Medicare Program; Provider Reimbursement Determinations and Appeals

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405, 413, and 417

[CMS-1727-P]

RIN 0938-AL54

Medicare Program; Provider Reimbursement Determinations and Appeals

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

Subpart R of 42 CFR part 405 consists of regulations governing Medicare reimbursement determinations, and appeals of those determinations by health care providers. (For sake of simplicity, through this proposed rule we use “reimbursement” to refer to Medicare payment under both the reasonable cost and prospective payment systems.) Under section 1878 of the Social Security Act (the Act) and the regulations, the Provider Reimbursement Review Board (Board) has the authority to adjudicate certain substantial reimbursement disputes between providers and fiscal intermediaries. Board decisions are subject to review by the CMS Administrator, and the final agency decision of the Board or the Administrator, as applicable, is reviewable in Federal district court. In addition, under the regulations, fiscal intermediaries have the authority to hold hearings and adjudicate certain other payment and reimbursement disputes with providers. This proposed rule would update, clarify, and revise various provisions of the regulations governing provider reimbursement determinations, appeals before the Board, appeals before the intermediaries (for lesser disputes), and Administrator review of decisions made by the Board.

DATES:

To be assured consideration, comments must be received at the appropriate address, as provided below, no later than 5 p.m. on August 24, 2004.

ADDRESSES:

In commenting, please refer to file code CMS-1727-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of three ways (no duplicates, please):

1.

Electronically.

You may submit electronic comments to

http://www.cms.hhs.gov/regulations/ecomments

or to

http://www.regulations.gov

(attachments must be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word).

2.

By mail.

You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1727-P, P.O. Box 8017, Baltimore, MD 21244-8017.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.

By hand or courier.

If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7197 in advance to schedule your arrival with one of our staff members.

Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 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 persons 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 received after the comment period. For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Morton Marcus, (410) 786-4477.

SUPPLEMENTARY INFORMATION:

Submitting Comments:

We welcome comments from the public on all issues set forth in this rule to assist us in fully considering issues and developing policies. You can assist us by referencing the file code CMS-1727-P and the specific “issue identifier” that precedes the section on which you choose to comment.

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. After the close of the comment period, CMS posts all electronic comments received before the close of the comment period on its public website. Comments received timely 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 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.

This

Federal Register

document is also available from the

Federal Register

online database through GPO Access, a service of the U.S. Government Printing Office. The Web site address is:

http://www.gpoaccess.gov.

I. Background

[If you choose to comment on issues in this section, please include the caption “Background” at the beginning of your comments.]

Section 1878(a) of the Social Security Act (the Act) allows providers to appeal to the Board final determinations made by the intermediary under section 1861(v)(1)(A) of the Act (reasonable cost reimbursement), as well as certain determinations by the Secretary involving payment under section 1886(d) (inpatient hospital prospective payment) and section 1886(b) (commonly known as the TEFRA payment system). (See section II.c.1., of this preamble, concerning how we propose to define “provider.”) In addition, by regulation, providers are given the right to appeal to the Board or intermediary certain other determinations. A brief discussion of the original cost reimbursement, TEFRA, and prospective payment systems (PPS), and some of the types of determinations that are appealable, follows.

For cost reporting years beginning before October 1, 1983, all providers were reimbursed for Part A (hospital insurance) covered items and services they furnished to Medicare beneficiaries on the basis of reasonable cost. Reasonable cost is defined at section 1861(v)(1)(A) of the Act and implementing regulations at 42 CFR, Part 413. In 1982, the Congress determined that the reasonable cost reimbursement system should be modified to provide hospitals with better incentives to render services more efficiently. Accordingly, in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, the Congress amended the Act by imposing a ceiling on the rate of increase of inpatient operating costs recoverable by a hospital under Medicare.

The Social Security Amendments of 1983 (Pub. L. No. 98-21) added section 1886(d) to the Act, which effective with cost reporting periods beginning on or after October 1, 1983, changed the method of payment for inpatient hospital services under Medicare Part A for short-term acute care hospitals. The method of payment for these hospitals was changed from a cost-based retrospective reimbursement system to a system based on prospectively set rates. Under Medicare's inpatient hospital PPS, payment is made at a predetermined specific rate for each hospital discharge (classified according to a list of diagnosis-related groups (DRGs)), excluding certain costs that continue to be reimbursed under the reasonable cost-based system.

Other statutory changes expanded the types of providers that are subject to a PPS. The Balanced Budget Act of 1997 (BBA), Pub. L. 105-33, established a prospective payment system for home health agencies (HHAs), for rehabilitation hospitals, and for all skilled nursing facilities (SNFs). The Balanced Budget Refinement Act of 1999, Pub. L. 106-113, provided for the establishment of a PPS for long term care hospitals (LTCHs). Although many types of providers are now paid on a prospectively-determined basis, some types of providers, such as hospices, psychiatric hospitals, and children's hospitals continue to be paid on a reasonable cost basis.

Payments to providers are ordinarily made through private organizations known as fiscal intermediaries, under contracts with the Secretary. For covered items and services reimbursed on a reasonable cost basis, the intermediary pays a provider during a cost reporting year interim payments that approximate the provider's actual costs. Under a PPS, providers are generally paid for each discharge after each bill is submitted.

Regardless of whether the provider is paid under reasonable cost or under a PPS, the provider files an annual cost report after the cost year is completed. The intermediary then reviews or audits the cost report, determines the aggregate amount of payment due the provider, and makes any necessary adjustments to the provider's total Medicare reimbursement for the cost year. This year-end reconciliation of Medicare payment for the provider's cost reporting period constitutes an intermediary determination, as defined in § 405.1801(a). Under §§ 405.1801(a)(1) and (2) and 405.1803, the intermediary must render the provider with written notice of the intermediary determination for the cost period in a notice of amount of program reimbursement (NPR). The NPR is an appealable determination.

In addition to the NPR, other determinations made by the intermediary or CMS for hospitals and other providers are appealable to the intermediary or Board (depending on the amount in controversy), such as: a denial of a hospital's request for an adjustment to, or an exemption from, the TEFRA rate of increase ceiling (see § 413.40); a denial of a HHA's or SNF's request for an adjustment to, or an exemption from, the routine cost limits that were in effect prior to a PPS for such providers (see § 413.30); a denial of a PPS hospital's request to be classified as a sole community hospital (see § 412.92) or rural referral center. Also, some health care entities such as renal dialysis facilities, rural health clinics (RHCs) and Federally qualified health centers (FQHCs) are treated as “providers” for purposes of subpart R and have appeal rights before the intermediaries and the Board. Thus, for example, a renal dialysis facility may appeal to the intermediary or the Board a CMS denial of its request for an exception to its composite payment rate (see § 413.194(b)).

If a provider is dissatisfied with some aspect of an appealable intermediary or CMS determination, it may request a hearing before the intermediary or the Board, depending on the amount in controversy. For an amount in controversy that is at least $1,000 but less than $10,000, the provider may request an intermediary hearing before the intermediary hearing officer(s) under § 405.1811. If the amount in controversy is at least $10,000, the provider may request a hearing before the Board under section 1878(a) of the Act and § 405.1835 and § 405.1841. Alternatively, the provider may request a Board hearing with one or more additional providers under section 1878(b) of the Act and § 405.1837, if the amount in controversy is, in the aggregate, at least $50,000 (such an appeal is known as a group appeal).

Decisions by the intermediary hearing officer(s) or the Board are subject to further review. Intermediary hearing officers' decisions are subject to review by a CMS reviewing official under section 2917 of the Provider Reimbursement Manual, Part 1, but there is no provision for judicial review of a final decision of the intermediary hearing officer(s) or CMS reviewing official, as applicable. Board decisions are subject to review by the Administrator or the Deputy Administrator of CMS, under section 1878(f)(1) of the Act and § 405.1875. (The Secretary's review authority under section 1878(f)(1) of the Act has been delegated to the Administrator, and redelegated to the Deputy Administrator, of CMS. (For ease of use, throughout this proposed rule we use the term “Administrator” to refer to either the Administrator or Deputy Administrator, and the term “Administrator review” to review by either official.) A final decision of the Board, or any reversal, affirmance, or modification of a final Board decision by the Administrator, is subject to review by a United States District Court with venue under section 1878(f)(1) of the Act and § 405.1877 of the regulations.

Most of the central provisions of the regulations governing provider reimbursement determinations and appeals are approximately 25 years old. On May 27, 1972 we published a final rule (37 FR 10722), which provided for the intermediary determination, NPR, intermediary hearing, and reopening of both intermediary determinations and intermediary hearing decisions. Five months later, the Congress added section 1878 to the Act, which established the Board and provided for review of Board decisions by the Secretary and for judicial review. (See Social Security Amendments of 1972, Pub. L. 92-603, section 243(a), 86 Stat. 1420 (October 30, 1972). We then, on September 26, 1974 published a final rule (39 FR 34514), that implemented the 1972 amendments to the Act, and revised and redesignated the preexistent rules governing the intermediary determination, NPR, intermediary hearing, and reopening. These regulations were redesignated as subpart R of part 405 of title 42 of the CFR (subpart R) on September 30, 1977 (42 FR 52826). We have revised these regulations on several occasions, largely in response to various amendments to section 1878 of the Act.

For several reasons, we believe it is necessary and appropriate to reexamine many of the subpart R regulations governing provider reimbursement determinations and appeals. As described previously, the principal provisions of the regulations are about 25 years old. In the intervening period, various issues have arisen regarding provider reimbursement determinations and appeals. Important parts of the regulations have been the subject of extensive litigation, the results of which indicate a need for reexamination of the rules. Also important is the development of a backlog of approximately 10,000 cases before the Board. Experience gained through long use of the regulations indicates that

revisions to the regulations would lead to a more effective and efficient appeal process. We believe that the revisions proposed would help the Board reduce the case backlog (or at least forestall substantial additions to it), and would also reflect changes in the statute, clarify our policy on various issues, and eliminate outdated material. Please note that the Provider Reimbursement Review Board's instructions for providers and intermediaries, as well as the Board's decisions on specific cases brought before it, are available on the web at

http://www.hcfa.gov/regs/prrb.htm.

II. Provisions of the Proposed Rule

[If you choose to comment on issues in this section, please include the caption “Definitions of or Decisions by Entities” at the beginning of your comments.]

A. Definitions of Entities That Review Intermediary Determinations or Decisions by Such Entities; Definition of Reimbursement (§ 405.1801(a))

1. Intermediary Hearing Officer, CMS Reviewing Official, and CMS Reviewing Official Procedure

As explained above, a provider may appeal the intermediary determination included in the NPR for a cost reporting period to either the intermediary hearing officer(s) or the Board, depending on the amount in controversy. A decision by the intermediary hearing officer(s) may be reviewed by a CMS reviewing official, whereas a Board decision may be reviewed by the CMS Administrator.

Although the term “intermediary hearing” is defined in § 405.1801(a) by reference to § 405.1809, the terms “intermediary hearing officer(s),” “CMS reviewing official,” and “CMS reviewing official procedure” are not defined in the regulations. We propose to add to § 405.1801(a) definitions for each of these three terms. The proposed definition of “intermediary hearing officer(s)” is “the hearing officer or panel of hearing officers provided for in § 405.1817.” The other two terms would be defined by reference to proposed § 405.1834, which is a new section that would add a CMS reviewing official procedure to subpart R. The proposed definition of “CMS reviewing official” is “the reviewing official provided for in § 405.1834.” In turn, “CMS reviewing official procedure” would mean “the review provided for in § 405.1834.”

2. Administrator Review

We propose to revise the term “Administrator's review” in § 405.1801(a) to read “Administrator review,” although the current definition of the former phrase would still apply to the new phrase. The current use of the possessive term “Administrator's” is unnecessary, and the proposed replacement with the phrase “Administrator review” would be consistent with current use of the non-possessive terms “Board hearing,” “intermediary hearing,” and “CMS reviewing official procedure.”

