entitlement to past-due disability benefits. Therefore, in § 405.910(f), we make explicit that no award of attorney fees may be made against the Medicare trust fund. We recognize that section 1869(b)(1)(B)(iv) requires CMS to apply § 205(j) and 206 provisions to the Medicare appeals process; therefore we welcome comments on those provisions. Specifically, we request comments on petitions to ALJs to review and approve attorney fees. We believe that we should not establish such a process since we do not have authority to award attorney fees. We also welcome comments on procedures to govern the conduct of representatives.

Proposed §§ 405.910(g)-(l) are self-explanatory provisions concerning the responsibilities and rights of a representative. For example, a representative must ensure that a party receives information about appeal decisions, and disclose to a beneficiary any financial risk or liability associated with a non-assigned claim. In the past, there has been some confusion about whether the representative or the party should receive information about the appeal, including the decision. We believe that a representative should have the right to obtain any information applicable to the claim at issue since the representative acts on behalf of the party. Section 405.910(i)-(j) would require adjudicators to send notices of their decisions and otherwise communicate with representatives rather than parties. We considered whether beneficiaries that are represented also should receive copies of decision letters, but decided to maintain the existing provision at 20 CFR § 404.1715. Therefore, any communication with a representative would have the same force and effect as if it had been sent to the party.

Proposed section § 405.910(m) deals with the extent to which a representative may delegate responsibilities. A representative may not designate another individual to act as the representative unless the representative notifies the party of the name of the designee, and the designee's acceptance to comply with the requirements of authorized representation. Also, the represented party must evidence its acceptance of this arrangement by a signed, written consent. We believe that these provisions are necessary to protect the privacy and confidentiality of medical records. They would also provide adjudicators with an effective way to resolve any conflicting information as to who has authority to proceed in an appeal.

The decision on whether to have a representative is left with the party, and we neither encourage nor discourage representation. Therefore, proposed § 405.910(n) gives a party the ability to revoke an appointment for any reason, at any time. To ensure a seamless process, a revocation of an appointment is not effective until the entity processing the appeal receives a signed, written statement from the party. We also propose that the death of a party will terminate the authority of the representative. However, when a party dies, we do not intend to terminate an appeal that is in progress since another individual or entity may be entitled to receive or obligated to make payment for Medicare claims.

In section 1869(b)(1)(C) of the Act, Congress added a new provision that permits Medicare beneficiaries to assign their appeal rights to a provider or supplier of services, pursuant to a written agreement using a form developed by the Secretary. This provision appears similar to the provisions that allow a party to an appeal to appoint a person, including the provider or supplier of services, as a representative for the appeal. Under our current rules, though, in acting as the representative, the provider or supplier does not achieve party status to the appeal; the representative simply acts on behalf of the party. With the new assignment provision, we believe the Congress intended the arrangement to differ from the provision enabling a party to appoint a representative.

Proposed § 405.912 creates new regulatory procedures for the assignment of appeal rights by a beneficiary to a supplier or provider of service. Provider/supplier representation rules impose certain limits'the provider/supplier cannot charge a representation fee for actions in connection with services it furnished, and the provider/supplier must waive any right to payment from the beneficiary for the services at issue if the representation involves a claim where limitation of liability, under section 1879 of the Act, is an issue. Similarly, we believe that a provider or supplier wishing to take assignment of a beneficiary's appeal rights for a particular claim must waive any right to payment from the beneficiary in order to fully protect beneficiaries when their appeal rights are assigned. We do not intend, however, to prohibit the provider/supplier from recovery of any coinsurance or deductible, or where the beneficiary signed an advance beneficiary notice accepting responsibility for payment. The nature of assignment means that beneficiaries must relinquish their party status in an appeal, as well as any further rights to appeal on their own behalf. Additionally, BIPA expressly requires us to develop the form that will be used to make an assignment valid, thereby giving us the discretion to determine the requirements of a valid assignment. Thus, the proposed waiver provision is necessary to protect beneficiaries from potential liability in the event the supplier or provider is unsuccessful in the appeals process.

As noted above, an appointment of representation would be valid for one year for any appeal by the individual, and for the duration of the administrative review process for an appeal related to specific items or services. Note that a different standard would apply for assignment purposes. Section 1869(b)(1)(c) clearly indicates that the assignment of appeal rights applies with “respect to an item or service.” Accordingly, we are proposing that an assignment would be valid for the duration of the appeals process, but only for the items or services listed on the assignment form. Thus, a supplier or provider of service would need to perfect a valid assignment for subsequent appeals of other items or services.

Like in the representation provisions, we also are proposing rules for the revocation of an assignment. We are soliciting comments on whether an assignment should be irrevocable, particularly since it only applies on a per item or service basis, and thus does

not have any effect on other appeal rights. However, we are concerned about reinstating a beneficiary's appeal rights in the event of abandonment by a provider or supplier. We have proposed that if a beneficiary revokes an assignment, the appeal rights on the item or service at issue would revert to the beneficiary.

D. Initial Determinations (§§ 405.920-405.926)

As noted above, section 1869(a)(1) of the Act continues to provide that the Secretary shall make initial determinations with respect to whether an individual is entitled to benefits under part A or part B and to the amount of benefits available to an individual under those parts. However, section 1869(a)(2)(A) of the Act establishes that, on all claims other than clean claims, the initial determination shall be concluded and a notice of such determination must be mailed by no later than 45 days after receiving the claim, in contrast to the existing 60-day deadline for such non-clean claims. Section 1869(a)(2)(B) currently requires that interest will accrue if clean claims are not processed within 30 days. This standard remains unchanged (as specified in sections 1816(c)(2) and 1842(c)(2) of the Act). Nothing in BIPA, however, requires that interest would accrue on non-clean claims, regardless of whether they are adjudicated within 45 days. The proposed regulations to implement these statutory provisions regarding the timing and notice requirements pursuant to an initial determination are contained in §§ 405.920 and 405.922.

In § 405.920, we require that claims must be filed in the manner and form described in 42 CFR part 424 subpart C, which continues our current policies for filing claims. When a claim is filed with the appropriate carrier or FI, the carrier or FI will determine whether the items and/or services are covered under Part A or Part B of title XVIII. The contractor will then determine any amounts due and make payment accordingly. The parties to the initial determination, as specified in § 405.906, will be notified of the initial determination in writing by the contractor. This notice will also contain the basis for the determination and information on how to request a redetermination. As with our current policy, the Remittance Advice and Medicare Summary Notice will be used as a notice of initial determination.

In accordance with section 1869(a)(2) of the Act, proposed § 405.922 sets forth the time frames for initial Medicare claims determinations. That is, a contractor shall issue initial determinations on clean claims (as defined in § 405.901) within 30 days of receipt and, on all other claims, the contractor shall issue initial determinations within 45 days of receipt.

Our proposed regulations at § 405.922 currently state that all other claims, other than clean claims, must be processed within 45 days of receipt. While we plan to monitor contractors on their compliance with the 45-day standard, we also recognize that 45 days may not be achievable in every case. By definition, non-clean claims are often claims that require additional documentation, and therefore take time to process. Under the current process, providers or suppliers are given 45 days to produce additional medical documentation. Thus, the imposition of a 45-day decision-making time frame on non-clean claims could jeopardize effective medical review. Currently, our plans are to monitor, on average, contractors' compliance with the 45-day standard. However, we do not propose escalation or other remedies when the 45-day deadline is missed.

In existing section 1842(b)(3)(C) of the Act, the Congress provided a special appeals rule in cases where a Part B Medicare claim was not acted upon promptly, defined previously as 60 days following the submission of the claim. The rule provides for an appeal directly to a carrier-hearing officer, bypassing the first level of appeal, the review determination. In BIPA, Congress reduced the time period within which contractors must make initial determinations on claims to 45 days. However, section 1842(b)(3)(C) of the statute was not amended to reflect the change in the appeals process, that is, that the carrier hearing officer appeal was eliminated and effectively replaced by an appeal to the QIC. Our opinion is that the Congress, by implication, repealed this provision as the remedy specified in the statute will no longer exist since the Congress eliminated the carrier fair hearing level of appeal. We considered providing for a reconsideration by the QIC when a claim is not acted upon with reasonable promptness (that is, an initial determination is not issued within 45 days following the date the claim was received by the contractor). However we believe that this is not an economically feasible approach since the QIC will, in essence, simply direct the contractor to process the claim. We also considered the fact that this rule only applies to Part B claims and concluded that it would be confusing and contrary to the general approach mandated by BIPA to have two separate processes. Therefore, we are not carrying over this rule.

Proposed §§ 405.924 and 405.926 list the types of actions that are, and are not, considered initial determinations. In these sections, we have generally maintained current policies concerning initial determinations, although we have unified the existing part A and part B rules. In § 405.924(a) we maintain our longstanding policy that, through a memorandum of understanding with the Secretary, SSA makes initial Part A and Part B entitlement determinations and initial determinations on applications for entitlement. In § 405.924(b), we provide an extensive, but not necessarily exhaustive, list of actions that constitute initial determinations and thus are subject to the administrative appeals rules that follow.

We are proposing to clarify the circumstances under which an appeal may be filed when a beneficiary disputes the computation of coinsurance amounts. Previously our rules stated that beneficiaries could appeal Medicare determinations regarding the “application of the coinsurance feature.” We are clarifying this provision to state that the contractor's “computation of coinsurance” is considered an initial determination and, thus, may be appealed. In making this proposal we considered that for most Part B services, beneficiaries are responsible for a 20 percent coinsurance payment and, since the 20 percent is calculated by the contractor, a beneficiary may appeal the contractor's computation of the coinsurance amount to be paid by the beneficiary. In instances where the coinsurance amount is not computed by the contractor, but rather it is an amount prescribed by regulation, for example, outpatient services, the issue of whether the coinsurance amount is appropriate is not appealable since it is not an amount computed by the contractor. Also, we are proposing clarifying language specifying that determinations regarding the timeliness of claims submission are initial determinations. We are also clarifying which Medicare secondary payer (MSP) determinations are initial determinations for purposes of this subpart. A determination regarding the applicability of the MSP provisions to a particular claim is an initial determination. A determination that Medicare has a recovery claim against a provider/supplier or beneficiary with respect to items or services that have already been paid by the Medicare program is also an initial determination except where the recovery claim against the provider/supplier is based upon a failure to file

a proper claim as defined in 42 CFR part 411. Finally, under proposed § 405.924(c), we would state that expedited determinations by QIOs under new section 1869(b)(1)(F) are also considered initial determinations.

In proposed § 405.926, we list examples of determinations that are not initial determinations, and therefore not subject to the administrative appeal procedures of this subpart. Again, we continue our longstanding policies in this area, subject to several minor clarifications. First, for certain aspects of initial determinations, there are no administrative appeal rights available. For example, under section 1833(t) of the Social Security Act, administrative appeals are prohibited for issues involving the calculation of coinsurance amounts for outpatient services subject to prospective payment rules, and under 1848(i) of the Act, the values used to calculate allowable amounts under the physician fee schedule may not be the subject of an administrative appeal. In addition, here, too, we have proposed new examples of MSP-related determinations that do not constitute initial determinations for purposes of section 1869 of the Act. We have also clarified that decisions by contractors or QICs with respect to reopenings are not considered initial determinations.