3. Reviewing Entity

We propose to add the term “reviewing entity” to § 405.1801(a), which would be defined as “the intermediary hearing officer(s), a CMS reviewing official, the Board, or the Administrator, as applicable.” We believe that “reviewing entity” is an appropriate term for the various entities that can review intermediary determinations (that is, the intermediary hearing officer(s) and the Board) or the entities that can review intermediary hearing officer and Board decisions (that is, a CMS reviewing official and the Administrator, respectively). For example, current §§ 405.1885(a) and (c) provide for reopening of an intermediary determination by the intermediary that made the determination, and reopening of a decision by the administrative body that issued the decision. Current § 405.1885(a) specifies three different decisionmaking bodies as having reopening authority over one of their respective decisions: the intermediary hearing officer(s), the Board, and the Administrator. As a conforming amendment to proposed § 405.1834 (see section II.G. below), we propose to amend § 405.1885(a) to recognize the CMS reviewing official's authority to reopen a prior decision (see section II.V.1. of this preamble). Instead of adding the phrase “CMS reviewing official” to the list of decisionmakers with reopening authority under § 405.1885(a), we believe it facilitates ease of reference to use the phrase “reviewing entity” in lieu of enumerating all four decisionmakers.

4. Reimbursement

The term “reimbursement,” as referring to compensation for providers, appeared in our regulations, and in industry parlance, at a time in which all providers were paid on the basis of their reasonable costs. Upon the development of the inpatient hospital PPS, it became customary for some to use “payment” when speaking of remuneration to a hospital covered under the inpatient hospital PPS and “reimbursement” when referring to a hospital or other provider covered under the reasonable cost system, whereas others continue to use “reimbursement” to refer to compensation under either reasonable cost or a PPS, and still others use the terms interchangeably. We believe it would be verbose, in places where both reasonable cost and a PPS are implicated, to use “reimbursement or payment.” Therefore, we propose to define “reimbursement” as encompassing compensation under either the reasonable cost or a PPS, so as to make clear that by using “reimbursment” we do not mean to exclude providers paid under a PPS or some other payment system.

B. Calculating Time Periods and Deadlines (§§ 405.1801(a) and (d)

[If you choose to comment on issues in this section, please include the caption “Calculating Time Periods” at the beginning of your comments.]

1. Basic Proposals

Under section 1878 of the Act and our regulations at 42 CFR, part 405, subpart R, various time periods and deadlines are prescribed for taking specific actions. In addition, the reviewing entities routinely require completion of specific actions within certain time periods or by a specific deadline. We have identified several situations that the present regulations do not specifically address. For example, section 1878(f)(1) of the Act and current § 405.1875(g)(2) authorize the Administrator to review a Board decision within 60 days of when the provider received notification of the Board's decision. Under current § 405.1801(a), the phrase “date of receipt” means “the date on the return receipt of ‘return receipt requested’ mail, unless otherwise defined.” The regulations do not address, however, how to determine the date of provider receipt under § 405.1875(g)(2) if a Board decision is not sent by return receipt requested mail, the provider does not return or date any receipt, or the return receipt certificate is destroyed or obscured. The potential for uncertainty seems greater for material exchanged between providers and intermediaries because experience indicates they do not use return receipt mail regularly.

Similarly, the various reviewing entities routinely issue orders requiring that certain actions be taken within a prescribed time period. (For example, the Board may require submission of position papers within 90 days of an order.) Section 405.1801(a) defines “date of filing” and “date of submission of materials” to mean “the day of the mailing (as evidenced by the postmark) or hand-delivery of materials, unless

otherwise defined in this subpart.” However, the regulations do not address how to determine the date of submission (or filing) of materials where, for example, the envelope containing a Board order is destroyed or lost, has no postmark, or has an obscured postmark.

The current regulations also do not address how to determine the first, subsequent, and last days of a prescribed time period. For example, no provision in subpart R addresses how to determine the end of a designated time period when the last day of the period is a Saturday, Sunday, Federal legal holiday, or other nonwork day for Federal employees.

Accordingly, we believe it is necessary and appropriate to revise our regulations at subpart R to ensure that providers, reviewing entities and others may determine precisely the various time periods and deadlines imposed by section 1878 of the Act, the regulations, and particular orders of a reviewing entity. In order to meet this objective, we propose to remove the current definitions in § 405.1801(a) of “date of filing” and “date of submission of materials” and instead provide specific provisions that address the time to appeal a determination or decision of an intermediary, the Board or the Administrator. Thus, proposed § 405.1811(a)(3) would specify the time to request an intermediary hearing; proposed § 405.1834(c) would explain the time to request review by a CMS reviewing official of an intermediary hearing officer decision; proposed § 405.1835(a)(3) would state the time to request a Board hearing; and proposed section 1875(c)(1) would specify the time to seek Administrator review. Likewise, proposed § 405.1875(e)(2) would specify the time the Administrator must render a decision (where the Administrator has taken review of a Board decision or other reviewable Board action), and proposed section 405.1877(b) would state the time a provider may request judicial review of a final Board or Administrator decision. As a general matter, we propose to calculate the beginning period that a party has to take action with reference to the date the party received the triggering notice, and we propose to calculate the end of the period that the action must be taken with reference to the date the reviewing entity must receive the party's submission. (We are using “party” in the previous sentence in a non-technical sense.) Also, generally throughout the preamble and the text of this proposed rule we avoid using the phrase “within x days” and instead use “no later than x days after” in order to make clear that the party or reviewing entity has the benefit of the last day of the period specified. Where the language “within” is used (because it would be cumbersome to say “no later than”) it should be understood that the party or reviewing entity has the benefit of the last day of the period specified.)

Accordingly, we propose to revise the current definition of “date of receipt” in § 405.1801, and we propose to add a new paragraph (d) to § 405.1801, which would prescribe rules for determining the first, subsequent, and last days of a designated time period.

2. Definition of “Date of Receipt”

We propose to revise the definition for “date of receipt” as the date a document or other material is received. As part of the proposed definition, we would specify how we determine when a document or other material is received by: (1) a party or non-party involved in proceedings before a reviewing entity; and (2) a reviewing entity.

a. Determining Date of Receipt by Parties and Non-Parties Involved in Proceedings Before a Reviewing Entity—Use of 5-Day Presumption

Under our proposal, we would establish the presumption that the receipt date of documents or other materials sent to providers, intermediaries, and other entities involved in proceedings is 5 days after the postmark date. The presumption would apply to documents and other materials sent by the reviewing entity to parties and non-parties as well as to those sent from one party or non-party to another party or non-party. However, this presumption would be rebutted if a preponderance of the relevant evidence established that the intermediary notice, reviewing entity document, or submitted material, as applicable, was actually received on a later date. The proposed definition further states that the phrase “date of receipt” in the definition is, as applied to a provider, synonymous with the term “notice” in section 1878 of the Act and in subpart R.

We believe this definition is necessary and appropriate in order to facilitate accurate determinations of the date of receipt by parties and affected nonparties of documents and materials pertaining to reviewing entity proceedings. Furthermore, as discussed below with respect to § 405.1835(a)(3) (see section II.D.3. of this preamble), we believe the proposed definition is appropriate given the apparent need to dispel potential confusion about when the 180-day period for submitting a Board appeal begins to run. Under proposed § 405.1835(a)(3), we would interpret the references to notice in section 1878(a)(3) of the Act and in subpart R to mean that the 180-day appeal period commences on the date of receipt by the provider of the NPR for the intermediary determination or, where applicable, upon the expiration of the 12-month period for issuance of the NPR. Our proposal that the phrase “date of receipt” in this definition is, as applied to a provider, synonymous with the word “notice” in section 1878 of the Act, facilitates our new interpretation of the 180-day appeal period prescribed in section 1878(a)(3) of the Act and in the regulations.

Our proposal to determine the presumed receipt date of a document or other material through a “5-day convention” is premised on several factors. Use of a time period convention would avoid any problem of verifying when a document or other material is actually received, except where evidence is presented to rebut the presumed 5-day period. Also, use of a 5-day period as the presumed receipt date would be similar to our policies for reconsideration and appeal for an individual under Medicare Part A (see § 405.722), and for reconsideration and appeal of determinations affecting participation in the Medicare program (see § 498.22(b)(3) and § 498.40(a)(2)), and it would ensure enough time for the period typically necessary for receipt of first class, United States mail.

Also, we believe our proposal to allow for rebuttal of the 5-day convention for determining the receipt date provides an adequate means for a provider, or any entity involved in reviewing entity proceedings to establish that it actually received a document or other material on a later date. We propose to limit the rebuttal opportunity to a satisfactory showing of actual receipt on a date

later

than the presumed date, due to the need for the intermediary (in the case of intermediary notices) or a reviewing entity to know in advance that the prescribed period for taking a given action commences no earlier than a date certain. For example, in order to ensure compliance with the 60-day period for Administrator review of a Board decision under section 1878(f)(1) of the Act and § 405.1875, the Administrator must know in advance that the review period commences no earlier than a date certain. We believe it is reasonable to permit a provider to establish actual receipt of a Board decision after the presumed 5-day period ends, because the Administrator would still be able to render a timely decision. But if we permit the provider to establish actual

receipt before the presumed 5-day period ends, the Administrator might not have enough remaining time to meet the 60-day deadline.

b. Determining Date of Receipt by Reviewing Entity—Presumption of Date Stamp

For materials submitted to a reviewing entity, we would establish the presumption that the receipt date is the date the reviewing entity (or its substitute, see following paragraph) stamped “Received” on the document or other submitted material. The presumption would be rebutted if a preponderance of the relevant evidence established that the document or other submitted material was actually received on a different date by the reviewing entity.

For intermediary hearings where the intermediary hearing officer has not yet been appointed or is not presiding currently, the date of receipt by the intermediary hearing officer would be determined by the date stamped “Received” by the intermediary. In other words, the intermediary would act as a substitute for the intermediary hearing officer for this purpose. Similarly, we propose to determine receipt date by a CMS reviewing official or the CMS Administrator by reference to the date stamped “Received” by CMS's Office of the Attorney Advisor because that Office would seem to be the appropriate recipient in light of the Administrator's many other duties, and because the proposal is consistent with our longstanding practice (see 59 FR 14628, 14645 (March 29, 1994) for a description of the Office of the Attorney Advisor).

Our proposal to use the date a document or other material is received by the reviewing entity is based on the presumption of administrative regularity in agency action. In view of that presumption, it seems reasonable to have our proposed definition presume that the receipt date is the date the reviewing entity or its substitute stamped “Received” on the document or other submitted material. We also believe reasonable our proposal that the presumed receipt date may be rebutted if a different date of receipt is established by a preponderance of the relevant evidence. Given the presumption of administrative regularity, we considered proposing use of the stricter standard of clear and convincing evidence, but rejected this alternative for the sake of consistency and ease of application. That is, as discussed above, the preponderance of the relevant evidence standard would apply for purposes of establishing that a provider or entity received a document on a date other than the presumed receipt date, and the preponderance of the evidence standard seems easier to apply than the clear and convincing evidence standard.

3. Determining Specific Days in Calculating Time Periods and Deadlines

We propose to add a new paragraph (d) to § 405.1801 in order to facilitate the determination of the first, subsequent, and last days included in a time period prescribed or allowed under section 1878 of the Act or subpart R or authorized by a reviewing entity. As to the first day of such a period, the day of the act, event, or default from which the designated time period begins to run would be excluded from the period under proposed paragraph (d)(1).

Proposed paragraph (d)(2) provides that, with two exceptions, each succeeding calendar day, including the last day, would be included in the time period. The first exception is that, for an act to be performed by a reviewing entity, a calendar day would be excluded if the intermediary (for purposes of an intermediary notice) or the reviewing entity is unable to conduct business in the usual manner due to extraordinary circumstances beyond its control (for example, natural or other catastrophe, weather conditions, fire, or furlough). In such cases, the designated time period would resume on the next work day the intermediary or reviewing entity is again able to conduct business in the usual manner.

The second exception proposed under paragraph (d)(2) is that the last day of the designated time period would be excluded if it is a Saturday, Sunday, Federal legal holiday, other nonwork day for Federal employees, or, in the case of a deadline for submission of material to the intermediary (for purposes of an intermediary notice) or a reviewing entity, a day when the intermediary or reviewing entity is not conducting business. In the case of any such excluded day, the designated time period would continue to run until the end of the next day that is not one of the above-described days. Furthermore, paragraph (d)(4) would provide that a reviewing entity is, for purposes of paragraph (d), deemed to be the intermediary in the absence of duly appointed and presiding intermediary hearing officer(s), and to include, in the context of review by a CMS reviewing official or the Administrator, the Office of the Attorney Advisor.

We believe the proposed addition of paragraph (d) to § 405.1801 is necessary and appropriate to ensure the accurate determination of the specific days to be included in the calculation of a time period or deadline prescribed under section 1878 of the Act, subpart R, or by a reviewing entity. Also, we believe that proposed paragraph (d) will accomplish these objectives because much of that paragraph seems reasonably based on and adapted from other authorities. Specifically, proposed paragraphs (d)(1) and (d)(3) are adapted from the first and second sentences of Rule 6(a) of the Federal Rules of Civil Procedure, which address the same kinds of problems for civil actions. Also, proposed paragraph (d)(3) is authorized by sections 216(j) and 1872 of the Act.

Proposed paragraph (d)(2) reflects our concern that a prolonged period in which an intermediary (as to intermediary notices) or a reviewing entity is unable to conduct business in the usual manner due to extraordinary circumstances beyond its control could result in the intermediary or reviewing entity being required to take action on numerous matters immediately after the prolonged period of inactivity. For example, the intermediary could be required to issue numerous NPRs, and/or a reviewing entity might have to render multiple decisions on the first business day after the work interruption. In fact, the Board and the Administrator were confronted with similar problems at the end of a prolonged furlough of Federal employees in late 1995 and early 1996. We believe proposed paragraph (d)(2) would eliminate this problem by requiring that a designated time period would be suspended for as long as the intermediary or reviewing entity is unable to conduct business in the usual manner due to extraordinary circumstances beyond its control. Extraordinary circumstances would be defined as circumstances such as natural or other catastrophe, weather conditions, fire, or furlough.

Finally, in proposed paragraph (d)(4) we would provide that, for purposes of paragraph (d), a reviewing entity would include an intermediary in the situation where an intermediary officer has not yet been appointed (or if appointed, is not yet presiding), and would also include the Office of the Attorney Advisor.

C. Providers Under Subpart R; Limited Applicability to Non-Provider Entities (§ 405.1801(b))

1. Providers

Current § 405.1801(b)(1) states that the term “provider” includes, for purposes of subpart R, hospitals paid under the PPS. However, neither

§ 405.1801(b)(1) nor any other regulation identifies all of the entities that constitute providers under subpart R.

We believe it is necessary and appropriate to identify all of the entities that qualify as a provider for purposes of subpart R. Sections 1861(u), 1878(j), and 1881(b)(2)(D) of the Act recognize various types of entities as providers for purposes of provider reimbursement determinations and appeals. By collecting and enumerating the various types of providers in one regulation, we believe the potential for confusion about this matter can be forestalled. Thus, we propose to amend § 405.1801(b)(1) to recognize as a provider under subpart R each entity recognized under the Act for purposes of provider reimbursement determinations and appeals.

In accordance with the definition of “provider of services” in section 1861(u) of the Act, we propose to recognize specifically a hospital, critical access hospital (CAH), SNF, comprehensive outpatient rehabilitation facility (CORF), HHA, and hospice program. Also, a RHC and a FQHC would be included in accordance with section 1878(j) of the Act, and an end stage renal disease (ESRD) facility would be recognized under section 1881(b)(2)(D) of the Act. Our proposed revision to § 405.1801(b)(1) would also recognize as a provider any other entity treated as a provider under the Act, in order to ensure recognition in subpart R of any other entity that may qualify as a provider under the Act for purposes of provider reimbursement determinations and appeals.

2. Non-Provider Entities

Current § 405.1801(b)(2) addresses entities that do not qualify as providers under the Act, but which are reimbursed on the basis of information included in required cost reports. Such non-provider entities include health maintenance organizations (HMOs) and competitive medical plans (CMPs). Section 405.1801(b)(2) states that such non-provider entities do not qualify for Board review, but that the rules in subpart R regarding intermediary hearings “are applicable to the [non-provider] entities to the maximum extent possible” where the amount of program reimbursement in controversy is at least $1,000.

We believe § 405.1801(b)(2) needs clarification and revision as to the specific applicability of subpart R to non-provider entities. We believe the regulation is incomplete in stating that non-provider entities do not qualify for a Board hearing. Under our longstanding policy, these entities cannot qualify for a Board hearing or an intermediary hearing because both types of hearings are available only to providers. (We note that non-provider entities such as HMOs and CMPs may instead have a right to a hearing before a CMS reviewing official if the amount in controversy is at least $1,000.) Thus, we propose to revise § 405.1801(b)(2) to state that non-provider entities may not obtain an intermediary hearing or a Board hearing.

We believe § 405.1801(b)(2) further states that rules for intermediary hearings are applicable to non-provider hearings “to the maximum extent possible” also needs clarification. It is our longstanding policy that only the procedural rules in subpart R apply to non-provider hearings before a CMS reviewing official. In addition, we believe that non-provider hearings before a CMS reviewing official are more analogous to a Board hearing than an intermediary hearing. For example, non-provider hearings before a CMS reviewing official are adversarial, which is also true of Board hearings (see § 405.1843) but not intermediary hearings (see § 405.1815). Accordingly, we propose to revise § 405.1801(b)(2) to state that if a hearing is available to a non-provider entity on an amount in controversy of at least $1,000, the procedural rules for a Board hearing under this subpart are applicable to the maximum extent possible. The phrase “procedural rules” in proposed § 405.1801(b)(2) would have the same meaning as the phrase “rules of agency organization, procedure, or practice” in the Administrative Procedure Act, 5 U.S.C. § 553(b)(3)(A).

D. Provider Hearing Rights (§ 405.1803(d), § 405.1811, and § 405.1835)

[If you choose to comment on issues in this section, please include the caption “Provider Hearing Rights” at the beginning of your comments.]

Under section 1878(a) of the Act and §§ 405.1835 and 405.1841 of the regulations, a provider may obtain a Board hearing if it meets three jurisdictional requirements: (1) The provider is dissatisfied with its Medicare reimbursement for a cost reporting period; (2) the amount in controversy is at least $10,000 (at least $50,000 for a group appeal); and (3) the provider files a timely request for a hearing to the Board. The same jurisdictional requirements govern provider requests for an intermediary hearing under § 405.1811, except the amount in controversy requirement is $1,000 or more but less than $10,000.

For the reasons set forth in this section, we believe it is necessary and appropriate to revise the regulations in subpart R governing provider hearing requests. We discuss the first and third jurisdictional requirements below, and address the amount in controversy requirement separately for § 405.1839 in section II. I. of this preamble.

1. Provider Dissatisfaction With Medicare Reimbursement; Revised Self-Disallowance Policy

Section 1878(a)(1)(A) of the Act authorizes a provider to obtain a Board hearing if the provider is dissatisfied with a final determination by: (i) the intermediary, of the total amount of program reimbursement for a cost reporting period, or (ii) the Secretary, as to the amount of payment under sections 1886(b) or (d) of the Act. (We note that the references to “final determination” in section 1878(a)(1)(A) of the Act are reflected in § 405.1801(a)(1) through (a)(3) and § 405.1803 of the regulations, which require the intermediary to issue to the provider a written NPR reflecting the intermediary determination for the cost reporting period.) Provider dissatisfaction with Medicare reimbursement is also a requirement for a hearing before the intermediary and the Board under §§ 405.1811(b) and § 405.1841(a)(1), respectively. Under our original policy, we required a provider to make a specific claim for an item on its cost report as a prerequisite to appeal. That is, under that policy, a provider that did not claim an item on its cost report did not meet the dissatisfaction requirement for purposes of obtaining an intermediary or Board hearing. We did not permit a provider to “self-disallow” an item (even if the intermediary had no discretion to award payment for the item) and then seek an appeal before the Board.

Several court decisions addressed our original self-disallowance policy, culminating in the Supreme Court's decision in

Bethesda Hospital Association

v.

Bowen,

485 U.S. 399 (1988). The providers in the

Bethesda

case self-disallowed their malpractice insurance costs by submitting cost report claims that complied with a regulation, and seeking additional reimbursement before the Board. The Board dismissed the providers' appeal for lack of jurisdiction based on the self-disallowance policy. The Supreme Court held that the plain language of the dissatisfaction requirement in section 1878(a)(1)(A) of the Act supported Board jurisdiction under the facts of the case. The Court reasoned that the intermediary had no authority to award

reimbursement in excess of the regulation by which it was bound, and that it would be futile for a provider to try to persuade the intermediary otherwise.

Following the

Bethesda

decision, we no longer required providers to claim items for which the intermediary did not have the discretion to award payment due to a regulation or manual provision. (See former Appendix A, § B.1. of the Provider Reimbursement Manual (PRM)). We believe it is appropriate to codify our policy in regulations and we are taking this opportunity to make the following proposals. We propose to include, as an interpretation of the dissatisfaction jurisdictional requirement, our self-disallowance policy in a revised § 405.1811(a)(1) and § 405.1835(a)(1) for intermediary and Board hearings, respectively.

Under our proposal, in order to preserve its appeal rights, a provider must either claim an item on its cost report where it is seeking reimbursement that it believes to be in accordance with Medicare policy, or self-disallow the item where it is seeking reimbursement that it believes may not be in accordance with Medicare policy (for example, where the intermediary does not have the discretion to award the reimbursement sought by the provider). In order to self-disallow an item, the provider would be required to follow the applicable procedures for filing a cost report under protest, which are contained currently in § 115 of the PRM, Part 2 (CMS Pub. 15-2). Note that we are using the term “item” instead of “cost” to emphasize that our proposed policy would refer to determinations of amounts due to providers subject to a prospective system as well as determinations of reimbursement due to providers that are paid under cost reimbursement principles.

We believe the self-disallowance rule proposed in § 405.1811(a)(1)(i) and § 405.1835(a)(1)(i) is appropriate under the

Bethesda

decision. We further believe that our proposed policy is a reasonable response to statements by the

Bethesda

providers and others that it is necessary, for any reimbursement request in excess of the amount allowed under program policy, to raise the entire payment request before the Board, because it would be improper to include a cost report claim for more payment than is permitted by Medicare policy. It has been our longstanding policy that a cost report claim at variance with Medicare policy is not improper, provided that such a claim is not intended to procure an intermediary determination (or reviewing entity decision) by fraud or similar fault. For example, given that the

Bethesda

providers' request for additional reimbursement before the Board was premised on their disagreement with and challenge to a reimbursement regulation, it would not have been improper for them to include cost report claims in conformity with their good-faith view as to the proper amount of reimbursement.

2. Audits of Self-Disallowed Items

Under our proposed policy regarding self-disallowed costs, the amount of any cost report claim or intermediary disallowance may differ from the amount of reimbursement requested through a Board or intermediary hearing. Intermediary audits of provider items are usually limited to items included in a cost report, which presumably would often exclude self-disallowed items. Thus, in cases where a provider self-disallows an item by foregoing any cost report claim (or including less than a full claim) and appealing to the Board or intermediary, we would expect such self-disallowed items to be unaudited.

We believe the likelihood that self-disallowed items are unaudited is reason for concern in the event of reviewing entity decisions, court judgments, and settlement agreements that require payment of self-disallowed items. Specifically, in cases where a self-disallowed item is held reimbursable in a final decision by a reviewing entity or a final, non-appealable court judgment, the intermediary might pay the provider for unaudited self-disallowed items. The same problem could develop where an administrative or judicial settlement agreement requires payment of a self-disallowed item. We believe that these results may prove inappropriate in specific cases.

We believe that, given the potential for inappropriate payment of unaudited self-disallowed items, it is necessary and appropriate to provide for intermediary audits of these items. Thus, we propose to add a new paragraph (d) to § 405.1803, which would authorize CMS to require intermediary audits of self-disallowed items before these items may be paid according to a final agency decision, a final, non-appealable court judgment, or an administrative or judicial settlement agreement. Proposed § 405.1803(d) would further provide that CMS's authority to require audits of self-disallowed items is inapplicable to the extent such audits would be inconsistent with a governing court order or settlement agreement.