Section 405.928 describes the effects of an initial determination. In proposed § 405.928(a), we would clarify that initial determinations by SSA with respect to an individual's entitlement are binding upon the individual or the individual's estate unless revised or reconsidered under SSA's regulations at 20 CFR 404.907. Then, under § 405.928(b), we would state the general rule that other initial determinations shall be binding upon all parties to the initial determination unless a redetermination is completed in accordance with § 405.940 through §§ 405-950 or the initial determination is revised as a result of a reopening in accordance with proposed § 405.980. Please refer to our discussions on the redetermination and reopenings process below.

E. Redeterminations (§§ 405.940-405.958)

1. Overview of Statute

Section 1869(a)(3) contains certain requirements for redeterminations that are specific to fiscal intermediaries and carriers, and do not apply to the initial determinations made by other entities, such as SSA or QIOs. Section 1869(a)(3) of the Act mandates that FIs and carriers make redeterminations, upon request, with respect to claims for benefits that are denied in whole or in part. Section 1869(a)(3)(B) specifies that an initial determination may not be reconsidered or appealed unless the contractor has made a redetermination of that initial determination and that no redetermination may be made by an individual involved in the initial determination, two requirements that essentially mirror existing policy. The time frames for requesting and carrying out redeterminations are set forth under section 1869(a)(3)(C). A request for a redetermination must be made within 120 days from the date the individual receives the initial determination. The carrier or FI then must make a redetermination decision and notify the parties of the decision within 30 days of receiving the request for redetermination. Under section 1869(a)(3)(D), for purposes of subsequent appeals, a redetermination is considered part of the initial determination. For purposes of contractor performance evaluation, we plan to monitor how effectively fiscal intermediaries and carriers meet the 30-day deadline, on average, for redeterminations. However, we do not propose escalation or other remedies if the carrier or fiscal intermediary does not complete a redetermination within the 30-day time frame.

A critical feature of the new statutory language with respect to redeterminations is that the same provisions apply for these first level appeals of both Part A and Part B claim determinations. Thus, parties wishing to appeal initial determinations will need to meet identical time frames for filing requests for redeterminations and the time frame for redetermination decisions is significantly shorter than the previous time frames for either Part B reviews or Part A reconsiderations. This means, for example, that CMS’ contractors must complete all redeterminations within 30 days, even though the cases in need of redetermination may differ considerably in terms of complexity and dollar amounts. (Currently, under sections 1816(f)(2) and 1842(b)(2) of the Act, respectively, contractors now must complete 75 percent of part A reconsiderations within 60 days, and 90 percent within 90 days, while 95 percent of part B reviews must be completed within 45 days.) In developing the proposed regulations needed to implement the new system, we have attempted to construct procedural requirements that can work for all types of redeterminations, while still permitting contractors the flexibility needed to conduct redeterminations using methods that are both efficient and fair to appellants.

2. Redetermination Requests (§§ 405.940-405.946)

Proposed § 405.940 establishes the general rule that any party to an initial determination that is dissatisfied with that determination may request a redetermination. Sections 405.942 and 405.944 then set forth the proposed requirements concerning the time frames and procedures for filing a redetermination request. Consistent with section 1869(a)(3)(C) of the Act, a request for redetermination must be filed within 120 days from the date an individual receives the notice of initial determination. In § 405.942(a)(1), we would establish that the date of receipt of the initial determination is presumed to be 5 days after the date of such notice, unless there is evidence to the contrary. This is consistent with our longstanding policy that we allow 5 days for the individual to receive the notice of initial determination.

Under proposed §§ 405.942(a)(2) and 405.944(a), we propose to continue the current policy of permitting parties to file their requests for a redetermination not only with the appropriate CMS contractor, as indicated on the notice of initial determination, but also at a local SSA or CMS office. In view of the requirement that a contractor must issue a written notice of the redetermination decision within 30 days of a request for redetermination, we strongly considered requiring that all redetermination requests be filed directly with the contractor indicated on the notice of initial determination. Clearly, such a policy would eliminate confusion about where to file appeal requests and promote efficiency—we have often experienced lengthy delays in receiving requests filed with SSA offices, for example. However, we recognize that local SSA offices provide a valuable service to individuals who would like assistance in filing requests for redeterminations. In maintaining this policy for filing requests, we thus propose that the date the redetermination request is considered to be filed means the date the contractor, SSA, or CMS receives the request. As discussed below, however, we also propose under § 405.950 that for purposes of issuing a redetermination decision, the date of timely filing will be considered as the date that the contractor responsible for the redetermination receives the redetermination request. This proposed policy would benefit appellants by promoting flexible access to the appeals system without unfairly reducing the

time a contractor would have to issue a redetermination decision.

Section 405.942(b) contains the proposed rules concerning request for extensions to the time frames for redetermination requests. In general, a contractor may extend the time frame for requesting a redetermination if a party shows good cause for missing the 120-day deadline. In order to request an extension, the party must file a request for the extension with the contractor. The request for extension and request for redetermination must be in writing and state why the request for redetermination was not filed within the required time frame. In order to determine whether a party has shown good cause for missing the deadline, the contractor considers: The circumstances that kept the party from making the request on time; whether the contractor's actions misled the party; and whether the party had any physical, mental, educational, or language limitations that prevented the party from filing a timely request or from understanding or knowing about the need to file a timely request for redetermination. Proposed § 405.942(b)(3) sets forth examples of “good cause,” including serious illness, death or serious illness in the party's immediate family, the destruction or damage of important records due to fire or other accidental cause, incomplete or incorrect information supplied to the party about how or when to request a redetermination from the contractor, lack of notice of initial determination, and evidence of requests made with another Government agency in good faith, within the time limit, where the request did not reach the contractor until after the time period to file a redetermination had expired.

Proposed § 405.944(b) specifies that the request for a redetermination must be in writing and describes the content of the redetermination request. Under our existing regulations, requests for reconsiderations of Part A initial claim determinations have been required to be made in writing (§ 405.711) but request for reviews of Part B initial determinations have been accepted both in writing and orally. However, even for Part B reviews, this policy has never been well understood and has proven very difficult to administer for a number of reasons. First, it is important to recognize that in practice, an oral request for a review generally implied that the review itself would take place over the telephone, usually at the same time as the request. Moreover, although some very simple reviews could be carried out orally, many reviews did not lend themselves to this approach, although the regulations did not limit the availability of oral requests for review. (For example, many cases, such as reviews of DME claims, frequently involve issues that are either too complex to handle in a brief telephone call or require the submission and review of medical documentation and records that are too voluminous to provide over facsimile.) Requests for oral reviews of more complex cases could result in repeated requests for documentation and extended delays in review decisions, even under the longer time frames that were in effect for appeals of Part B initial claim determinations before the implementation of new section 1869 of the Act.

Therefore, in implementing the BIPA provisions, we would require that requests for redeterminations be accepted only in writing. We believe that the best method of accepting requests for redetermination is in writing because it provides a reliable record of the request and promotes the submission of evidence to support the request. (As discussed below, under § 405.946, we propose that parties should present evidence related to the issue in dispute with the request for a redetermination.) This position is consistent with our general belief that an efficient and accurate appeals system will necessitate better notices from CMS concerning the reasons for denials of claims and their appeals and by subsequently encouraging parties to submit relevant evidence as early as possible in the appeals process. Although we recognize that it may be efficient to take some requests by telephone, it would be extremely difficult to offer such a process and still meet the 30-day redetermination decision deadline without severely restricting the types of redeterminations that can be requested over the telephone.

We welcome comments on alternative approaches that are convenient and easy for appellants. We note that providers, suppliers, and beneficiaries can still make inquiries and some adjustments to a claim over the phone, using the telephone number indicated on the Remittance Advice or Medicare Summary Notice. In addition, we are continuing to work with contractors to identify the best methods for conducting redeterminations, such as permitting call back responses to requests for redeterminations. Again, our goals here are to improve the accuracy and efficiency of the appeals process, to make the procedures as accessible and user friendly as possible for appellants, and to avoid causing confusion and dissatisfaction as to the available procedures.

Section 405.944(b) also specifies the required elements of a redetermination request. Requests are to be made on a standard CMS form and when not made on a CMS form must contain the beneficiary's name, the insurance claim (HIC) number, the specific date of service and identification of the item or service with which the party is requesting the redetermination, and the name and signature of the party or appointed representative filing the request. These required elements mirror the requirements contained on the current standard CMS forms to request a review or reconsideration and correspond to the requirements detailed on the Medicare Summary Notice (MSN) that beneficiaries receive. Thus, a beneficiary or beneficiary representative may continue to file a request for an appeal using the instructions on the MSN—that is, he or she could satisfy the requirements by circling an item on the MSN, signing the bottom of the MSN, and returning the MSN to the contractor.

Under proposed § 405.944(c), we would specify that if more than one party files a request for redetermination on the same initial determination, the contractor shall consolidate the separate requests into one proceeding. To the extent that two or more entities may have appeal rights on a single request for payment, there is potential for a duplicate administrative process and differing resolution of the appeal. To prevent this occurrence, we are codifying the longstanding practice that when multiple parties request a redetermination, the requests are to be joined into a single administrative action.

As noted above, proposed § 405.946 specifies that when filing a redetermination request, a party should explain why he or she disagrees with the contractor's initial determination and include any evidence that the party believes should be considered by the contractor in making its redetermination. Although we are not proposing to make presentation of evidence a prerequisite to filing an appeal, we believe that encouraging parties to present evidence to support the redetermination request will facilitate the correction of erroneous initial determinations at the earliest possible stage of the appeals system.

Even when appellants are unable to submit relevant documentation along with the request for redetermination, we still wish to encourage appellants to submit documents and make their case at the earliest possible level. Therefore,

proposed § 405.946(b) permits later submission of documentation to be considered as part of the redetermination. However, since it would be difficult to process redeterminations within 30 days when documents are submitted after the request, we propose an automatic 14-day extension of the redetermination decision time frame when an appellant submits evidence after the request.

3. Conduct of Redeterminations (§§ 405.940-405.958)

Section 1869 of the Act provides little or no guidance with respect to the conduct of redeterminations, with the exception of establishing the filing and decision making time frames as noted above. Thus, with few exceptions, we are not proposing major changes to the existing procedures for first level appeals of claim determinations. Proposed § 405.948 simply specifies that in conducting a redetermination the contractor would examine the evidence and findings upon which the initial determination was based and any additional evidence submitted by the parties or obtained by the contractor on its own. As with our current process, the individual who makes the redetermination decision must not have been involved in making the initial determination.

Consistent with section 1869 (a)(3)(C)(ii) of the Act, proposed § 405.950(a) would require contractors to issue a written notice of the redetermination decision to the parties within 30 days of receiving a request for redetermination. In general, we will maintain our current policy in calculating the 30-day time frame for decision-making based on the date the request for redetermination is actually received at the contractor. As discussed above, however, if the request is made to an entity other than the contractor (such as an SSA office), we would use the date the request is actually received by the contractor as the date of the request for a redetermination for purposes of calculating the 30-day decision making time frame.