3. Determining Timeliness of Hearing Requests (§§ 405.1811 and 1835)

Section 1878(a)(3) of the Act requires a provider to file any request for a Board hearing within 180 days “after notice” of a final determination by an intermediary or the Secretary. Moreover, section 1878(a)(1)(B), (C), and (a)(3) of the Act require that, in the absence of a timely final determination, a Board hearing request must be filed within 180 days “after notice” of such determination “would have been received” if the determination had been made on a timely basis. Under current § 405.1835(a)(2) and § 405.1841(a)(1) of the regulations, any request for a Board hearing must be filed with the Board within 180 days of the date the NPR was mailed to the provider. Also, current § 405.1835(c) and § 405.1841(a)(1) provide that if an NPR is not issued within 12 months of the intermediary's receipt of an appropriate cost report, then any hearing request must be filed with the Board within 180 days after the expiration of the 12 month period for a timely NPR. Comparable requirements apply under § 405.1811(a) for purposes of determining the timeliness of a provider request for an intermediary hearing.

We believe it is necessary to revise the regulations governing the timeliness of hearing requests before the Board and intermediary. There is some potential for confusion in determining the 180-day appeal period, especially as to the beginning date of the period. For example, for Board appeals from a timely NPR, section 1878(a)(3) of the Act states that the period commences “after notice” of the final determination, but does not specify how to determine the date of such notice. For Board hearings, the beginning date under § 405.1841(a)(1) is the date the NPR is mailed to the provider. But under § 405.1811(a), the date of the NPR starts the period for intermediary hearing requests.

In our opinion, the references in section 1878(a)(3) of the Act to “after notice” are ambiguous as to the beginning date for the 180-day period for Board hearing requests. We believe the statute can be interpreted reasonably to permit use of any of the following events as the beginning date: the date the provider receives the final determination; the mailing date of the determination; and, the date of the determination.

We propose to revise the regulations to provide that the 180-day period for requesting a Board or intermediary

hearing begins on the date of receipt by the provider of the intermediary determination or, where applicable, the expiration date of the 12-month period for issuance of a timely NPR by the intermediary. These proposed revisions are premised in part on our belief that it is unnecessary for the beginning date of the 180-day period to be determined differently for hearing requests to the intermediary (that is, the NPR date) and the Board (that is, the NPR mailing date). Although we considered the three alternatives of receipt date, NPR date, and NPR mailing date, our proposed use of receipt date is based on several factors.

We believe the proposed use of receipt date is consistent with the reference in section 1878(a)(3) of the Act to when an untimely final determination “would have been received,” and to the various references to receipt date in section 1878(f)(1) of the Act and current § 405.1875 and § 405.1877 pertaining to the beginning date of the 60-day period for Administrator and judicial review. Also, determining the beginning date of the 180-day appeal period by reference to receipt date is consistent with our more general proposal in § 405.1801(a) to redefine the phrase “date of receipt” as applied to a provider, as discussed in section II.B.2.a. of this preamble. Moreover, under the 5-day convention for determining date of receipt under our proposed definition, the provider likely would have the NPR in hand by the proposed beginning date of the 180-day appeal period. Thus, the beginning date of the 180-day appeal period would probably be a day on which the provider could actually start to determine whether to request a hearing.

Our proposal also includes a different means of determining the ending date of the 180-day appeal period. Under current § 405.1811(a)(1) and § 405.1841(a)(1), the ending date is the date of filing with the intermediary or Board, respectively, which is determined under § 405.1801 by reference to the date of mailing or hand delivery of the hearing request. We propose to determine the ending date of the appeal period by the date the intermediary or Board received the hearing request. As discussed in II.B.2.b. of this preamble, the date a reviewing entity receives a hearing request or other document is presumed to be the date stamped “Received.”

We believe that the proposed use of receipt date by the Board or intermediary is consistent with the reference in section 1878(a)(3) of the Act to “provider files a request for a hearing.” The word “file” is defined in

Black's Law Dictionary

in terms of depositing material in the custody or among the records of a court, and delivering material to the proper official for filing as a matter of record. Determining the ending date of the 180-day appeal by reference to when the Board or intermediary receives the hearing request comports with this definition and the usual practice of the courts. Also, given our proposal to determine the beginning date by reference to provider receipt date, we believe the proposed use of Board or intermediary receipt date to determine the ending date is an appropriate corresponding change.

4. Contents of Hearing Request

Under § 405.1811(a) and (b) (for an intermediary hearing) and § 405.1835(a)(2) and § 405.1841(a)(1) (for a Board hearing), a hearing request must be in writing and must identify the specific aspects of the intermediary determination with which the provider is dissatisfied, explain its dissatisfaction with each matter at issue, and submit supporting documentation for its position on each matter at issue. We believe it is necessary and appropriate to revise the regulations governing the content of provider hearing requests for three reasons.

First, we believe the extensive litigation of various issues of Board jurisdiction is attributable in part to the absence of regulations requiring an early and continuing focus on whether the Board has jurisdiction over each matter at issue. Although we address this problem in detail with respect to our proposed addition of new § 405.1814 (“Intermediary hearing officer jurisdiction”) and § 405.1840 (“Board jurisdiction”), as discussed in sections II.F. and II.J. of this preamble, we believe it is necessary to propose corresponding changes to other regulations. In order to facilitate an early focus by the parties and the reviewing entity on the jurisdictional requirements for a hearing before the Board or intermediary, we believe it is reasonable to require the original hearing request to include a demonstration (through argument and supporting documentation) that the provider satisfies the jurisdictional requirements for the hearing request. Accordingly, we propose in § 405.1811(b)(1) and § 405.1835(b)(1) to require the provider to demonstrate in its hearing request (through argument and supporting documentation) that it meets the requirements for a hearing before the intermediary or the Board, respectively. We believe this proposal will facilitate the reviewing entity's capacity to meet its continuing responsibility to ensure its own jurisdiction throughout each stage of the proceedings (see § 405.1814 and § 405.1840).

Second, we also believe it is necessary to revise the current requirement that a provider identify, explain, and document its dissatisfaction with particular aspects of the intermediary determination. In order to facilitate the reviewing entity's capacity to determine compliance with our proposed self-disallowance rules, we believe it is reasonable to require the hearing request to include a description of the nature and amount of each self-disallowed item and the reimbursement sought for each cost. In proposed § 405.1811(b)(2) and § 405.1835(b)(2), we would include this requirement in addition to the current requirement that the provider identify and explain its dissatisfaction with each matter at issue in the hearing request. We also note that the proposed requirement of detailed information about each specific self-disallowed item should help the intermediary conduct any audits of self-disallowed items that may be required under proposed § 405.1803(d), as discussed in section II.D.2. of this preamble.

Third, we further believe it is necessary to clarify the current requirement that a hearing request include supporting documentary evidence. We are aware of various cases in which the need to determine Board jurisdiction over a specific matter at issue has been hampered by the absence of the NPR(s) relevant to the appeal or by confusion about whether the NPR at issue was the initial NPR or a revised NPR issued after reopening (see § 405.1885 and § 405.1889). Because appropriate findings of fact and conclusions of law about Board jurisdiction (see proposed § 405.1840) cannot be reached without this information, proposed § 405.1811(b)(3) and § 405.1835(b)(3) would require the hearing request to include each intermediary determination at issue in the appeal. (We note that if the intermediary determination under appeal is a revised NPR, the provider would be required to include the pertinent reopening notice and the initial NPR so that an appropriate determination can be made as to whether a specific matter at issue is within the scope of the revised NPR.) For similar reasons, the hearing request would have to include all documents necessary to determine compliance with the self-disallowance rules proposed in § 405.1811 and § 405.1835. However, the hearing request would no longer need to include documents necessary to

support the merits of the provider's position on a specific reimbursement matter because the reviewing entity must make a preliminary finding of its jurisdiction over each matter at issue before it considers the merits of a particular issue (see proposed § 405.1814 and proposed § 405.1840).

5. Adding Issues to Original Hearing Request (§ 405.1811(c) and § 405.1835(c))

Under current § 405.1811(c) and § 405.1841(a)(1), a provider may add a specific matter at issue to the original request for a hearing before the intermediary or the Board, respectively, anytime before the commencement of a hearing. Under our longstanding interpretation of these provisions, a provider's right to add issues is limited to a single provider appeal before the Board or the intermediary, and does not apply to a group appeal to the Board under section 1878(b) of the Act and § 405.1837. Also, a provider's right to add issues is contingent on an original hearing request that meets all jurisdictional requirements for a Board or intermediary hearing, along with satisfaction of applicable jurisdictional requirements after any issues are added to the original request. Moreover, if a provider's original hearing request is an appeal from a revised NPR issued after a reopening (see § 405.1885 and § 405.1889), the provider's right to add issues is limited to those specific matters that are within the scope of the reopening and revised NPR.

We believe it is necessary to revise the regulations governing the addition of issues to an original hearing request. At the time the current provisions were adopted in September, 1974, there was no case backlog at the Board; thus, it was reasonable to expect that hearings would be conducted expeditiously, thereby leaving a relatively short period for the addition of new issues. As the case backlog and the period before the hearing have increased, however, it has become apparent that permitting the addition of issues at any time before the hearing is untenable. Because Board hearings often are not conducted until several years after the original hearing request, the period for adding issues far exceeds our original expectations. Moreover, we believe the availability of such a long period for adding issues has become a major obstacle to the Board's efforts to reduce (or at least minimize additions to) its case backlog.

In order to resolve (or at least mitigate) the problems posed by a virtually open-ended period for adding issues, we believe it is appropriate to propose a period that reconciles a provider's potential need to supplement its original hearing request with the imperative of enhancing the Board's capacity to reduce the case backlog. We believe a 60-day period, commencing with the expiration of the applicable 180-day period for submitting the original hearing request under proposed § 405.1811(a)(3) and § 405.1835(a)(3), would strike an appropriate balance between these two concerns. On the one hand, a 60-day period should foreclose additions to the case backlog that are attributable to the addition of new issues to appeals that may remain pending before the Board for several years.

However, a 60-day period would afford providers an adequate opportunity to appeal specific issues that were overlooked in the original hearing request. A provider has at least 5 months after the end of a fiscal period to file a cost report (see § 413.24(f)(2)), after which the intermediary has 12 months to issue a timely NPR (see § 405.1835(c)). Of course, the provider then has 180 days in which to analyze the NPR and prepare and submit any hearing request. Our proposal to allow 60 more days for the addition of new issues to the original hearing request gives the provider ample time to appeal any matter overlooked in the original hearing request.

We believe a proposed 60-day limitation on the period for adding issues to an original hearing request is consistent with section 1878 of the Act. This provision does not address whether or how long a provider may add issues to a pending request for a Board hearing. Nonetheless, we considered whether our proposal is consistent with section 1878(d) of the Act, which gives the Board the power to affirm, modify, or reverse the intermediary determination under appeal, and to make any other revisions on matters covered by the cost report regardless of whether such matters were considered by the intermediary in making the final determination of Medicare reimbursement.

We believe that, in cases where the Board has jurisdiction under section 1878(a) of the Act, section 1878(d) does not foreclose our proposed 60-day period for adding issues. We recognize that, to the extent the Board has jurisdiction under section 1878(a) over a single provider appeal from an initial NPR, the third sentence of section 1878(d) confers on the Board the power to affirm, modify, or reverse the intermediary determination, and to make any other revisions on matters covered by the cost report regardless of whether such matters were considered by the intermediary in making the final determination. However, we interpret this provision to address only the Board's powers over a jurisdictionally proper appeal under section 1878(a)—not whether or how long after filing the appeal a provider may add issues to such an appeal. Indeed, the third sentence of section 1878(d) of the Act is reflected in § 405.1869 (“Scope of Board's decisionmaking authority”), instead of § 405.1841(a)(1) (“Time, place, form, and content or request for Board hearing”), since the original Board regulations.

Given our interpretation that section 1878 of the Act does not address whether or how long after filing an appeal a provider may add issues to the appeal, we believe our proposal to allow a 60-day period to add issues to such an appeal is an appropriate exercise of the Secretary's general rulemaking authority under sections 1102 and 1871 of the Act. As discussed previously, we believe this proposal strikes a reasonable accommodation between a provider's potential need to ensure the completeness of its original hearing request and the necessity of improving the Board's ability to reduce the case backlog.

Moreover, we believe the Board's powers under section 1878(d) of the Act do not apply to appeals from a revised NPR after a reopening. Instead, the Board's powers under section 1878(d) apply, for purposes of a single provider appeal, only to an appeal from an initial NPR that satisfies the jurisdictional requirements of section 1878(a) of the Act. We believe the Board's jurisdiction over post-reopening appeals is based on § 405.1889 of the reopening regulations, and not on section 1878(a) of the Act. See

French Hosp. Med. Ctr.

v.

Shalala,

89 F.3d 1411, 1416-20 (9th Cir. 1996);

HCA Health Servs. of Oklahoma, Inc.

v.

Shalala,

27 F.3d 614, 617-19 (D.C. Cir. 1994). Because section 1878(d) of the Act does not pertain to post-reopening appeals premised on § 405.1889 of the reopening regulations, our proposal to limit the period for adding issues to a post-reopening appeal does not seem inconsistent with the statute.

For the foregoing reasons, we propose to revise § 405.1811(c) and § 405.1835(c) to authorize a provider to add issues to an original request for an intermediary or Board hearing within 60 days after the expiration of the applicable 180-day period for making the original request. (See section II.V. of this preamble for a discussion of our proposal for the time in which to add issues following a reopening by an intermediary of a determination currently on appeal to the Board (proposed § 405.1885(c)(1)). Any

request to add issues would have to be in writing, satisfy the jurisdictional dissatisfaction requirements under proposed § 405.1811 (a)(1) or § 405.1835(a)(1), and meet the requirements governing the contents of a hearing request under proposed of § 405.1811(b) or § 405.1835(b), as applicable. Also, the provider would have to establish both that the original hearing request meets all applicable jurisdictional requirements, and that the original request combined with the matters identified for addition to that request satisfy the applicable amount in controversy requirement under proposed of § 405.1811(a)(2) or § 405.1835(a)(2). Moreover, we would continue our longstanding policies of prohibiting the addition of issues to a group appeal before the Board, as discussed in section II.H. of this preamble), and limiting the addition of issues in a single provider appeal from a revised NPR to those specific issues that are within the scope of the reopening and revised NPR.

We considered the alternative of eliminating altogether the opportunity to add issues to a single provider appeal. This alternative would be likely to enhance further the Board's capacity to reduce the case backlog. We believe, however, that a provider may reasonably need additional time to ensure its original hearing request is complete, and, if necessary, request addition of issues to the original request.

E. Provider Requests for Good Cause Extension of Time Period for Requesting Hearing (§ 405.1813 and § 405.1836)

[If you choose to comment on issues in this section, please include the caption “Provider Request for Extension” at the beginning of your comments.]

Current § 405.1813 and § 405.1841(b) authorize the intermediary hearing officer(s) and the Board, respectively, to extend “for good cause shown” the 180-day period for requesting a hearing. Under these regulations, a provider must file any request for a good cause extension within 3 years after the date of the original notice of intermediary determination.

We believe it is necessary to revise the regulations governing good cause extension requests for two reasons. First, there is a split among the Federal circuit courts of appeals on the threshold question of our authority to authorize the Board to extend the 180-day period for hearing requests under section 1878(a)(3) of the Act. The courts of appeals for the Eighth and Eleventh Circuits have held that the good cause extension request provisions in § 405.1841(b) are invalid because they are inconsistent with section 1878(a)(3) of the Act. (

St. Joseph's Hosp. of Kansas City

v.

Heckler,

786 F.2d 848 (8th Cir. 1986);

Alacare Home Health Services, Inc.

v.

Sullivan,

891 F.2d 850 (11th Cir. 1990).) By contrast, the Ninth Circuit has upheld our authority to authorize good cause extension requests before the Board, and concluded that a final agency decision on such a request is subject to judicial review under the Administrative Procedure Act, 5 U.S.C. 706(2)(A).

Western Med. Enters., Inc.

v.

Heckler,

783 F.2d 1376 (9th Cir. 1986). Other courts, without addressing the issue of whether there is authority to allow an extension for good cause, have found that the courts do not have jurisdiction to review a finding by the Board or the Administrator that good cause did not exist in a particular case. See

Lenox Hill Hosp.

v.

Shalala,

131 F. Supp. 2d 136 (D.D.C. 2000) and cases cited therein.

Second, we believe the case backlog at the Board also necessitates revision of the good cause extension request regulations. When the Board finds good cause to extend the 180-day period for requesting a hearing, another case is added to the backlog. Also, the lengthy 3-year period for requesting a good cause extension makes increases in the backlog more likely.

We propose to continue to authorize good cause extensions of the 180-day period for requesting a hearing. However, we also are proposing revisions to these regulations in response to the case law and the case backlog before the Board.

The split of authority among the Federal circuit courts of appeals regarding our authority to provide for good cause extensions led us to consider the alternative of eliminating these regulations altogether. Our proposal, to retain and revise the regulations instead, is based on several considerations. As discussed previously in the context of the regulations for adding issues to an original hearing request in section II.D.5. of this preamble, we believe the Board's jurisdiction over post-reopening appeals is based on § 405.1889 of the reopening regulations, and not on section 1878(a) of the Act. See

HCA Health Servs. of Oklahoma, Inc.

v.

Shalala,

27 F.3d 614, 617-19 (D.C. Cir. 1994);

French Hosp. Med. Ctr.

v.

Shalala,

89 F.3d 1411, 1416-20 (9th Cir. 1996). Thus, we see no statutory impediment to retaining good cause extension regulations for requests for a Board hearing based on a reopening and revised NPR.

As for a Board hearing request based on an initial NPR and section 1878(a) of the Act, we see some merit to both sides of the split of judicial authority as to our authority to provide for good cause extensions in such cases. Although our proposal to retain and revise these regulations is based primarily on policy considerations, we note that adoption of this proposal may result in additional court decisions and lead to a definitive resolution of whether the regulations are consistent with section 1878(a)(3) of the Act.

We believe it is appropriate to afford providers an additional period to submit hearing requests in limited circumstances. Specifically, in cases where a provider establishes it could not reasonably have been expected to submit a hearing request within the 180-day period due to extraordinary circumstances beyond its control (for example, natural or other catastrophe, fire, or strike), we believe it appropriate to authorize the Board and the intermediary hearing officer(s), as applicable, to extend the appeals period provided that the provider's good cause extension request is received by the Board within a reasonable time after the expiration of the 180-day period (but in no circumstances more than three years after the date of the intermediary determination). We emphasize that the circumstances justifying additional time to submit a hearing request truly would have to be extraordinary. Where such extraordinary circumstances would exist, what would be considered a “reasonable” additional period would depend on the particular situation and would be set according to the discretion of the Board or the intermediary hearing officer(s). The outer limit of three years after the date of the intermediary determination would be consistent with the time for seeking a reopening under proposed § 405.1885(b).

For the foregoing reasons, we propose to revise § 405.1813 and add a new § 405.1836 to authorize the intermediary hearing officer(s) and the Board, respectively, to extend the 180-day period for requesting an intermediary or Board hearing, as applicable. Proposed § 405.1813 and § 405.1836 include three principal revisions to the current regulations. First, our proposal to continue to authorize good cause extensions is limited under paragraph(a) of § 405.1813 and § 405.1836 to provider extension requests received by the Board or the intermediary hearing officer(s), as applicable, within a reasonable time after the expiration of the applicable 180-day period prescribed in proposed § 405.1811(a)(3) or § 405.1835(a)(3), as applicable.

Second, while the current regulations do not include specific guidance for

determining whether there is good cause for granting an extension request, we propose to add criteria for this purpose. Proposed § 405.1813(b) and § 405.1836(b) would provide that the intermediary hearing officer(s) and the Board, respectively, may find good cause to extend the time limit only if the provider demonstrates it could not reasonably have been expected to submit a hearing request within the 180-day period due to extraordinary circumstances beyond its control such as natural or other catastrophe, fire, or strike. Furthermore, § 405.1813(c)(1) and § 405.1836(c)(1) would prohibit the pertinent reviewing entity from granting a good cause extension request if the provider relies on a change (whether based on a court decision or otherwise) in the law, regulations, CMS Rulings, general CMS instructions, or CMS administrative ruling or policy as the basis for the extension request. We believe these proposals are a necessary and appropriate means to ensure that an additional period for submission of a hearing request is available only if the provider was prevented from submitting an appeal due to extraordinary circumstances beyond its control. We also believe the proposed prohibition of good cause extensions based on a change in the law will prevent the provider from appealing improperly a new issue—one it had not intended previously to appeal—after expiration of the 180-day period.

Third, we also are proposing revisions to delineate the consequences of a reviewing entity's decision on a provider's good cause extension request. A decision by an intermediary hearing officer(s) or the Board, to grant or deny a request for an extension for good cause, would be subject to review by a CMS reviewing official or the Administrator, as applicable. Because we view decisions on whether to grant an extension for good cause to be analogous to decisions on whether to reopen a previous determination or decision, we would state that a decision by the Board or the Administrator to not grant an extension for good cause would not be subject to judicial review under proposed § 405.1877(a)(3) or (a)(4).

In order to facilitate any further administrative review of such a decision, proposed § 405.1813(d) and § 405.1836(d) requires the pertinent reviewing entity to provide written notice of its decision to grant or deny a good cause extension request. Such notice must include an explanation of the reasons for the decision by the Board or the intermediary hearing officer(s), as applicable, and the facts underlying the decision.

Also, § 405.1813(e) and § 405.1836(e) includes proposals about the availability and timing of any review of such decisions. Specifically, § 405.1813(e) and § 405.1836(e) would provide that a decision by the Board or the intermediary hearing officer(s), as applicable, denying good cause and dismissing the appeal, is final and binding on the parties unless the decision is reviewed by the Administrator or a CMS hearing officer, respectively. Such a dismissal decision would be immediately reviewable. Proposed §§ 405.1813 and 405.1836(e) would further provide that if the Board or intermediary hearing officer(s) grants a good cause extension request, the decision would be non-final and not subject to immediate administrative or judicial review. Any non-final decision on an extension request would be reviewable solely during the course of review by the Administrator or a CMS hearing official, as applicable, of one of the decisions enumerated in § 405.1875(a)(2) or § 405.1834, respectively. We believe these proposals are an appropriate way to avoid piecemeal litigation, and are consistent with settled principles regarding the timing of administrative review.

Finally, proposed § 405.1836(e) would state that a determination by the Board or the Administrator that the provider did or did not demonstrate good cause for extending the time to request a hearing, is not subject to judicial review. We do not believe that it is necessary to propose a provision for § 405.1814 as that section would not provide for any judicial review of any decision by an intermediary hearing officer(s) or a CMS reviewing official.

F. Intermediary Hearing Officer Jurisdiction (§ 405.1814)

We propose to add a new § 405.1814 to impose certain requirements on intermediary hearing officers regarding making jurisdictional findings and to provide certain information on matters that are excluded from an intermediary hearing officer's jurisdiction. Proposed § 405.1814 would be similar to proposed § 405.1840, pertaining to Board jurisdiction, discussed below.

In proposed § 405.1814, we would require the intermediary hearing officer to make a preliminary determination of the scope of his or her jurisdiction, if any, over the matters at issue in the appeal, and notify the parties of his or her specific jurisdictional findings, before conducting any of the following proceedings: determining his or her authority to decide a legal question relevant to a matter at issue (see § 405.1829; permitting discovery (see § 405.1821); and conducting a hearing (see § 405.1819). Our proposal is designed to ensure the hearing officer's and the parties' focus on jurisdictional issues, for the purposes of making accurate decisions and to avoid committing needless time and resources in cases where jurisdiction is not present.

In issuing his or her decision, the intermediary hearing officer would be required to include a final jurisdictional finding for each specific matter at issue in the appeal. If the hearing officer determines that he or she lacks jurisdiction over every specific matter at issue in the appeal, he or she would issue a jurisdictional dismissal decision under § 405.1814(c)(2). Final jurisdictional findings and jurisdictional dismissal decisions by the hearing officer(s) would be subject to the CMS reviewing official procedure. Where a hearing officer does not dismiss an entire appeal, but instead finds that he or she lacks jurisdiction over a particular issue or issues, (or, conversely, finds that he or she has jurisdiction over a particular issue or issues) the hearing officer's jurisdictional ruling on such issue or issues would not be immediately reviewable, but rather would be reviewable upon the hearing officer's issuance of a hearing decision. Our proposal is intended to promote an efficient hearing and appeals process by not allowing for bifurcated appeals.