Proposed § 405.952 contains provisions relating to the withdrawal or dismissal of a request for a redetermination. Under § 405.952(a), a party may withdraw a request for redetermination within 14 days of the original request. The withdrawal request must be made in writing to the redetermination contractor. Currently, a withdrawal request may be made at any time before a contractor mails an appeals decision, but we are proposing the 14-day time frame in order to avoid the confusion and uncertainty that can result from decisions and withdrawal requests crossing in the mail. However, a contractor has the option of accepting a late withdrawal request if it has not issued a redetermination decision. For example, a contractor may accept a withdrawal request at any time when the withdrawal is based upon a party entering into an agreement with CMS to compromise the amount of a debt.

Section 405.952(b) would set forth the reasons a contractor will dismiss a request for a redetermination, including:

• If a person or entity who is not a party to an initial determination files a request for redetermination.

• If a request for redetermination does not contain the minimum elements for a redetermination request set forth in proposed § 405.944.

• If a party to an initial determination files a request for a redetermination more than 120 days following receipt of the initial determination from the contractor and does not establish good cause for late filing in accordance with § 405.942(c).

• If the party filing the request dies and there is no information in the record to determine whether there is another party who may be prejudiced by the determination.

• If the party filing the request submits a request for withdrawal.

• If the contractor has not issued an initial determination on the claim for which a redetermination is requested.

Section 405.942(c) specifies that when a request for redetermination is dismissed, the contractor will mail a written notice to the parties at their last known addresses. Under proposed § 405.952(d), a dismissal may be vacated at any time within 6 months from the date of the notice of dismissal if good and sufficient cause is shown. An appellant may request QIC reconsideration of a redetermination dismissal. The request for a QIC reconsideration of the decision must be made within 180 days of the redetermination dismissal notice. A dismissal is binding unless it is vacated in accordance with § 405.952(d), or is subject to a reconsideration by a QIC.

Proposed §§ 405.954 and 405.956 address redetermination decisions and notification rules. When the contractor concludes its redetermination, it is responsible for issuing a decision that affirms or reverses, in whole or in part, the initial determination in question. When a decision fully reverses the initial determination, we propose to maintain our current policy that proper notification is achieved through the MSN or the remittance advice notices that are sent to beneficiaries, and providers and suppliers, respectively. We welcome comments on maintaining this policy for decisions that are fully favorable to the appellant.

Under proposed § 405.956(b), for decisions that affirm the initial determination either in whole or in part, a redetermination decision notice must contain: (1) A clear statement indicating the extent to which the redetermination is favorable or unfavorable; (2) a summary of the facts; (3) an explanation of how the pertinent laws, regulations, coverage rules, and CMS policies apply to the facts of the case; (4) a summary of the rationale for the decision; (5) notification to the parties of their right to a reconsideration, the procedures that a party must follow in order to request a reconsideration, and the time limit for requesting a reconsideration; (6) a statement of the specific supporting documentation that must be submitted with a request for a reconsideration; (7) an explanation that if the specific supporting documentation indicated in the notice is not submitted with the request for a reconsideration, this evidence will not be considered at an ALJ hearing, unless the appellant demonstrates good cause as to why the evidence was not provided previously; and (8) any other requirements specified by CMS.

To a large extent, these requirements are similar to the current instructions concerning the content of contractor appeals decision (for example, Medicare Carriers Manual, section 12002). However, these policies add more detail to the required elements. They also include one major substantive addition—the requirement that notifications identify any specific supporting documentation that must be submitted with a request for a reconsideration. By setting forth clear, detailed requirements for redetermination notices in the regulations, in concert with the proposed requirement for more information about specific supporting documentation that resulted in an unfavorable determination and redetermination, we believe we are setting the stage for the most accurate and efficient reconsideration process possible. In concert with these changes, we believe that placing a requirement for full and early presentation of evidence at the QIC level is fair to appellants and can stem the volume of cases that are now appealed to ALJs and the MAC. As discussed in further detail below, if available supporting documentation that is identified as needed in the redetermination denial notice is not submitted at the QIC level, an appellant who is dissatisfied with a QIC reconsideration decision and

desires an ALJ hearing generally would not be able to introduce such evidence at an ALJ hearing, absent good cause for not submitting the evidence to the QIC.

The proposed redetermination provisions end with the straightforward requirement under § 405.958 that the redetermination decision is binding on all parties unless there is a subsequent QIC reconsideration or a reopening by the contractor consistent with § 405.980.

F. QIC Reconsiderations (§§ 405.960-978)

1. Introduction

Section 1869(b)(1) of the Act entitles any individual dissatisfied with an initial determination of a Part A or Part B claim denial, to file a request, within 180 days, for reconsideration of the initial determination, including the redetermination. In accordance with § 1869(c), reconsiderations are to be processed, generally within 30 days, by entities called qualified independent contractors (QICs). Section 1869(c)(4) requires CMS to contract with no fewer than twelve QICs. The introduction of QICs creates an additional appeals level for Part A claim determinations and replaces the Part B carrier hearing level of appeal. We believe that the QIC process, which will entail reviews of medical necessity determinations by health care professionals, routine participation in ALJ hearings, and mandatory development of an appeals-specific database, can result in significant improvements in the Medicare fee-for-service appeals system. The statute gives CMS a great deal of latitude in designing the reconsideration component of the Medicare appeals process, and we have attempted to use this discretion to design a process that will prove to be impartial, efficient, and accurate.

2. Reconsideration Requests (§§ 405.960-405.966)

Section 1869(a)(3)(B)(i) states that initial determinations made by fiscal intermediaries and carriers may be reconsidered only after the fiscal intermediary or carrier has performed a redetermination of the initial determination. Thus, proposed § 405.960 states that any person or entity who is a party to a redetermination, and is dissatisfied with the determination, may file a request for reconsideration of the redetermination in accordance with the requirements set out in §§ 405.962-966.

Consistent with section 1869(b)(1)(D) of the Act, § 405.962(a) specifies that appellants who wish to file a request for reconsideration must do so within 180 days of the date on which they receive the notice of the redetermination, or within such additional time as CMS may allow. For good cause, the QIC may extend the time frame for filing a reconsideration request. Section 405.942(b)(2) describes the process QICs are to use in determining if good cause for late filing exists. Examples of good cause, as provided in § 405.942(b)(3), would include: Circumstances beyond the appellant's control, including mental or physical impairment that prevented timely filing of the reconsideration request; significant communication difficulties; receipt of incorrect or incomplete information about the subject reconsideration from official sources (for example, CMS, the contractor, QIC or SSA); delay in filing caused by destruction of or damage to the appellant's records; and unusual or unavoidable circumstances, the nature of which demonstrate that the appellant could not reasonably be expected to have been able to file timely. The request for an extension of the reconsideration filing deadline must be in writing, signed by the party requesting the appeal, and state the reason(s) why the appellant did not file the request within 180 days. In addition, the appellant's request for reconsideration must accompany the request for an extension, so that if the QIC grants the extension, it may begin a substantive review of the appeal without further delay.

The QICs' 30-day decision-making deadline, to a large extent, dictates the procedural parameters that need to apply to the reconsideration process. Because of the equally challenging time frames for concluding ALJ and DAB appeals (combined with the provision that unresolved appeals can be escalated to the next level of administrative review, including Federal court), it is essential that the QIC procedures be designed to facilitate timely, accurate decision-making by these new administrative review bodies. As we developed the proposed QIC procedures, we have been careful to balance these efficiency concerns with the need to ensure a consistent, fair process for appellants.

We set forth the place and method for filing a request for reconsideration in § 405.964(a). Existing regulations give appellants wide discretion in terms of where an appeal may be filed. For example, under § 405.964, requests for carrier fair hearings may be filed with not only the carrier, but also at any CMS or SSA office. We recognize that some appellants, especially beneficiaries, rely on SSA offices to assist them in filing an appeal request. While we do not want to create a process that might make it difficult for appellants to file appeals, we cannot ignore the stringent decision-making time frames imposed by the statute. Thus, as an accommodation to appellants, we propose in § 405.964 that in addition to filing reconsideration requests with the QICs, parties be permitted to file their requests with the CMS and SSA offices as well (just as they may now for carrier fair hearings). For purposes of establishing whether an appellant has timely filed a request for reconsideration, a request will be considered filed on the date it is received by the QIC, SSA, or CMS. However, to ensure that QICs have adequate time to adjudicate reconsiderations that they do not receive directly, we subsequently propose under § 405.970(b)(1) that for reconsideration requests submitted to CMS or SSA offices, the QIC's 30-day decision-making period would begin on the date such request is received by the QIC. This policy will allow appellants to continue receiving assistance in filing reconsideration requests, without shortening the QIC's decision-making time frame.

Since multiple parties may request reconsideration of the same claim (for example, a beneficiary and a physician, or a beneficiary and a provider), we propose in §§ 405.964(c) and 405.970(b)(3) that QICs consolidate multiple requests for reconsideration into a single proceeding and issue one reconsideration determination to all parties within 30 days of the latest reconsideration request.

Under our existing regulations, a party's request for a Part A reconsideration or Part B fair hearing must be in writing (see §§ 405.711 and 405.821), but we do not require use of a standard form for making the appeal request. In practice, appellants now use a CMS form, a contractor's form, or submit written requests of their own design. In implementing the BIPA provisions, CMS will develop and make available a standard filing form for reconsideration requests and we considered making use of this form mandatory. However, in § 405.964, we are proposing that reconsideration requests either be made on the standard CMS form, or must contain the key elements captured by that form (for example, name, HIC number, date(s) of service and service(s) at issue). We believe that these requirements are not onerous, as they are the same as those listed on existing forms (Form HCFA-2649 and Form HCFA-1965) used to request Part A reconsiderations and Part B hearings. If the reconsideration request does not contain any one of

these essential elements referenced above, we propose that the QIC dismiss the reconsideration on the basis that the party failed to make out a valid request.

In addition to the basic information required by § 405.964(a), we believe that it is in the appellant's best interest for a reconsideration request to include additional information, including a statement of evidence and allegations of fact or law related to the issue(s) in dispute and an explanation of why the contractor's determination should be reversed. Therefore, proposed § 405.966(a) describes the type of evidence that should accompany reconsideration requests. Although such documentation is not mandatory, we note that proposed § 405.966(a)(2) specifies that failure to submit documentation that was specified as necessary in a redetermination notice generally would preclude the introduction of such evidence for consideration at subsequent appeal levels. We strongly believe that this requirement for the full and early presentation of relevant evidence is critical for accurate QIC decisions and for avoiding backlogs of appeals at the ALJ level that could have been satisfactorily resolved by QICs. Submission of such evidence should not only lead to a more efficient appeal system, but should also facilitate QIC decisions that pertain directly to the concerns of appellants, as opposed to decisions on reconsideration requests that simply state “I appeal,” without elaboration.

In the current appeals process, appellants may continually supplement their initial appeal request with additional evidence. Although we agree that appellants should have an opportunity to provide supplementary evidence to support their initial filing of reconsideration requests, allowing appellants multiple opportunities to submit documentation would make it impossible to adjudicate a case within the 30-day decision-making period. In general, we believe that the 180-day reconsideration filing time frame provides parties with sufficient opportunity to gather the information that they need to complete their requests. However, if appellants need to submit additional documentation after their request for reconsideration has been filed we are proposing under § 405.966(b) that such late submission of evidence would result in an automatic 14-day extension of the QIC's 30-day decision-making time frame.