Finally, proposed § 405.1814 would specify that certain matters at issue are removed from the jurisdiction of the intermediary hearing officer, such as a finding in an intermediary determination that no payment be made by Medicare for costs incurred for items and services furnished to an individual because those items and services are excluded from coverage under section 1862 of the Act and our regulations. (Such a finding may be reviewed only in accordance with the applicable provisions of section 1869 of the Act, and of subpart G or H of part 405 of our regulations, pertaining to coverage appeals.) Another example of matters removed from the intermediary hearing officer's jurisdiction includes certain matters affecting payments to hospitals under the prospective payment system, as provided in § 405.1804.

G. CMS Reviewing Official Procedure (§ 405.1834)

Currently, our procedures for CMS review of intermediary hearings appear at § 2917 of the PRM. The procedures at § 2917 of the PRM were issued in response to the court's decision in

St. Louis University

v.

Blue Cross Hospital

Service,

537 F.2d 283 (8th Cir. 1976). Because we believe that these procedures are of sufficient importance to warrant inclusion in the regulations, we propose to add a new § 405.1834 for that purpose.

In § 405.1834(a), we would specify the current rule that a provider, and only a provider, has the right to a review by the Administrator (acting by delegation to a CMS reviewing official) of an intermediary hearing officer decision. Unlike CMS Administrator review of a Board decision conducted in accordance with § 405.1875, if a provider requests review of an intermediary hearing officer decision and otherwise meets the requirements for review, the request must be granted. We also propose that the Administrator, through the CMS reviewing official, may take own motion review of an intermediary hearing officer decision, regardless of whether the decision is favorable to the provider. (Own motion review, as used here for review of intermediary hearing officer decisions and other reviewable actions, and also for Administrator review of Board decisions and other reviewable actions, is any review undertaken by the Administrator on his or her own initiative, including the situation where the Administrator takes review following a suggestion by a CMS component or other entity that review is appropriate.) We believe the rationale of

St. Louis University

is applicable to the situation where the intermediary hearing officer's decision is unfavorable to the provider as well as to the situation where the decision is favorable to the provider.

In proposed § 405.1834(b) we would specify the types of decisions that are and are not immediately reviewable. A final decision by the intermediary hearing officer denying a provider's good cause extension request; a final jurisdictional dismissal decision by the intermediary hearing officer (including any determination denying a provider's good cause extension request), and a final intermediary hearing decision would be immediately reviewable. Non-final actions taken by the intermediary hearing officer generally would not be immediately reviewable. For example, and in accordance with proposed § 405.1814(d), if an intermediary hearing officer finds that he or she has jurisdiction over one or more issues but not over another issue(s), the provider may seek review by a CMS reviewing official of the issue(s) for which the intermediary hearing officer found no jurisdiction, but may not seek such review until the intermediary hearing officer has issued an intermediary hearing decision. We would provide an exception, in the case of certain discovery or disclosure rulings, to the proposed provision that non-final actions may not be immediately appealed. We would

allow

immediate review, upon request of the provider or upon own motion of the Administrator, of any discovery or disclosure order (including an order made at the hearing) for which an objection based on privilege or other protection from disclosure was made. We would do so because any harm that may be caused by a discovery or disclosure order might not be rectified by a reversal of the order by the CMS reviewing official in the context of review of the intermediary hearing officer's final decision. An immediate review would be at the discretion of the CMS reviewing official. That is, although, a provider has the right to CMS reviewing official review (as discussed previously), whether the CMS reviewing official takes immediate review, where an objection based on privilege or other protection from disclosure was made, is discretionary. We discuss our proposal for immediate review of certain discovery and disclosure rulings further in section II.N., of this preamble.

In proposed § 405.1834(c) and (d), we would specify the time for a provider to request review, or for the CMS Administrator (through a CMS reviewing official) to take own motion review, of an intermediary hearing officer decision. In order for a provider request for review to be timely, the request must be received by CMS's Office of Hearings no later than 60 days after the date on which the provider received the intermediary hearing officer decision. The address of the Office of Hearings is: Suite CMS L, 2520 Lord Baltimore Drive, Baltimore, MD 21244-2670.

For provider requests for CMS reviewing official review of a discovery or disclosure order for which an objection based on privilege or other protection from disclosure was made, we would require the request to be made within 5 business days after the day the objection was made so as not to unduly disrupt the hearing process.

If the CMS Administrator wishes to take own motion review, through a CMS reviewing official, of an intermediary hearing officer decision, the CMS reviewing official must notify the parties and the intermediary of his or her intention to take own motion review no later than 60 days after the date the Office of the Hearings received the intermediary hearing officer decision. It is not necessary for the CMS reviewing official to issue his or her decision within such 60-day period.

In proposed § 405.1834(e), we would specify the procedures to be followed by a CMS reviewing official in reviewing an intermediary hearing officer's decision. A CMS reviewing official would be required to follow all applicable statutes, regulations and CMS Rulings, and would be required to afford great weight to other interpretive and procedural rules (such as those contained in the Provider Reimbursement Manual) and general statements of policy. The review by a CMS reviewing official ordinarily would be limited to the record of the proceedings before the intermediary hearing officer, but the CMS reviewing official could consider extra-record evidence if he or she determined under § 405.1823 that the evidence was improperly excluded from the record. The CMS reviewing official ordinarily would issue a decision based on the written record, but could decide to hold an oral hearing if he or she determines that an oral hearing is necessary. Upon completion of his or her review, the CMS reviewing official would issue a decision that affirms, reverses, modifies, or remands the intermediary hearing officer decision and would mail a copy of such decision to each party, to the intermediary and to CMS's Office of Hearings.

Proposed § 405.1834(f) would state the effect of a decision or a remand. Consistent with current procedures in section 2917 of the PRM, § 405.1834(f) would state that a CMS reviewing official decision that affirms, modifies or reverses the intermediary hearing officer's decision is final and binding on each party and on the intermediary, unless reopened, and is not subject to further appeal. A CMS reviewing official remand decision would not be a final decision and would have the effect of vacating the intermediary hearing officer's decision. A CMS reviewing official remand would require the intermediary hearing officer to take the actions specified in the remand order and to issue a new intermediary hearing officer decision.

H. Group Appeals (§ 405.1837)

[If you choose to comment on issues in this section, please include the caption “Group Appeals” at the beginning of your comments.]

Section 1878(b) of the Act and § 405.1837(a) of the regulations authorize a group of providers to appeal to the Board. (We note that group appeals are available for Board hearings, but not for intermediary hearings.) Each provider in a group appeal must satisfy individually the requirements for a single provider appeal under section

1878(a) of the Act and § 405.1835, except for the $10,000 amount in controversy requirement. Also, a group appeal is limited to those cases that involve a single common question of fact or interpretation of law, regulations, or CMS Rulings, in which the amount in controversy is, in the aggregate, $50,000 or more. Furthermore, the last sentence of section 1878(f)(1) of the Act, and § 405.1837(b), require providers under common ownership or control to bring any appeal, involving a legal or factual issue common to such providers and involving $50,000 or more in controversy in the aggregate, as a group appeal rather than allowing them to bring separate, single provider appeals.

We believe it is necessary to revise the group appeal provisions of § 405.1837 and propose appropriate revisions in order to ensure conformity with other proposed changes to the regulations. For example, we believe it is appropriate to propose revisions to § 405.1837 to conform the group appeal regulations to our proposed changes to the single provider appeal provisions of § 405.1835.

Another reason to propose revisions to § 405.1837 is that it is appropriate to clarify and update that regulation to reflect longstanding group appeal procedures. For example, our longstanding policy is that a group appeal may start as a Board hearing request for a group of providers or as a single provider appeal that later becomes a group appeal. Other longstanding policies limit each group appeal to only one common legal or factual issue, and prohibit the addition of new issues to a group appeal. We believe it is necessary and appropriate to propose revisions to § 405.1837 to reflect and update such longstanding policies for group appeals.

Under our proposal, § 405.1837(a) would be revised to clarify that each provider in a group appeal must satisfy individually the requirements for a single provider appeal (except for the $10,000 amount in controversy requirement). (We address the $50,000 amount in controversy requirement for group appeals separately for § 405.1839 in section II. I., for this preamble.)

Proposed § 405.1837(a)(1) would clarify that each provider must establish its dissatisfaction with Medicare payment for a specific item in accordance with our proposed revisions to § 405.1835(a)(1). This proposal would further clarify that each provider must demonstrate, for each disputed matter at issue, that it satisfied the 180-day deadline for appeal under our proposed revisions to § 405.1835(a)(3).

In proposed § 405.1837(a)(2), we would clarify our longstanding interpretation that a group appeal must be limited to one legal or factual issue that is common to each provider in the group. Section 1878(b) of the Act authorizes a group appeal if “the matters in controversy involve a common question of fact or interpretation of law or regulation.” We interpret the foregoing reference to “a” common legal or factual issue to mean that “the matters in controversy” (that is, the separate matters appealed by the different providers in the group) in one group appeal may involve only one common question of law or fact. Similarly, we construe the reference in the last sentence of section 1878(f)(1) of the Act to “an issue common to such providers” to mean that commonly owned or operated providers must file a separate group appeal for each common legal or factual question. Besides comporting with the statutory language, our interpretation has always been reflected in § 405.1837 and in our general policies and procedures for group appeals. (See, for example, Board's “Group Appeal Instructions” (July 1997)), reprinted in [CCH] Medicare and Medicaid Guide 7700.30 (each group appeal must “contain one issue”; providers “may not combine different issues”). See also PRRB Instructions, Part 1, Section B.I.d (March 2002).

We also propose to revise § 405.1837(b) to clarify the distinction between mandatory and optional uses of group appeal procedures, and to specify the different ways these two types of group appeals may be initiated. Proposed § 405.1837(b)(1) would require, consistent with section 1878(f)(1) of the Act and current § 405.1837(b), that any appeal brought by two or more commonly owned or controlled providers, involving a legal or factual question that is common to these providers, and involving $50,000 or more in controversy in the aggregate, be brought as a group appeal. Proposed § 405.1837(b)(2) would provide, consistent with section 1878(b) of the Act and current § 405.1837(a), that two or more providers not under common ownership or control may (but are not required to) bring a group appeal of a specific matter at issue that involves a common legal or factual question.

In proposed § 405.1837(b)(3), we would specify the different ways mandatory and optional group appeals may be initiated. We would require a provider subject to the mandatory group appeal requirements of section 1878(f)(1) of the Act and proposed § 405.1837(b)(1) to request, either alone or with other commonly owned or operated providers, a group appeal. We believe it is reasonable to require commonly owned or operated providers to initiate an appeal with a request for a hearing as a group because their common ownership or control should enable these providers to identify issues raising a common legal or factual question. By contrast, providers not under common ownership or control do not have a ready means to identify common issues with other providers. Thus, proposed § 405.1837(b)(3) would give providers not under common ownership or control an election between submitting at the outset a group hearing request, or starting with a single provider appeal and transferring common issues to a group appeal at a later time.

Also, we propose to add a new § 405.1837(c), which would specify the requirements for the contents of a request for a group appeal. Under proposed § 405.1837(c)(1), a group appeal request would have to be submitted in writing to the Board and include a demonstration that the request satisfies all requirements for a group appeal under proposed § 405.1837(a). Proposed § 405.1837(c)(2) would require each provider in the group appeal to demonstrate in its initial request its dissatisfaction with Medicare payment for each disputed item and compliance with the applicable 180-day appeal deadline, and to include a copy of each intermediary or Secretary determination under appeal and any other documentary evidence the provider believes necessary to demonstrate the dissatisfaction and timely filing requirements.

Under proposed § 405.1837(c)(3), the initial request for a group appeal must include a precise description of the one question of fact or interpretation of law, regulations, or CMS Rulings that is common to the particular matters at issue in the group appeal.

In proposed § 405.1837(c)(4), we would authorize an election as to when the group may demonstrate compliance with the $50,000 amount in controversy requirement. Our longstanding policy is to permit providers to submit a group appeal request before the group is fully formed. This policy reflects our recognition that it may not be possible for the group to satisfy the $50,000 amount in controversy requirement until other providers receive their respective NPRs and request a hearing as part of the same group appeal. Accordingly, proposed § 405.1837(c)(4) would give the group an election between establishing at the outset that all hearing requirements (for each

provider and for the whole group) are met, or showing initially that all requirements are satisfied except for the $50,000 amount in controversy requirement. Proposed paragraph (c)(4) would further require that the group appeal request include a statement representing that the providers believe the hearing request is jurisdictionally complete (and hence the Board can proceed to make jurisdictional findings) or the request is incomplete (and thus the Board should defer making jurisdictional findings).

We advance corresponding provisions in proposed new § 405.1837(d) regarding the Board's preliminary response to group appeal hearing requests. Apart from taking any ministerial steps deemed necessary upon receipt of such a request, the Board's principal response would be determined by the providers' representation under proposed § 405.1837(c)(4) as to whether the hearing request satisfies all requirements for a group appeal. For hearing requests described as jurisdictionally complete by the group, the Board would be required under § 405.1837(d) to make jurisdictional findings in accordance with new proposed § 405.1840 (see section II.J. of this preamble) before conducting any further proceedings. If the hearing request is described as jurisdictionally incomplete by the group, the Board would defer the requisite jurisdictional findings (and hence any further proceedings in the appeal) until the group represents that the hearing request is complete.

Proposed § 405.1837(e) clarifies the regulations to reflect and update our longstanding policies regarding the processing of group appeals pending full formation of the group and issuance of a Board decision. Proposed § 405.1837(e)(1) would authorize the filing of a group appeal hearing request before each member of the group has been identified or complied with the dissatisfaction and timely filing requirements, or before the group has satisfied the $50,000 amount in controversy requirement. Proceedings before the Board in any such partially formed group appeal would be determined by the remainder of proposed § 405.1837(e).

Under proposed § 405.1837(e)(2), the Board would not make the jurisdictional findings required under new proposed § 405.1840 until the group notifies the Board in writing that the group appeal is jurisdictionally complete. Proposed § 405.1837 (e)(3) authorizes the Board to take further steps necessary for consideration of the appeal only to the extent it finds jurisdiction over the specific matters at issue. In the event the Board finds jurisdiction before the group is fully formed, however, § 405.1837 (e)(3) would require the Board to make additional and updated jurisdictional findings after any ensuing changes in the composition of the group.

Proposed § 405.1837(e)(4) would authorize a provider to request from the Board permission to join a group appeal anytime before the Board issues one of the final decisions enumerated in proposed § 405.1875(a)(2). The Board would be required to grant any such request that is unopposed by any group member and received timely by the Board, and otherwise complies with § 405.1837. If the Board grants a request, the newly added provider would be bound by the Board's actions and decision in the appeal. If the Board denies the request, the provider could still submit a separate appeal on the same issue. The applicable 180-day period for filing a separate appeal (and the 60-day period for adding issues to any separate single provider appeal) would be suspended during the period from submission of the original hearing request through the Board's denial of the provider's request to join the group appeal. That is, following the Board's denial, the provider would have the same number of days to file an appeal or add issues that it had at the time it submitted the request to join the group appeal. We believe proposed of § 405.1837(e) reasonably reflects and updates our longstanding policies regarding group appeal processing pending full formation of the group and issuance of a Board decision.

In proposed § 405.1837(f), we would clarify that the specific matters at issue in a group appeal must be limited to one legal or factual question common to each provider in the group.

I. Amount in Controversy (§ 405.1839)

Section 405.1839 sets forth the requirements for determining the minimum amounts in controversy for intermediary and Board hearings ($1,000 for an intermediary hearing and $10,000 for a Board hearing.) We believe that certain aspects of the regulations need clarification to ensure the proper interpretation of the requirements by providers.

To clarify the method for determining the amount in controversy, we propose a series of minor revisions to § 405.1839. For both individual and group appeals, we would specify in proposed § 405.1839(a) and (b), respectively, that the amount in controversy is determined based only on those particular adjustments that the provider has challenged before the Board or the intermediary and includes the combined total of all issues raised by the provider that arise within the same cost year. Thus, a provider may aggregate issues within a cost year to meet the threshold amount. However, we would specify in proposed § 405.1839(a)(1) that a single provider may not aggregate issues across more than one cost year even if the issues involve the same payment adjustments being appealed in other cost years. We believe this proposed provision reflects the intent of section 1878(a)(1)(A)(i) of the Act, which specifies that a provider may obtain a Board hearing if it is dissatisfied with the intermediary's determination of the amount due the provider for the period covered by the provider's cost report. Therefore, a provider would have to meet the amount in controversy requirement for each cost year being appealed. In contrast, in proposed § 405.1839(b)(1) we would allow providers to aggregate issues across more than one cost year for purposes of meeting the amount in controversy requirement for group appeals. In

Cleveland Memorial Hospital, Inc.

v.

Califano

, 594 F.2d 993 (4th Cir. 1979), and

White Memorial Medical Center

v.

Schweiker

, 640 F.2d 1126 (9th Cir. 1981), the courts held that Congress's intent in enacting section 1878 of the Act was to permit providers in a group appeal to aggregate issues over more than one cost year, if necessary, to meet the amount in controversy requirement. We do not necessarily agree with the courts' view of Congressional intent and we note that the cases were decided prior to the Supreme Court's decision in

Chevron U.S.A., Inc.

v.

Natural Resources Defense Council, Inc.

, 467 U.S. 837 (1984), which held that courts must defer to an agency's interpretation of a statute that the agency is charged with administering, if the agency's interpretation is a permissible one. However, because we have conformed our policy to the courts' decisions since their issuance, and because no significant problems have been encountered with that policy, we see no reason to propose departing from it at the present time.

J. Board Jurisdiction (§ 405.1840)

We propose to add a new § 405.1840, which would be similar to proposed new § 405.1814, pertaining to intermediary hearing officer jurisdiction, as discussed at section II.F. of this preamble. In addition, we note that current § 405.1873 provides that the Board decides questions relating to its

jurisdiction and that the Board may not review intermediary determinations denying payment because the item or service is excluded from coverage under section 1862 of the Act. Because we believe it appropriate to state within § 405.1840 that the Board does not have jurisdiction to review an intermediary determination that an item or service is excluded under section 1862 of the Act, we propose to delete § 405.1873 and consolidate its provisions into new § 405.1840.

K. Expediting Judicial Review (§ 405.1842)

[If you choose to comment on issues in this section, please include the caption “Expediting Judicial Review” at the beginning of your comments.]

After the Board began conducting hearings under section 1878 of the Act, it became evident that in cases where providers challenged an intermediary's determination based on objections to the validity of the law, regulations or CMS rulings, a hearing before the Board would not resolve the dispute. Because these cases did not raise factual issues and because, under section 1878(e) of the Act, the Board is bound by the law and regulations, the Board was obliged to decide these cases against the provider. Although the provider could then seek judicial review in these cases (that is, file a complaint in a Federal district court), the provider effectively was required to participate in a futile hearing before the Board as a prerequisite to obtaining Federal court jurisdiction.

To remedy this situation, we published a proposed rule on February 14, 1980 (45 FR 9953) that sought to provide the Board with the authority to permit a provider to avoid the delay of a futile Board hearing and immediately seek to challenge the CMS policy in court. Before a final rule was published, section 1878(f)(1) of the Act was amended by section 955 of the Omnibus Reconciliation Act of 1980 (Pub. L. 96-499) to allow providers to seek immediately judicial review of any action of the fiscal intermediary involving a question of the statute or regulations whenever the Board determined that it was without authority to decide the issue. Under the revised provisions of section 1878(f)(1), a provider can request that the Board make a determination of its authority to decide the issue before it. If the Board determines that it has jurisdiction over the issue but does not have the authority to decide the issue, the provider may obtain expedited judicial review. The legislative history indicates that the intent of revising section 1878(f)(1) was to eliminate undue delays resulting from the requirement that providers pursue time-consuming and unproductive administrative reviews before they could obtain judicial review of a Board determination. (H.R. Rep. No. 96-1167, at 394 (1980)).

Over the years, there has been some confusion about the types of cases to which expedited judicial review applies. For example, in appeals before the Board, providers have contended not only that intermediary audit adjustments are improper, but that the statute or regulation under which the intermediaries' review was conducted is invalid. The providers have argued that, because an aspect of the appeal concerns a challenge to a statute or regulation, expedited judicial review should be granted so that the legal matter can be contested in court while the audit adjustments are simultaneously being contested before the Board. The Board has denied these requests for expedited judicial review because it found that the issues before it involved the accuracy of the cost adjustments. In the Board's view, a provider's assertion that the audit procedure was in violation of a statute or regulation was not an issue for purposes of the judicial review provision but constituted a legal argument in support of the provider's position that the adjustments had to be reversed. The Board found that in the types of cases mentioned above, a hearing before it would not necessarily be futile because it often could decide the case and grant the relief sought by the provider based on other arguments presented.

We agree with the Board's position that, in situations in which a provider asserts that audit adjustments are improper and also argues that a statute, regulation, or CMS Ruling bearing on those adjustments is invalid, a Board hearing should be held before the matter proceeds to court. We believe that although an assertion that a statute, regulation, or Ruling is invalid is a matter that the Board cannot decide, the Board should accept the case and rule on those other issues relating to the same adjustments over which it has jurisdiction and does have authority to decide. Only in those cases in which the Board determines it has jurisdiction but does not have the authority to decide any of the issues raised with respect to a particular item by the provider, should it grant expedited judicial review as to those issues.

Accordingly, we propose the following revisions to § 405.1842.

To reflect more accurately the subject matter of this section, we would change the title from “Expediting Board Proceedings” to “Expedited Judicial Review”. We would change all references in this section to reflect the revised title, including using the acronym “EJR.” We recognize that to say that the Board grants or does not grant expedited judicial review is not strictly accurate. The Board actually grants or denies the opportunity to seek expedited judicial review, because only the court can grant review by taking jurisdiction over the case. However, we believe “expedited judicial review” and “EJR” are suitable and commonly used terms to refer to proceedings at the administrative level.

In § 405.1842(a), we would clarify that providers may seek expedited judicial review when the Board decides, because it is bound by a relevant statute, regulation, or CMS Ruling, that, although it has jurisdiction, it does not have the authority to decide the issue. We consider jurisdiction to be a necessary prerequisite of the Board's ability to issue an EJR Decision. We would also clarify that the Administrator may review the Board's determination of whether it has jurisdiction over the matter(s) at issue, but may not review the Board's determination of whether it has the authority to decide such matter(s).

In proposed § 405.1842(b), we would set forth an overview of the EJR process. We believe that an overview would be helpful given the complexity of the process. In § 405.1842(b)(1), we would emphasize that a Board finding that it has jurisdiction over the specific matter at issue is a prerequisite for its determination of its authority to decide the legal question, and for the ensuing stages of the EJR process. Section 1878(f)(1) of the Act states that a provider may file a request for EJR “[i]f [such] provider of services may obtain a hearing under subsection (a) [which sets forth the jurisdictional requirements for obtaining a Board hearing].” In § 405.1842(b)(2) we would state that the EJR procedures may be initiated in two ways. First, a provider or group of providers may request the Board to grant EJR, or, second, the Board may consider on its own motion whether to grant EJR. We would also state in paragraph (b)(2), consistent with the requirement that a Board finding of jurisdiction is a prerequisite of both the provider's ability to obtain EJR and the Board's authority to issue an EJR Decision, that the 30-day time limit specified in section 1878(f)(1) of the Act for the Board to act on a provider's complete request does not begin to run until the Board has found jurisdiction on the specific matter at issue.

In § 405.1842(c), we would clarify the procedures for own motion consideration by the Board of whether to grant EJR. Upon finding that it has jurisdiction on a specific matter at issue, the Board would be authorized to consider, on its own motion, whether it lacks the authority to decide a legal question relevant to the matter at issue. The Board would be required to send written notice to each of the parties to the appeal so that they may respond with evidence or argument in favor of or against granting EJR.

In proposed § 405.1842(d) we would specify the procedures for provider requests for EJR, including the required contents of such requests.