3. Reconsideration Process (§§ 405.968-405.970)

For existing second level appeals of Part B determinations (the fair hearing level), appellants may request one of three types of hearings: In-person, telephone, or on-the-record. We considered applying this concept to QIC proceedings. However, we concluded that such a system was both impractical and unnecessary under the requirements of new section 1869 of the Act. Instead, we believe that only through on-the-record proceedings could QICs be expected to meet the requirements, under section 1869(c)(3)(C), that reconsideration decisions be issued within 30 days of receipt of a timely filed reconsideration request. In addition, nothing in section 1869 requires a hearing at the QIC level. Also, we note that the requirement for a panel of physicians or other qualified health care professionals to conduct reconsiderations of § 1862(a)(1)(A) denials, makes QIC reconsiderations less like the traditional fee-for-service fair hearings, and more like the independent review process that now applies to Medicare+Choice (M+C) appeals. M+C appeals primarily involve reviews by a physician or other qualified health care professional and are currently conducted within 30 days. Therefore, we elected to apply the existing M+C model to QIC reconsiderations and propose making reconsiderations on-the-record reviews. Thus in § 405.968, we define a reconsideration as “an independent, on-the-record review of an initial determination, including the redetermination, performed by a QIC.” In conducting reconsiderations, QICs would be required to review the evidence and findings upon which the initial determination was based and any other evidence the parties submit, or the QIC obtains. The QIC then must make an independent determination affirming or reversing, in whole or in part the initial determination in question. We also specify that if an initial determination involves a finding on whether an item or service is reasonable and necessary for the diagnosis or treatment of illness or injury (under section 1862(a)(1)(A)), a QIC's reconsideration must be based on clinical experience and medical, technical, and scientific evidence, to the extent applicable.

Section 405.968 would also reflect the statutory requirements regarding the relevance of national and local coverage determinations, and who conducts reconsiderations. Section 1869(c)(3)(B)(ii)(I) of the Act states that national coverage determinations (NCDs) shall bind the QIC with respect to issuing reconsiderations. However, unlike intermediaries and carriers (including carrier fair hearing officers) QICs would not be required to follow local coverage determinations (LCDs) in making their determinations. Instead, QICs, like ALJs, would be bound only by law, regulations, CMS Rulings, and NCDs. This constitutes an important change from the current appeals system, which has been marked by high reversal rates at the ALJ level. Often these reversals stem from the different criteria applied by Medicare contractors and ALJs in ruling on Medicare payment and coverage issues. Section 1869(c)(3)(B)(ii)(II) does require that QICs “shall consider” LCDs in issuing reconsideration decisions, but it provides no guidance on the extent to which QICs are bound by CMS manuals or other instructions. Under § 405.968(b)(3), we propose that QICs be required to “give deference” to LCDs, local medical review policies (LMRPs), and CMS program guidance, including manual instructions (for example, the Medicare Coverage Issues Manual, the Medicare Intermediary Manual, the Medicare Carriers Manual). A QIC's decision must explain why it agrees or disagrees with the appellant's reasoning. Although QICs would not be bound by these types of policies, we would require that QIC reconsiderations follow these policies unless the appellant questions the policy and provides a reason that the QIC finds persuasive as to why the policy should not be followed. (See 66 FR 54536 for a detailed explanation of the distinction between LCDs and LMRPs.) We believe that the use of consistent review criteria and the establishment of strong standards to ensure sufficiency of a QIC's rationale for its decisions will serve several important purposes, including better explaining QIC decisions, identifying recurrent problems with CMS policies, and potentially reducing both ALJ appeals volume and the ALJ reversal rate.

Consistent with section 1869(c)(3)(D) of the Act, no physician or health care professional employed by a QIC may review a determination regarding the health care services furnished to a beneficiary if the physician or health care professional was directly responsible for furnishing such services or items. Also, a physician or health care professional may not review a redetermination if the physician or health care professional or a family member of the physician or health care professional has a significant financial

interest in the institution, organization, or agency that provided the health care services. Family is defined in section 1869(c)(1)(ii) as the spouse (other than a spouse who is legally separated from the physician or health care professional under a decree of divorce or separate maintenance), children (including stepchildren and legally adopted children), grandchildren, parents, and grandparents of the physician or health care professional. Section 405.968(c) would also implement the statutory requirement that reconsiderations involving a determination as to whether an item or service is reasonable and necessary under section 1862(a)(1)(A) of the Act, shall include consideration by a panel of physicians or other appropriate health care professionals. Under proposed § 405.968(c)(2), a QIC would be required to designate a panel to consider the facts and circumstances of any case involving a “reasonable and necessary determination.” We note that the estimated workload for QICs is expected to be close to 1 million cases per year, the majority of which we believe will involve medical necessity determinations. Given the prohibitively expensive nature of requiring a sitting panel to review each of these million cases, we plan to define what will constitute a panel. One option we are considering is that, rather than requiring that a panel be made up of at least two physicians or health care professionals simultaneously reviewing the issue, we would allow the physicians or health care professionals to review the issue sequentially. This would allow one professional to propose a determination on the matter and a second professional to then review the proposed reconsideration determination.

Section 405.970 sets forth the general requirement that QICs complete their reconsiderations within 30 days of receiving a timely filed request. Proposed § 405.970(c) specifies that, by no later than the close of the 30-day decision-making period, a QIC must issue the parties either a reconsideration decision or a notice stating that the QIC will not be able to complete its review by the decision-making deadline. This notice must also advise the appellant of the right, pursuant to § 1869(c) of the Act, to request escalation of his or her appeal to an ALJ. Under § 405.970(d), appellants must submit a written request directing the QIC to escalate their appeal. Appellants who are anxious to have their cases escalated clearly could make this request before receiving notice of a delay, that is, on their own, rather than in response to a QIC notice. In all instances, while awaiting the appellant's response, the QIC must continue processing the reconsideration “unless and until it receives a written request from the appellant to escalate the case to an ALJ.” Section 1869(c)(3)(C)(ii) makes clear that when a QIC fails to meet its reconsideration deadline, an appellant may request an ALJ hearing. Under any system where escalation is at the appellant's option, we believe it is possible that in some instances, the QIC will complete its reconsideration before receiving an escalation request from an appellant. To avoid confusion and establish an efficient system for processing reconsiderations, we propose that whenever a QIC receives an escalation request, the QIC must take one of two actions within 5 days: (1) Complete its reconsideration and notify the parties of its decision; or (2) acknowledge the escalation request in writing and forward the case file to the ALJ. This provision should lend administrative finality to the QIC process and avoid any uncertainty in the inevitable situations where escalation requests and QIC reconsideration decisions cross in the mail. In cases where such QIC decisions are favorable to appellants, this process will eliminate unnecessary additional delays and administrative burden that appellants would face in ALJ hearings. See the ALJ and DAB portions of this preamble for further discussion of the escalation provisions.

4. Withdrawal or Dismissal of Reconsideration Requests (§ 405.972)

Section 405.972 sets forth provisions for withdrawing and dismissing requests for reconsideration. We are proposing that appellants be able to withdraw their reconsideration request by filing a written request for withdrawal with the QIC within 14 calendar days of filing the reconsideration request. A QIC, however, may accept a withdrawal request at any time when the withdrawal is based upon a party entering into an agreement with CMS to compromise the amount of a debt. A QIC will dismiss a reconsideration request, either entirely or as to any stated issue, pursuant to a timely filed request for withdrawal, or on its own motion. For example, if the person or entity filing for reconsideration does not meet the proper definition of a party, or does not otherwise have a right to reconsideration under § 1869(b) of the Act, the QIC will dismiss the request. The QIC also may dismiss a request for reconsideration where the party fails to file the reconsideration request within 180 days of receipt of the redetermination notice, or if the party fails to make out a valid request consistent with the essential reconsideration requirements identified in § 405.964. In addition, if the party who filed the request dies before the adjudicator renders a decision, and the record does not reflect that some other party may be prejudiced by the redetermination, the QIC will dismiss the reconsideration.

An appellant may request ALJ review of a QIC's dismissal of a request for reconsideration. The request for ALJ review must be filed with an ALJ within 60 days of the date of the QIC's notice of dismissal. Additionally, at any time within 6 months of the date of the QIC's dismissal notice, the QIC may vacate its dismissal of a request for reconsideration if good and sufficient cause is shown.

5. Content and Effect of the Reconsideration Decision (§§ 405.976-978)

With regard to the content of the reconsideration decision notice, we propose in § 405.976 that these decisions be in writing and contain several substantive elements, including: (1) A clear statement as to whether the reconsideration decision is favorable or unfavorable; (2) a summary of the facts; (3) an application of the pertinent laws, regulations, coverage rules, and CMS policies to the facts; (4) an explanation of the medical and scientific rationale for the decision, when the case involves determining whether an item or service is reasonable or necessary for the diagnosis or treatment of an illness or injury; and (5) a clear statement of the QIC's rationale for its decision. Consistent with proposed § 405.968(b)(3), as discussed above, if the QIC's decision conflicts with an LCD, LMRP, or with program guidance, such as a CMS manual instruction, the notice must include the QIC's rationale for doing so. Similarly, consistent with the proposed § 405.976(b)(5), the reconsideration notice must address how any missing documentation affected the reconsideration decision and the evidence limitations at the ALJ hearing level. The notice must also contain key procedural information such as advice to the parties of the right to an ALJ hearing; if appropriate, advice regarding the requirements for use of the expedited appeals process; and a description of the procedure that a party must follow in order to obtain an ALJ hearing or expedited appeal.

Finally, § 405.678 establishes that reconsiderations are final and binding on all parties unless a timely appeal is filed and a higher adjudicative body

overturns the reconsideration decision, or unless the reconsideration is reopened and revised by the QIC.

G. Reopenings of Initial Determinations, Redeterminations, Reconsiderations, Hearings and Reviews (§§ 405.980-405.986)

Section 1869(b)(1)(G) of the Act provides for the reopening and revision of any initial determination or reconsidered determination according to guidelines prescribed by the Secretary. These provisions are needed not only for BIPA purposes but to deal with longstanding concerns over the reopening rules for Medicare claim determinations. Over the years these provisions (existing §§ 405.750(b), 405.841, 405.842, and 405.850) have concerned providers, suppliers, physicians, and contractors. Providers have been vocal about the need for reopening for purposes of recovering underpayments at any point beyond 60 days or the initial timely billing period of 15-27 months.

Some providers have commented that some contractors do not grant requests to reopen claims for underpayments and clerical errors. We believe that the goal of the Medicare payment system should be to pay the correct amount. Thus, we believe that the purpose for conducting a reopening should be to change the determinations or decisions that result in either overpayments or underpayments. The proposed provisions below are intended to establish clear and concise rules to enable contractors to reopen claims and appeals in a fair and consistent manner.

Proposed § 405.980(a) establishes that a reopening is a remedial action taken by a carrier, intermediary, QIC, ALJ, or MAC to change a final determination or decision made with respect to an initial determination, redetermination, reconsideration, hearing, or review, even though the determination or decision may have been correct based upon the evidence of record. (Note that in this section of the proposed rule, we use the term “contractors” to signify carriers, intermediaries, and program safeguard contractors.)

Reopenings often have been misconstrued as a level of the appeals process, so we clarify the conditions for when to use the reopening process instead of the appeals process. We believe that in order to give meaning to the reopening process, we should identify well-defined parameters for how parties must proceed, and how contractors, QICs, ALJs, and the MAC will conduct reopenings. First, unlike the appeals process, a party must establish that good cause exists in order for an adjudicator to grant a request for a reopening. We discuss in detail below the ways that good cause may be established. Because some of the same types of issues may be raised in either process, we believe that a party's appeal rights must be exhausted, or the time limit for appealing must have expired, in order for an adjudicator to grant a request for a reopening and take jurisdiction. A decision on whether to grant a request for reopening is at the sole discretion of the adjudicator and is not subject to appeal.

We also draw the distinction that requests for adjustments to claims resulting from clerical errors must be handled through the reopening process. Therefore, when a contractor makes an adjustment to a claim, the contractor is not processing an appeal, but instead, conducting a reopening. Nevertheless, the revised initial determination that results from the adjustment may be appealed. Finally, some providers argue that contractors will only initiate a reopening for clerical errors when the error can be attributed to the contractor, but not the provider. We make clear in this proposed rule that the clerical error may be that of the contractor or party. We also define clerical error as human and mechanical mistakes such as mathematical, computational, or inaccurate data entry. We welcome comments on other types of mistakes that would warrant reopenings on the basis of clerical errors.

Proposed § 405.980(b)-(e) sets forth the time frames and requirements for reopening initial determinations, redeterminations, reconsiderations, hearing decisions, and reviews, both for those initiated by contractors, QICs, ALJs, the MAC, and those requested by parties. An adjudicator's notice of intent to reopen preserves the time frame by which it is required to initiate a reopening. Either a party may request a reopening, or a contractor may reopen on its own motion, within one year from the date of the notice of the initial determination or redetermination for any reason. We believe that one year is a reasonable time frame for a party to bring issues to the contractor's attention, considering that it is the party's responsibility and obligation to bill and code correctly, discover errors timely, and respond to documentation requests in order to facilitate appropriate payment determinations by the contractors.

A party and a contractor have the same 4-year time frame for initiating reopenings for good cause, but although a party may request a reopening, the contractor may find that there is not adequate reason to reopen the case. A contractor's decision on whether good cause exists is final.

A contractor may reopen within 5 years from the date of the initial determination or redetermination if the contractor discovers a pattern of billing errors or identifies an overpayment. In protecting the Medicare Trust Fund, CMS grants contractors the authority to reopen and revise initial determinations on claims that have been procured through similar fault and/or are believed to have been procured through fraud. Under proposed § 405.980, we are proposing significant revisions to existing rules concerning reopening initial determinations procured through similar fault or fraud.

We are proposing a definition for the term similar fault and outline its evidentiary requirements. Similar fault is intended to cover instances where Medicare payment is obtained by those with no legal rights to the funds, but falls short of outright fraud. In order for the initial determination to be procured by similar fault, Medicare funds must have been obtained, retained, converted, or received by a person who knows, or reasonably should be expected to know, that the person has no legal entitlement to those funds. This covers instances where a provider has been paid twice for the same claim (such as through different payors); where the contractor erroneously pays for codes that should not be paid, and the provider does not refund the money; or manipulation of legitimate codes contrary to Medicare policy to obtain a higher reimbursement. Examples of how knowledge can be shown include: Provider bulletins and educational efforts, standard practices in the community, and previous errors that have been brought to the provider's attention.

A contractor may reopen at any time if reliable evidence shows fraud or similar fault. Evidence is reliable if it is relevant, credible, and material. Since a reopening of an initial determination is an administrative action to correct erroneous payments, there is no requirement for a burden of proof. The contractor only must show that its evidence is reliable. If the reopening results in a revised determination that is unfavorable, the affected party has the right to use the administrative appeals process to rebut the contractor's evidence. In the appeals process, however, the contractor's evidence must satisfy the burden of proof placed upon it.

Proposed §§ 405.980(d)(1) and (e)(3) provide 180 days from the date of a reconsideration decision for either a party to request, or a QIC to initiate, a

reopening. Similarly, both the parties and adjudicators at the ALJ and MAC levels also would have 180 days from the date of a hearing or review decision to request or initiate a reopening. The party, QIC, ALJ, or the MAC must establish good cause for a reopening. We considered whether a QIC, ALJ, or the MAC should have to establish good cause like parties in order to reopen matters that did not pertain to overpayments, investigations, or fraud. However, in an effort to propose a more equitable process, we believe that a QIC, ALJ, or the MAC should be held to the same standards as a party and should not be able to arbitrarily reopen its decision. We believe that a party should be able to rely on the finality of an appeal decision without undue concern that an adjudicator may reopen and revise its decision.

Proposed § 405.982-.984 would require contractors, QICs, ALJs, or the MAC to mail notices of revisions based on reopened determinations, reconsiderations, or decisions to the appropriate parties at their last known addresses. The notice must state the rationale and basis for the revision, and the parties' right to appeal. The revision of an initial determination, redetermination, or reconsideration shall be binding upon all parties unless a party files a written request for a subsequent appeal. Where a contractor reopens an initial determination, we considered whether it might be more efficient to allow a party to request a reconsideration by a QIC. However, since a redetermination is the first level of the appeals process, we have proposed that a revised initial determination is final unless a party files a written request for a redetermination.

Proposed § 405.986 creates a section on how a party, contractor, QIC, ALJ, or the MAC must establish good cause for a reopening. We modified and incorporated some of the provisions at §§ 405.750(b) and 405.841 of 42 CFR, and § 404.989 of 20 CFR to establish guidelines on what constitutes good cause for a reopening, such as “new and material evidence” and “error on the face of the evidence.” The existing provisions have been viewed by some to be ambiguous as to the meaning or context of these terms.

New and material evidence means information that was not available or known at the time the determination or decision was furnished, which, had it been available or known, may have resulted in a different conclusion. Error on the face of the evidence means an obvious mistake in the determination or decision.

We believe that we have exhausted the full range of circumstances that should give rise to good cause, but welcome comments on whether other provisions should be added to apply to good cause. Finally, we would also incorporate the longstanding rule that a change resulting from a judicial decision, legal interpretation, or administrative ruling upon which a determination or decision was made should not constitute a good cause for reopening.

H. Expedited Appeals Process (§ 405.990 Through § 405.992)

We are incorporating the current regulations governing expedited review at §§ 405.718 and 405.853 with only two changes. First, since under BIPA the appeals process is the same for both Part A and B claims, there will be one regulation governing expedited review of cases involving those claims. Second, under BIPA, ALJs are bound by all NCDs rather than only by NCDs based on section 1862(a)(1) of the Act. Therefore, the regulations will no longer limit expedited review to cases involving NCDs based on section 1862(a)(1)(A) of the Act.

In addition, we would establish under proposed § 405.992 the standards that would apply to ALJs and the MAC for policies that are not subject to the expedited appeals process. We are proposing that in general ALJs and the MAC should consider and give deference to an LCD, LMRP, or CMS manual instruction. An ALJ or the MAC may disregard such a policy at a party's request, if the ALJ or the MAC finds the party's explanation of why the policy should be disregarded to be persuasive, finds that the policy has been applied incorrectly, or finds for other reason that the policy is invalid for purposes of the party's appeal. A decision of the ALJ or the MAC would include its rationale for disregarding such a policy. We believe that these provisions will not only lend greater consistency to the appeal decisions, but also ensure that CMS is aware of policies that are being repeatedly overturned by adjudicators.

I. ALJ Hearings

1. Introduction

Consistent with new section 1869 of the Act, this proposed rule contains a series of changes to the existing procedures for ALJ hearings and DAB reviews. In addition, as discussed above, we are proposing in this rule to codify in the Medicare regulations at 42 CFR part 405, subpart I, all the requirements that apply to these proceedings. Most of these regulations have previously been set forth in 20 CFR part 404 of SSA's regulations, which focuses on SSA's disability procedures. These voluminous regulations contain many provisions that are not applicable for Medicare purposes. For the most part, the proposed regulations that are being carried over from part 404 simply incorporate relevant provisions of those rules and do not involve substantive changes. To the extent that the new regulations do make substantive changes, the changes are discussed below.

One of the changes required under section 521 of BIPA is the introduction of an appellant's right to escalate a case to an ALJ if a QIC fails to make a timely reconsideration, or to the DAB if an ALJ hearing does not produce a timely decision on an appeal of a QIC reconsideration. How escalation is implemented will affect all aspects of the ALJ and MAC proceedings discussed below. Therefore, before presenting a detailed discussion of our proposals with respect to ALJ and MAC procedures, we believe it is important to first discuss the issues associated with the new escalation requirements.

2. Escalation

a. General Principles

Section 1869(a)(3)(B)(I) provides that “[n]o initial determination may be reconsidered or appealed under subsection (b) unless the fiscal intermediary or carrier has made a redetermination of that initial determination under [section 1869(a)(3)].” Section 1869(a)(3)(D) provides that for purposes of pursuing appeals beyond the fiscal intermediary or carrier levels, the redetermination is considered an initial determination. Given the above provisions, it is clear that an appellant may not proceed beyond the initial contractor level until he or she has received a redetermination from that contractor, even if the contractor does not issue the initial determination or redetermination within the statutory time frames. This is consistent with the current regulations, which require an appellant to complete all steps of the appeals process in sequence, except when an appellant invokes the expedited review process described at §§ 405.718 [Part A appeals] and 405.853 [Part B appeals].

After the initial contractor has made its redetermination, however, a case may be advanced to the next level of appeal if an adjudicator does not act on the appeal within the statutory deadline. We call this movement of a case to the next level of appeal “escalation.” In this section, we

describe how escalation will affect the procedures the adjudicator will conduct at the next level of appeal.

Sections 1869(c) and (d) provide deadlines for QICs, ALJs, and the MAC within the DAB to issue their decisions. If the adjudicator does not meet the specified deadline, the party requesting the appeal (the appellant) “may request” an appeal at the next level without completing the appeal level below. Specifically, the statute allows an appellant to escalate an appeal by (1) requesting an ALJ hearing if the QIC does not decide the appeal within 30 or 44 days (depending on whether the appellant requested additional time to submit evidence to the QIC); (2) requesting a review by the MAC if the ALJ does not decide the appeal within 90 days; and; (3) requesting judicial review in federal district court if the MAC does not complete its review within 90 days. (At the ALJ and MAC levels, the statutory time period for completing the action begins on the date the appeal is timely filed.)

If an appellant does not request escalation to the next level, the case will remain with the current adjudicator until a final action is issued. Because there are different procedures at each of the appeals steps, appellants must carefully consider the type of review that is best to resolve their case before deciding to escalate an appeal. For example, appellants who escalate a case from the QIC level to an ALJ will not have the benefit of a review by health care professionals that the QIC provides before they proceed to a hearing. Similarly, when a case is escalated from the ALJ level to the MAC, an appellant will lose the right to present his or her case during an oral hearing; rather, in most circumstances the MAC will issue its action after reviewing the written record. Therefore, appellants who consider escalating their appeals must carefully weigh whether their case will be better served by completing a particular level of appeal or proceeding to the next level.

In addition, appellants who escalate their appeals will, in essence, be waiving their right to obtain a decision within the statutory deadline at the next level. For example, section 1869(d)(1)(A) provides that unless the appellant waives the statutory adjudication deadline, the ALJ “shall conduct and conclude a hearing on a

decision

of a [QIC]” and issue a decision by the 90th day from the date a request for hearing is timely filed. (Emphasis added.) We interpret this as requiring an ALJ to decide a case within 90 days when the QIC has issued a final action in a case, but not when the appellant has escalated the case to the ALJ level before the QIC issues a decision. A similar distinction is found in the provisions governing MAC review, which provide that the MAC must complete its “review of a decision” within 90 days. Therefore, when an appellant escalates an appeal from the QIC to the ALJ level or from the ALJ level to the MAC, the proceedings before the ALJ or MAC are not subject to the 90-day limit.

We believe this interpretation is not only consistent with the statute, but highlights other factors appellants will have to consider when deciding whether escalation is to their advantage. In our experience, ALJs and the MAC are able to decide cases more quickly and completely when the record below has been fully developed and the determination or decision issued below fully addresses the issues that were considered during the appeal. Because appeals that are escalated to the next level will not include a written determination or decision by the adjudicator below, the ALJ, the MAC, and the courts, as applicable, will require more time to determine what issues are properly before them and how they should be resolved.

As we discuss later in this preamble, we are proposing that CMS or its contractors may enter a case as a party at the ALJ level and be accorded the same rights as any other party to an ALJ decision. However, since we do not believe that the 90-day deadlines for the ALJ or the MAC to adjudicate appeals would apply to CMS, we have specifically noted in the regulation text that CMS would not be permitted to escalate a case, for example, from the ALJ to the MAC level, if the ALJ did not meet its adjudication deadline.

As noted above, section 1869(d)(1)(A) of the statute indicates that the 90-day deadline for an ALJ decision is premised on the existence of a QIC decision, and section 1869(d)(2)(A) specifies that the DAB has 90 days to “conduct and conclude a review of the decision on the hearing” by an ALJ. Neither the statute nor the legislative history provides any guidance with respect to the appropriate processing time frames for ALJ decisions on cases that have not been reconsidered by a QIC, or for DAB decisions on cases that have not been heard by an ALJ. Although the statute is silent in this respect, we recognize that appellants should not have to wait indefinitely for decisions on their appeals in these situations. We have proposed procedures that we believe will enable adjudicators to meet the statutory decision-making time frames in the vast majority of cases, thus minimizing the likelihood that an appellant would have the option of escalation. However, to the extent that such situations do arise, we believe that it may be appropriate to establish in the final rule specific decision-making time frames for both ALJ hearings and DAB reviews for those cases where there was no previous QIC reconsideration decision, or ALJ hearing decision, respectively. We encourage comments on whether the final rule should include such time frames and, if so, the most appropriate adjudication time frames for these cases.

b. Specific Provisions Affected by Escalation—From the QIC to the ALJ Level

Section 1869(c) provides that a QIC must complete its reconsideration within 30 days or 44 days if the appellant requests an extension. The statute also provides that an appellant may escalate the appeal to the ALJ level if the QIC does not complete the reconsideration within the requisite period. The statute does not specify, however, that appeals will automatically be referred from the QIC to the ALJ level once the 30 or 44-day period expires. Rather, the statute leaves it to the appellant to request escalation to the next level. The statute is silent concerning when the appellant must make this request or the precise effect the request will have on any case development or other adjudication efforts that the QIC may be conducting on the appeal when the escalation request is received.

We considered various options for effectuating this provision, including requiring that the QIC immediately cease its consideration of the appeal as soon as the request for escalation is received. As discussed above, we concluded that this option would be counterproductive for both the appellant requesting escalation and for the appeals system as a whole, including appellants whose claims remain at the QIC level and those whose appeals are already pending at the ALJ level. Specifically, because we expect that QICs will make every effort to issue determinations within the 30 or 44-day time frame, we would expect that many of the cases that are not decided by those deadlines will nonetheless be very close to completion. It would not benefit either the appellant who is requesting escalation or those appellants whose appeals are pending at the ALJ level if we require the QIC to cease deciding a case as soon as a request for escalation is received, particularly if the QIC is close to issuing a determination that will be fully favorable to the appellant.

Therefore, we are proposing that when a QIC receives a request for escalation, the QIC will defer sending the case to the ALJ level for 5 days. If possible, the QIC will complete its adjudication of the case, including issuing a written reconsideration, within the 5-day period. If the determination is fully favorable to all parties, the case will be forwarded to the initial contractor for effectuation. If not, the appellant or another party to the appeal may file a request for ALJ hearing within the 60-day period provided in these regulations. If the QIC is not able to decide the case within the 5-day period, it will notify the appellant and forward the case record to the hearing office that has jurisdiction of the case. The appeal will then be processed according to the rules described in proposed sections 405.1000

et. seq.

c. Specific Provisions Affected by Escalation—Escalation at the ALJ and MAC Levels

We are proposing similar procedures when an appellant requests escalation from the ALJ to the MAC level and from the MAC level to federal district court described below.

ALJ Level to the MAC (§ 405.1104)

The appellant must file the request for escalation directly with the ALJ/hearing office assigned to the appeal as well as with the MAC. (The notice that the hearing office issues acknowledging the request for hearing will provide sufficient information for the appellant to direct the escalation request to the appropriate office or ALJ.) Upon receipt of the request for escalation, the ALJ may, if feasible, issue a decision, dismissal or remand if it can be issued within 5 days of the receipt of the request for escalation. (

Note:

a request for escalation to the MAC will be deemed as a waiver of any oral hearing an appellant has requested but not yet received.) If the ALJ's action is fully favorable to all parties to the appeal, the ALJ will forward the case record to the appropriate contractor for effectuation. If the ALJ's action is not fully favorable to all parties, the appellant or another party to the appeal may file a request for MAC review within 60 days of receipt of the ALJ's action.

If the ALJ does not issue an action within the 5-day period, the case record, including the recording of the oral hearing, if any, will be sent to the MAC.

MAC to Federal District Court (§ 405.1132)

Finally, if the MAC does not issue a final action or remand the case to an ALJ for further proceedings within the 90-day adjudication period, the appellant may request that the case be escalated to federal district court if the amount in controversy is $1,000 or more. Similar to the above procedures, the MAC may, if feasible, issue a final action, if it can be issued within 5 days of the request for escalation.

d. Calculating the 90-Day Adjudication Period

Historically, Medicare appeals were conducted using the ALJ and Appeals Council procedures that were devised for appeals of Social Security claims. Those procedures do not mandate any time frames within which either an ALJ or SSA's Appeals Council must complete their actions on an appeal. However, they also provide generous time periods (or none at all) for scheduling or rescheduling hearings at the convenience of the appellant and the adjudicator, opportunities for both prehearing and posthearing conferences, and no limitations on when additional evidence may be submitted to the ALJ, as long as it is received before the decision is issued.

Congress, through BIPA, has now directed us to complete adjudication within specified time frames and, when such time frames are not met, give appellants the option to escalate their cases to the next level of appeal. To provide this level of service to all appellants, we are proposing the following changes to our appeals procedures. First, we are establishing time limits for submission of evidence. Appellants who submit evidence within these limits and comply with other deadlines described elsewhere in this document, will have the right to have their case adjudicated within the specified time period or to escalate it if the time limit is not met. Conversely, we propose to toll the 90-day adjudication period if appellants submit evidence after those specified time periods. For example, the regulations provide that an appellant must submit any additional evidence within 10 days of receiving the notice of hearing. If an appellant submits the evidence on the 20th day, the ALJ may still accept the evidence, but will have an additional 10 days to decide the case. (See § 405.1018)

We believe that this proposal is consistent with the statute and Congressional intent. Congress has clearly indicated that adjudicators must devise procedures compatible with meeting the statutory deadlines. Moreover, we do not believe that Congress meant to allow appellants to escalate appeals if it is the appellant who has delayed the administrative process. We note that such delays, in particular requests for postponement of scheduled hearings, affect the timely resolution of not only the appellant's own case, but our ability to provide timely hearings and decisions for other appellants as well. We believe that by tolling the 90-day adjudication period in those instances in which the appellant causes the delay, we will provide an incentive for more appellants to appear at scheduled hearings and otherwise comply with hearing procedures.

For the same reason, the proposed regulations contain changes to the current process that we anticipate will streamline the hearings and appeals process, thus providing quicker and more focused adjudication. For example, we are proposing to offer appellants at the ALJ level not only in-person hearings, but hearings via telephone and videoconferencing, where available. We are also restricting submission of additional evidence after an oral hearing to the following:

(1) With the permission of the ALJ, provided that the request is made before or during the hearing.

(2) On the ALJ's own motion, if he or she concludes that the evidence is necessary to resolve a material issue in the case.

We are also continuing the current requirement that the notice of hearing must identify the issues to be decided in the case. Although we are requiring appellants to file any objections to the issues within 5 days of the hearing, we encourage parties to alert ALJs as soon as possible if the notice of hearing does not accurately describe the issue to be decided or does not include an issue material to the resolution of the case (see § 405.1024). Similarly, as explained in more detail elsewhere in this preamble, we are proposing to require appellants seeking MAC review to identify those aspects of the ALJ's decision with which they disagree. (We are not proposing this requirement for beneficiaries who are proceeding pro se.) We believe that this requirement will enable the MAC to resolve requests for review more expeditiously. In addition, the MAC will issue final actions after considering the request for review, rather than first advising appellants of a proposed action and providing a comment period. We do not consider it feasible to provide both a proposed and final action within the designated time frame. In addition, because the MAC will now be conducting a de novo review, appellants are on notice that the MAC may alter the ALJ's decision even if it would have been sustained under the pre-BIPA substantial evidence standard (see § 405.1112).

3. Conduct of ALJ Hearing—General Rules ( § 405.1000)

Section 1869(b)(1)(A) of the Social Security Act as amended by BIPA provides that any individual dissatisfied with any initial determination shall be entitled to a reconsideration and, assuming the request for hearing is timely filed and the amount in controversy requirements are met, a hearing to the same extent as is provided in section 205(b) of the Act. Traditionally, the Secretary has granted individuals entitled to a 205(b) hearing an in-person hearing. In addition, current regulations allow an appellant to waive an in-person hearing and request a decision based on the written record. We would continue that policy in this proposed rule. However, given recent technological advances, we will also offer appellants an opportunity for a hearing via telephone or videoconference, as available. (Currently, videoconferencing is only available at selected hearing sites throughout the country. 66 FR 61310 (January 5, 2001)). Recent experience shows that hearings conducted via telephone and videoconferencing advantage both the adjudicator and the appellant, particularly beneficiaries who have difficulty traveling even short distances or providers and suppliers for whom a telephone hearing or a videoconference may be more convenient than a hearing scheduled at a more distant hearing office. We believe that offering these options, where available, will also enable ALJs to complete more cases within the 90-day adjudication period. It may also afford some appellants an opportunity to present their case orally who currently request on-the-record hearings because of transportation or scheduling difficulties.

4. What Actions Are Reviewable by an ALJ? (§ 405.1004)

We have interpreted the current regulations governing the Part A and Part B appeals process as affording a party the right to an ALJ hearing only if the intermediary or carrier hearing officer (CHO), as applicable, has issued a determination or decision on the merits. Consistent with this interpretation, ALJs have dismissed requests for an ALJ hearing when the contractor or CHO has dismissed a request for a reconsideration or carrier hearing.

We propose to revise this policy for appeals filed under BIPA. Specifically, we would give ALJs the authority to decide or review all final actions issued by a QIC including dismissals for untimely filing, failure to exhaust administrative remedies, or res judicata. (We expect that res judicata will most often occur when a party asks for another adjudication of a claim for the same service, that is, the same instance of receiving a service.) However, the proposed regulations also specify that if an ALJ decides that a QIC's dismissal was improper, the ALJ will remand to the QIC for a substantive decision.

5. What Authorities Are Binding on an ALJ?

In our May 12, 1997 final rule, we stated that ALJs are bound by the Medicare statute, CMS regulations, CMS Rulings and NCDs based on section 1862(a)(1) of the Act. Under BIPA, all NCDs, based on section 1862(a)(1) or other grounds, are binding on ALJs. We are revising our regulations, including those governing the expedited appeals process, accordingly.

6. Aggregating Claims To Meet the Amount in Controversy (§ 405.1006)

Prior to the enactment of section 521 of BIPA, the statute and regulations provided different amounts in controversy for Part A and Part B hearings and appeals. Under Part A, an appellant could receive a reconsideration of the initial determination regardless of the monetary value of the claim, but had to meet a $100 threshold to receive a hearing before an ALJ. Similarly, an appellant contesting an initial determination issued on a Part B claim could receive a review determination regardless of the amount in controversy. However, there was a $100 amount in controversy requirement for a Part B carrier hearing and a $500 threshold for an ALJ hearing with respect to a Part B claim determination.

The pre-BIPA aggregations provisions found at former section 1869(b)(2) directed the Secretary to devise a system for allowing appellants to combine claims to meet the amount in controversy as follows: In determining the amount in controversy, the Secretary, under regulations, shall allow two or more claims to be aggregated if the claims involve the delivery of similar or related services to the same individual or involve common issues of law and fact arising from services furnished to two or more individuals. The Secretary implemented the above provision in a final regulation published March 16, 1994. The regulation established two methods of aggregation, one for individual appellants and one for multiple appellants. Individual appellants appealing either Part A and Part B claims were allowed to aggregate two or more claims (within a specified time period), regardless of issue, to meet the jurisdictional minimums for a carrier hearing and ALJ hearing. (Prior to OBRA 1986, this method for aggregating claims had been available to appellants requesting a Part B hearing before a carrier hearing officer.) Multiple appellants, however, were allowed to aggregate their claims only under the statutory requirements, that is, if the claims involved the delivery of similar or related services to the same individual or common issues of law and fact arising from services furnished to two or more individuals.

BIPA 521 changed the amount in controversy requirements. Section 1869(b)(1)(E) provides that the amount in controversy for an ALJ hearing will be $100 for appeals of both Part A and Part B claims. In addition, the aggregation provisions have been altered as follows:

(ii) Aggregation of claims. In determining the amount in controversy, the Secretary, under regulations, shall allow two or more appeals to be aggregated if the appeals involve—

(I) the delivery of similar or related services to the same individual by one or more providers of services or suppliers, or

(II) common issues of law and fact arising from services furnished to two or more individuals by one or more providers of services or suppliers.

We are proposing to limit aggregation of claims under BIPA to those that meet the statutory requirements for aggregation, that is, those that involve the delivery of similar or related services to the same individual or common issues of law and fact. Accordingly, we would no longer allow appellants to aggregate all timely filed claims regardless of issue. We are proposing this change for several reasons. Under the current system, appellants can only appeal beyond the intermediary or carrier levels if their appeal meets the minimum amount in controversy requirements described above. With the creation of the QICs, however, appellants will have access to a review by an independent contractor regardless of a claim's monetary value. We believe that this will provide sufficient due process for those claims that are below the $100 threshold.

Moreover, BIPA has reduced the amount in controversy for a Part B ALJ hearing from $500 to $100. Our experience suggests that the majority of Part A and B appeals that are decided by the QICs will equal or exceed the $100 amount in controversy requirement. Thus, we do not believe that eliminating the more liberal rules

that individual appellants have used to aggregate claims will alter significantly an appellant's access to an ALJ hearing. We believe that continuing to apply the current aggregation rules would hinder ALJs and the MAC from meeting BIPA's 90-day deadlines for completing appeals. The current system, which allows aggregation of claims regardless of issue, has led to cumbersome and lengthy proceedings at both the ALJ and MAC levels. Adjudication is often delayed when an appellant seeks to aggregate a claim with another previously filed appeal; continuing this practice will impair our ability to meet the statutory deadline for the earlier appeal. Moreover, some of the current inefficiencies in the appeals system are caused by cases in which appellants seek to aggregate numerous claims that concern a variety of unrelated services or supplies, each of which has been denied for a different reason. Based on this experience, we believe that allowing appellants to aggregate claims regardless of issue will make it extremely difficult to provide a meaningful review of each issue within the statutory deadlines.

Therefore, we are proposing to limit aggregation for both individual and multiple appellants to the clear language of the statutory provisions. In order to allow individual beneficiaries, providers and suppliers, as well as multiple appellants to aggregate claims, we will allow appellants to aggregate claims to meet the amount in controversy if the claims involve common issues of law and fact or delivery of similar or related services, regardless of whether the services pertain to just one beneficiary or a number of beneficiaries and regardless of how many providers or suppliers provided the services. We will continue our policy, however, of restricting the claims that may be aggregated to those that are appealed within a limited period; to do otherwise would in essence extend the time to file a request for hearing beyond the 60-day time limit. We are also proposing separate rules for claims that are escalated from the QIC to the ALJ level to ensure that only appeals that clearly meet the amount in controversy requirements are escalated to the ALJ level. Finally, given the reduced amount in controversy threshold and the new adjudication deadlines, which will require adjudicators to resolve issues more quickly, we believe it is reasonable to require appellants to explain in their request for aggregation why they believe the claims involve common issues of law and fact or delivery of similar or related services.

7. When CMS or Its Contractors May Participate in an ALJ hearing (§§ 405.1010 and 405.1012)

Existing regulations do not address whether CMS and its contractors could participate in ALJ hearings. Occasions have arisen, however, in which a contractor or an ALJ has determined that an issue in a case could not be resolved without some input from CMS or the contractor. In some cases, ALJs have requested position papers, testimony, or other evidence from CMS or a contractor, but such proceedings have been cumbersome, because the regulations did not provide specific procedures for such input. After reviewing the outcome of other cases, CMS has concluded that the case might have been more appropriately resolved if CMS or the contractor had been parties to the appeal.

New section 1869(c)(3)(J) provides that the QIC will not only prepare the record of the reconsideration when a hearing before an ALJ is requested, but also will “participate in such hearings as required by the Secretary.” Consistent with this provision, we are proposing to revise our regulations concerning the conduct of an ALJ hearing to allow participation of a representative of CMS, or another CMS contractor, either at the request of an ALJ or upon the request of the QIC or CMS. Such participation may include filing position papers or providing testimony to clarify factual or policy issues in a case, but will not include those aspects of full party status such as the right to call witnesses or cross-examine the witnesses of another party. Because the role of a participant is non-adversarial, we would allow participation of the QIC, CMS, or CMS's contractors in cases brought by all appellants, including beneficiaries.

An ALJ will not have the authority to require CMS or a contractor to participate in a case. Nor may the ALJ draw any adverse inferences if CMS or a contractor decides not to participate. For example, an ALJ could not consider a party's allegations as accepted as true if CMS or a contractor decides not to participate and counter such allegations. We anticipate, however, that there will be other cases in which CMS or its contractor will want and need to be a full party in a case in order to ensure that the record before the ALJ is fully developed. Accordingly, we are also revising the current regulations to allow CMS or its contractor to enter an appeal at the ALJ level as a party, unless the appeal is brought by an unrepresented beneficiary. When CMS or its contractor enters the case as a party, it will have all the rights of a party, including the right to call witnesses or cross-examine the witnesses of other parties, as well as the right to seek MAC review of an adverse decision. CMS and the contractor, when acting as parties, may also submit additional evidence to the ALJ. An ALJ would not have the authority to require CMS or a contractor to enter a case as a party, nor would an ALJ be able to draw any inferences if CMS does not participate in the case. We believe that these proposed changes will enable adjudicators at the ALJ and, thereafter, the MAC level to resolve issues of fact and law more quickly and reduce the need for remands for additional development.

8. Filing Requests for ALJ Hearing and MAC Review—Time and Place (§§ 405.1014, 405.1016, 405.1106)

Section 1869(b)(1)(D)(ii) provides that “the Secretary shall establish in regulations time limits for the filing of a request for hearing by the Secretary in accordance with provisions in sections 205 and 206.” In addition, section 1869(d)(1)(A) provides that “except as provided in subparagraph (B), an administrative law judge shall conduct and conclude a hearing on a decision of a qualified independent contractor under subsection (c) and render a decision on such hearing by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed.” (Emphasis added.) Similarly, section 1869(d)(2)(A) of the Act provides that the MAC “shall conduct and conclude a review of [an ALJ decision] and make a decision or remand the case to the administrative law judge for reconsideration by not later than the end of the 90-day period beginning on the date a request for review has been timely filed.”

Section 205 of the Act gives an appellant 60 days to request a hearing. The current regulations governing appeals of Medicare claims provide the same 60-day period for appealing Medicare cases from the contractor's determination or decision to an ALJ and, thereafter, from the ALJ level to the MAC. We are proposing to continue to require parties to file their appeals to the ALJ level and the MAC within 60 days. As discussed above, for purposes of determining an appellant's right to appeal, we will also continue to use the general principles currently found in 20 CFR 404.933 and 42 CFR 405.722. These regulations provide that an appeal is considered filed on the day it is received by a Social Security office,

CMS, including its contractors, an ALJ, or, in the case of a request for MAC review, the MAC. We will also continue to calculate the 60-day period based on the date the appeal is actually received by one of the above offices.

As noted above, ALJs and the MAC must issue their decisions no later than the end of the 90-day period beginning on the date the appeal has been timely filed. Therefore we must determine not only whether an appeal has been timely filed to establish the party requesting review's right to an ALJ hearing or MAC review, but also when the appeal is considered timely filed in order to calculate the 90-day adjudication period. Given these deadlines, we considered requiring all requests for ALJ hearing to be filed directly with the hearing office, and all requests for review to be filed directly with the MAC. This requirement would advantage most parties, since we have experienced significant delays in receiving appeals filed with Social Security and other offices. Again, we recognize that local Social Security offices provide a valuable service to many individuals who want or require assistance in filing their appeals. Similarly, providers and suppliers are accustomed to filing requests for an ALJ hearing or, more rarely, MAC review with CMS's contractors.

Therefore, as with requests for redeterminations and reconsiderations, we are proposing to allow parties to file their appeals with these offices. For purposes of establishing whether the party has filed a timely request, the appeal will be considered filed on the date it is received in one of these offices. However, for purposes of establishing the start date for the 90-day adjudication period, we will define the date that an appeal is timely filed as the date the appeal is received by the ALJ or MAC, as applicable. We believe that this policy will give the parties requesting review access to assistance if needed while not reducing the time the ALJ or MAC will have to decide the case.

In addition, both ALJs and the MAC often receive appeals that have not been filed within the 60-day limit. The current regulations allow parties to ask for an extension of time to file their appeal for “good cause.” The regulations further provide examples of circumstances that may establish good cause for late filing, such as a serious illness or death of an immediate family member. In our experience, some parties do not acknowledge that they have filed an appeal after the 60-day period has expired or explain why the appeal is late. In the event that the party requesting review subsequently provides information that establishes good cause for late filing, we will calculate the date the appeal is “timely filed” for purposes of beginning the 90-day adjudication period as the date the ALJ or MAC, as applicable, receives the good cause explanation, assuming the ALJ or MAC determines that the explanation provides good cause for filing the appeal late.

9. Adjudication Deadlines—ALJ Level (§ 405.1016)

Section 1869(d)(1)(A) provides that unless the appellant waives the statutory adjudication deadline, the ALJ “shall conduct and conclude a hearing on a

decision

of a [QIC]” and issue a decision within 90 days from the date a request for hearing is timely filed. (Emphasis added.) We interpret this as requiring an ALJ to decide a case within 90 days only when the QIC has issued a final action in a case. Therefore, when an appellant escalates an appeal from the QIC to the ALJ level, the proceedings before the ALJ are not subject to the 90-day limit.

We are also proposing to toll the 90-day adjudication deadline when an appellant's actions, including delays in submitting evidence or requests for postponement of a hearing, rather than the ALJ's actions, extend the length of the proceedings.

10. Remand Authority (§ 405.1034)

Currently, the regulations governing Medicare appeals do not provide clear guidance concerning if and when an ALJ may remand a case to a contractor for further proceedings. We are proposing including regulations that would require or allow ALJs to remand to the QIC under certain circumstances. First, the regulations would allow an ALJ to review whether or not the QIC erred in dismissing a request for reconsideration and to remand the case to the QIC for a reconsideration determination if the dismissal was improper. The regulations would also require an ALJ to remand a case to the QIC for a new decision if the appellant submits new evidence to the ALJ without providing a good reason for not providing it at the QIC level. (If the ALJ determines that there is good cause for submitting the evidence to the ALJ, the ALJ will include the evidence in the administrative record and decide the case on that record.) As discussed previously, we believe that this requirement will encourage appellants to resolve appeals, if possible, at earlier and less costly steps of the appeals process. Moreover, since most Part A and B appeals pertain to services that have already been provided, most medical and other records relevant to the case should be available during the initial stages in the appeals process. Requiring earlier submission of evidence will also assist ALJs and the MAC to meet their adjudication deadlines, since it will reduce time consuming development of the record. However, because we recognize that the reason for denying a claim may be different at various steps of the appeals process, we would not require an ALJ to remand a case when an appellant submits evidence relevant to an issue that is first identified in the QIC's reconsideration determination.

We would also permit an ALJ to remand the case to a QIC when the record lacks technical information material to resolution of the case that only the contractor, rather than a party, can provide. For example, it may be necessary to examine a contractor's payment history records in order to determine whether a supplier has filed a claim for durable medical equipment that has already been billed for by another supplier. Since such records would not ordinarily be in the possession of a party to the appeal, it may be necessary for the ALJ to remand the case to the QIC, if the initial contractor or the QIC has not included this information in the record submitted to the ALJ.

11. When May an ALJ Consolidate a Hearing? (§ 405.1044)

This proposed rule does not alter the ALJ's ability to consolidate a hearing. However, we have added a provision requiring an ALJ to notify CMS of his or her intent to consolidate hearings (see § 405.1044(c)). We believe that that the consolidation of hearings may affect our decision on whether to participate or invoke party status.

12. When May an ALJ Dismiss a Request for Hearing? (§ 405.1052)

CMS's current regulations do not address this issue; rather, ALJs follow the regulations at 20 CFR 404.957. These regulations were designed to resolve appeals filed by applicants for Social Security retirement and disability benefits. We are proposing new regulations that will address the specific procedural issues that arise in Medicare claims appeals.

a. Effect of the Death of the Beneficiary

The current regulations do not give specific guidance to appellants or adjudicators concerning the effect of the death of a beneficiary on an appeal. We believe that the regulations should provide notice to appellants concerning what will happen to an appeal if the

beneficiary dies either before it is filed or while it is pending. The proposed provisions would identify those circumstances in which the appeal will continue to be adjudicated on the merits versus those that will be dismissed because there is no longer an interested party who may obtain relief.

We are proposing to continue deciding appeals on the merits under the following circumstances.

The appeal involves a claim for benefits under Part A or B in which the beneficiary obtained the service at issue and the beneficiary either paid for the service or has a spouse or estate who continues to be financially liable for the service. In this circumstance, the beneficiary's spouse or estate may continue to pursue the appeal.

The appeal is filed by another party, including a provider of services or supplier, who continues to have a financial interest in the outcome of the appeal.

The appeal involved a service (such as a skilled nursing facility stay) for which payment was made under waiver of liability, but for which the determination was construed as a notice of noncoverage to deny payment to the beneficiary for subsequent dates of service.

The ALJ would dismiss, upon the beneficiary's death, other requests for hearing that do not meet the above criteria. For example, the ALJ could dismiss if the beneficiary or the beneficiary's representative filed the request for hearing but the beneficiary died before the hearing was held, and the beneficiary was not held liable for the services at issue in the QIC's reconsideration. The ALJ would not be required to inquire whether other potentially affected parties wish to continue the appeal unless they participated in the QIC review below. Similarly, a dismissal would occur if the supplier filed the request for hearing as the representative of the beneficiary, but did not have appeal rights on its own (because, for example, it did not take assignment) and the beneficiary died before the request for hearing was filed.

b. Requests for Withdrawal of a Request for Hearing

SSA's regulations at 20 CFR 404.957 now provide that an ALJ may dismiss a request for hearing if the party that requested the hearing asks to withdraw the request. The request may be submitted in writing or made orally at the hearing. Guidelines issued by SSA's Office of Hearings and Appeals further instruct ALJs that the request must indicate that the party withdrawing the request for hearing is aware of the consequences of the withdrawal. Experience shows that some appellants are in fact unaware of the consequences; for example they may equate a request for withdrawal with a request for postponement of the case. In order to avoid unnecessary remands of these cases, we are adding a requirement that the request for withdrawal must contain a clear statement that the appellant is withdrawing the appeal and does not intend to further proceed with the appeal. If the request for withdrawal is filed by an attorney, or other legal professional on behalf of a beneficiary or other appellant, the ALJ may presume that the representative has advised the appellant of the consequences of the withdrawal and dismissal. (We note that most local rules governing the professional responsibility of attorneys would require that an attorney advise a client of the effects of withdrawing an appeal.)

c. Res Judicata

SSA regulations at 20 CFR 404.957(c)(1) provide that an ALJ may dismiss a request for hearing based on the doctrine of res judicata. We are including this provision in our new regulations but clarifying that in the Medicare context the issue will most often occur when a party asks for another adjudication of a claim for the same date of service based on the same facts and evidence and the previous decision on the claim is either administratively or judicially final.

d. Abandonment

Currently, an ALJ may dismiss a request for hearing if the appellant does not have a good reason for failing to appear at a scheduled hearing. We will continue to allow ALJs to dismiss a request for hearing for this reason. In addition, if the hearing is rescheduled because the ALJ finds that the appellant had a good reason for failing to appear, the number of days that expire between the first and second scheduled hearing will not be counted toward the 90-day time limit for deciding the case.

J. Review by the Medicare Appeals Council and Judicial Review (§§ 405.1100-405.1140)

1. Introduction

The component of the DAB that decides cases brought under section 521 of BIPA is called the Medicare Appeals Council (MAC). Prior to this rulemaking, the MAC has considered requests for review of Medicare cases under the procedures used by the SSA's Appeals Council. Those regulations are found at 20 CFR 404.966 through 404.982. As with the ALJ regulations discussed above, we are now proposing to incorporate these procedures into 42 CFR of the Medicare regulations. These proposed regulations will incorporate the BIPA provisions governing MAC review and establish procedures that will meet the particular needs of the Medicare appeals process.

2. MAC Review of an ALJ's Action/De Novo Review (§ 405.1100)

Under the current regulations, the MAC may deny or dismiss a request for review, or it may grant the request for review and either issue a decision or remand the case to an ALJ. The MAC may also review an ALJ's action in order to dismiss a request for hearing for any reason for which it could have been dismissed by the ALJ. (See Social Security Ruling 95-2c, 60 FR 31753 (June 16, 1985)).

The MAC also has the authority to review an ALJ's action on its own motion, provided that it takes review of the case within 60 days after the date of the hearing decision or dismissal.

In deciding whether to grant a request for review, the MAC considers whether: (1) There appears to be an abuse of discretion by the ALJ; (2) there is an error of law; (3) the actions, findings or conclusions of the ALJ are not supported by substantial evidence; or (4) there is a broad policy or procedural issue that may affect the general public interest. In addition, if new and material evidence is submitted that relates to the period on or before the date of the administrative law judge hearing decision the MAC will review the case if it finds that the administrative law judge's action, findings, or conclusion is contrary to the weight of the evidence currently of record. If the MAC denies review of an ALJ's decision, the ALJ's action, not the denial of review, is the final decision of the Secretary and is reviewable in federal district court on a substantial evidence standard.

BIPA directs the MAC to apply a different standard when reviewing an ALJ's action. Section 1869(d)(2)(B) directs the MAC to conduct a de novo review of an ALJ's decision on a hearing. In addition, section 1869(d)(3)(A) allows parties to request review by the MAC if an ALJ does not issue a decision within the 90-day adjudication period “notwithstanding any requirements for a hearing for purposes of the party's right to such a review.”

We are proposing to effectuate the MAC's new review process as follows. The MAC may no longer consider ALJ decisions under a substantial evidence standard nor may it “deny” review.

Rather, it will review the ALJ's decision de novo. If a case requires additional development or proceedings at the ALJ level, the MAC will remand the case to the ALJ for further action. Otherwise, the MAC will communicate its final action on the case by issuing a final decision or order that adopts, modifies or reverses the ALJ's action, as appropriate.

In addition to requiring any MAC review of an ALJ decision to be de novo, BIPA requires the MAC to complete its action on an ALJ decision within 90 days from the date the request for review is timely filed. In a previous section of this preamble, we have discussed the effect of these provisions on such questions as where and when a request for MAC review may be filed. We believe that the changes in the standard of review and the adjudication deadlines will require the following additional changes to the MAC's current procedures as well.

3. Escalation of an Appeal From the ALJ Level to the MAC (§§ 405.1104, 405.1106, and 405.1108)

Section 1869(d)(3)(A) of the Act, as amended by BIPA, provides that if an ALJ does not issue a decision within the 90-day adjudication period, “the party requesting the hearing may request a review by [the MAC], notwithstanding any requirements for a hearing for purposes of the [appellant's] right to such review.” As we have explained elsewhere in this preamble, the MAC's consideration of an appeal when it is escalated from the ALJ to the MAC level is not subject to the 90-day adjudication deadline. In addition, we interpret section 1869(d)(3)(A) to mean that only the person or entity who requested the ALJ hearing may escalate the appeal to the MAC if the ALJ does not meet the 90-day adjudication deadline. Where CMS has entered into the case as a party, it may not seek escalation.

Because the statute allows escalation for a MAC review “notwithstanding any requirements for a hearing,” the MAC is not required to hold a hearing if the case is escalated to its level. The statute does not describe the type of review that the MAC will conduct when an appeal is escalated before an ALJ action is issued, or what actions the MAC may take upon its review in such circumstances. Because it is possible that the MAC will receive cases escalated

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