In proposed § 405.1842(e), we specify the procedures for the Board to reply to provider requests for EJR and how we calculate the 30-day timeframe for issuing an EJR Decision following a provider request. In paragraph (e)(1) we would state that if the Board finds that it has jurisdiction over a matter for which the provider has requested EJR, the Board is then required to consider whether it lacks the authority to decide the legal question that is relevant to a matter. The Board would be required to issue an EJR decision for a matter no later than 30 days after the date of the Board's notice to the provider that the provider's request is complete. The condition that the 30-day timeframe does not begin to run until the Board has received a “complete” request from the provider is found in section 1878(f)(1) of the Act (a provider request for EJR shall be “accompanied by such documents and materials as the Board shall require” and “the Board shall render [an EJR Decision] within thirty days after the Board receives the request and such accompanying documents and materials.”)

In proposed § 405.1842(e)(2) we would define a “complete provider request” as one that includes all of the information and documents found necessary for the Board to issue an EJR decision. In proposed § 405.1842(e)(3), we would specify what the Board must do when it has received a complete provider request or an incomplete provider request. Where the Board has received a complete provider request, it would be required to issue an EJR decision within 30 days of its receipt of the complete provider request. We would also specify that if the Board does not issue a timely EJR Decision (that is, no later than 30 days after the date of the notice issued under § 405.1842(e)(3)(i)), the provider has a right to file a complaint in Federal district court in order to obtain judicial review over the matter(s) at issue (see also proposed (§ 405.1842(g)(4)). Where the Board has received an incomplete provider request the Board would be required to issue a written notice to the provider describing the further information the Board requires.

In proposed § 405.1842(f), we would specify the criteria for the Board to apply for purposes of granting or denying EJR. If the Board has taken own motion consideration of whether to grant EJR, or if the provider has requested EJR, the Board would be required to grant EJR if it determines that it has jurisdiction over the specific matter at issue, and lacks the authority to decide the matter. The Board would be required to deny EJR if it determined it lacked jurisdiction over the specific matter at issue, or if it determined that it had the authority to decide the specific matter at issue, or if it did not have sufficient information to determine whether it had jurisdiction over, or had the authority to decide, the specific matter at issue. Subject to § 405.1842(h), the Board would be required to issue an EJR Decision (either granting or denying EJR) in any case in which it notified the provider that it was taking own motion consideration of whether to grant EJR under § 405.1842(c), or in which it notified the provider that its request for EJR was complete under § 405.1842(e). Under proposed § 405.1842(h) (discussed below), the Board would not be required or permitted to render an EJR Decision if the provider filed a lawsuit on the specific matter at issue for the same cost year at issue. The Board would also not be required or permitted to issue an EJR Decision following a provider request for EJR if the provider did not submit a complete request and did not perfect the request after being given the opportunity to do so under § 405.1842(e).

In proposed § 405.1842(g)(1), we would provide that, in accordance with proposed § 405.1875(a)(2)(iii), the Administrator may review, on his or her own motion, or at the request of a party, the Board's EJR Decision. The Administrator's review would be limited to the question of whether there is Board jurisdiction over the specific matter at issue. The Administrator would not be permitted to review the Board's determination of its authority to decide the legal question. To account for the possibility that a Board decision may grant EJR and the Administrator may find that the Board did not have jurisdiction over one or more of the specific matters at issue, the proposed rule would state that a Board decision granting or denying EJR is inoperative during the 60-day period for review by the Administrator. Proposed paragraph (g)(1) also would specify that a final Board EJR Decision under paragraph (f) of this section, and a final Administrator decision affirming, modifying, reversing or remanding a Board EJR Decision under § 405.1875(a)(2) and (e), may be reopened in accordance with §§ 405.1885 through 405.1889. Under proposed § 405.1842(g)(3), where a Board decision denies EJR for a specific matter at issue solely because it determines that it did not have jurisdiction over the matter, and the Administrator reverses the Board on the jurisdictional finding, and the Board determines on remand that it lacks the legal authority to decide the question, the provider would be able to file a complaint seeking EJR.

Proposed § 405.1842(h) would set forth the effect of final EJR Decisions by the Board and the Administrator, and the effect of lawsuits, on the Board's ability to conduct further proceedings on the appeal. Paragraph (h)(1) would provide that if the final decision of the Board grants EJR, the Board would be precluded from conducting any further proceedings on the legal question. The Board would be required to dismiss the specific matter at issue from the appeal unless the Board could fully decide the matter without a final resolution of the legal question for which EJR was granted. The Board would be required also to dismiss the entire appeal if there were no other matters at issue that were within the Board's jurisdiction and could be fully decided by the Board.

Proposed § 405.1842(h)(2) would specify the effect that a Board or Administrator decision denying EJR would have on the Board's ability to conduct further proceedings on the appeal. First, if the final decision of the Board were to deny EJR solely on the basis that the Board determines that it has the authority to decide the legal question relevant to the specific matter at issue, the Board would be required to conduct further proceedings on the specific legal question and issue a decision on the matter at issue in accordance with this subpart. (An exception to this rule would exist where the provider(s) files a lawsuit pertaining to the legal question; in that situation, the Board would be precluded from conducting any further proceedings on the legal question or the matter at issue before the lawsuit is finally resolved.) Second, if the Board or the Administrator were to deny EJR on the sole, or additional, basis that the Board lacks jurisdiction over the specific matter at issue, the Board would be required, as applicable, to dismiss the specific matter at issue from the appeal, or to dismiss the appeal entirely if there

were no other matters at issue that were within the Board's jurisdiction and could be fully decided by the Board.

Example 1:

Suppose a provider, after it received a revised NPR, filed an appeal and raised three issues, and sought EJR on the first issue. If the Board decided that the issue for which the provider sought EJR was not within the scope of the revised NPR, it would be required to dismiss that issue. If the Board found that the second and third issues were within the scope of the revised NPR, the appeal would continue (assuming there were no other jurisdictional problems with those issues), and the provider would not be able to seek Administrator (or judicial) review of the first issue until the Board issued a final decision on all the issues. (See proposed § 405.1840(d).) If, following a final decision by the Board on all the issues, the Administrator were to take review of the first issue and find that the Board did have jurisdiction, the Administrator would remand for the Board to determine whether it had the authority to decide the issue. If the Board were to decide on remand that it did not have the authority to decide the issue, then the Board would grant EJR on the issue.

Example 2:

Same as above except that the Administrator declines review or issues a timely decision affirming the Board's decision that it did not have jurisdiction on the first issue. In this case, the provider could appeal the Board's decision (if the Administrator declined review) or the Administrator's decision to court, and if the court were to reverse the Board's or Administrator's decision, the Administrator would remand the matter to the Board for a finding of whether the Board had the authority to decide the legal issue.

Proposed § 405.1842(h)(3) would specify the effect that a provider lawsuit would have on the Board's ability to conduct further proceeding on the legal matter at issue. In general, if a provider files a lawsuit on the same legal issue for the same cost year that is currently pending before the Board—that is, the provider goes into court without waiting for a final administrative decision on EJR, we would seek to have the lawsuit dismissed, and we would prohibit the Board from conducting further proceedings on that issue until the lawsuit is resolved.

L. Parties to a Board Hearing (§ 405.1843)

Section 405.1843(a) of the regulations states that the parties to a Board hearing include the intermediary, the provider, and any related organization of the provider. This section also provides that CMS may be a party to the hearing only when it acts directly as an intermediary. Section 405.1843(b) provides that neither the Secretary nor CMS may be made a party to the hearing (except when CMS acts as an intermediary). With the disbandment of CMS's Office of Direct Reimbursement (formerly known as the Division of Direct Reimbursement), CMS no longer acts directly as an intermediary. Therefore, we propose to delete the obsolete references in § 405.1843(a) and (b) that provide that CMS may be a party to a hearing when it serves as an intermediary.

Although we are not a party to a Board hearing, our policies, actions and decisions are frequently central to a provider's reimbursement dispute before the Board. Moreover, in certain types of appeals, it is CMS, rather than the fiscal intermediary, that has made the determination being appealed by the provider.

Because our policies, actions and decisions may be at the center of many Board disputes, we believe the regulations should provide a mechanism by which CMS may be included in the hearings process, without having formal party status. Accordingly, we propose to add a new § 405.1843(c) to authorize intermediaries to designate a representative from CMS, who may be an attorney, to defend the intermediary's position in proceedings before the Board. We are modeling this portion of the regulations on the provisions authorizing the U.S. Department of Justice to allow an attorney (outside of the Department of Justice) to appear on its behalf in certain situations (see 28 U.S.C. 515). There may also be cases before the Board that have major policy implications that CMS would like to address without being designated as the representative of the intermediary. In these cases, proposed new § 405.1843(d)) would permit CMS to make written and timely filed

amicus curiae

submissions for the Board's consideration.

M. Quorum Requirements (§ 405.1845)

Section 405.1845(d) provides that a quorum is required for the rendering of Board decisions. Three Board members, at least one of whom is representative of providers of services, constitute a quorum. With the provider's approval, the Board Chairman may designate one or more Board members to conduct a hearing and prepare a recommended decision for adjudication by a quorum when a sufficient number of Board members are available.

As mentioned previously, the Board has an enormous case backlog. Approximately 10,000 hearing requests currently are awaiting disposition by the Board. In order to expedite the resolution of these cases and reduce this backlog, we propose several revisions to the quorum requirements under § 405.1845(d). First, because the presence of a quorum of Board members is not required at a hearing, we propose to clarify that more than one hearing may be held simultaneously. Under this proposed revision, the Board Chairman could designate one Board member to conduct a hearing. Under our proposal, it would not be necessary for the Board Chairman to obtain the approval of the provider or the intermediary before he or she could assign less than a quorum to conduct a hearing. We believe that the rights of the parties are not prejudiced by not requiring the Board to obtain the permission of the parties to have less than a quorum present at the hearing because no hearing decision would be rendered without the participation of a quorum of the Board members.

Second, we propose to eliminate the requirement that a recommended decision be prepared when less than a quorum has conducted the hearing. We believe that the preparation of a recommended decision is a time-consuming process that may be eliminated without affecting the fairness of the proceeding. A Board member who was not present at a hearing thus would be able to review the written record of the hearing and make a decision based upon that review. This proposed change is consistent with the Administrative Procedure Act, which provides at 5 U.S.C. 557(b) that an administrative officer charged with the decision making need not personally hear the testimony, but may rely instead on the written record.

We also propose that the Board may offer the parties the option to have the Board decide the case based on all the written evidence submitted by the parties. The parties would have to agree to waive their rights to an oral hearing as a condition for holding a “hearing on the written record.”

N. Board Proceedings Prior to Hearing; Discovery in Board and Intermediary Hearing Officer Proceedings (§ 405.1853 and § 405.1821)

[If you choose to comment on issues in this section, please include the caption “Board Proceedings Prior To Hearing” at the beginning of your comments.]

We propose to make several revisions to § 405.1853. Proposed § 405.1853(a) would specify the present requirement that, prior to any Board hearing, the intermediary and provider must attempt

to resolve legal and factual issues, and following such attempt must send to the Board joint or separate written stipulations setting forth the specific issues that remain for Board resolution. We would remove the requirement that the intermediary ensure that all documentary evidence in support of each party's position is in the record. The intermediary does not have the capability or the responsibility for ensuring that all documentary evidence in support of the provider's position is made part of the record. We would continue the present requirement that the intermediary be required to place in the record a copy of all evidence that it considered in making its determination, and would add, that where the determination under appeal is a Secretary determination, the intermediary would be responsible for placing in the record all evidence considered by CMS in making the Secretary determination.

In proposed § 405.1853(b), we would address the timeframes for submitting position papers. Currently, § 405.1853(a) requires the provider and the intermediary to submit position papers, identifying issues that have been resolved between the intermediary and the provider and those that remain for Board resolution, to the Board no later than 60 days after the provider's hearing request. In many instances, the 60-day timeframe for submitting position papers has proved to be not a realistic or workable timeframe. We would remove the reference to the 60-day timeframe and instead provide in proposed § 405.1853(b) that the Board will set the deadlines for submitting position papers in each case as appropriate, and that the Board would have the authority to extend the deadline for good cause shown.

Additionally, we propose requiring that each position paper set forth the relevant facts and arguments concerning the Board's jurisdiction over each remaining matter at issue in the appeal, and that any supporting exhibits must accompany the position paper. These proposed requirements are intended to facilitate the Board's ability to make preliminary findings as to whether it has jurisdiction with respect to each specific matter at issue (see proposed § 405.1840(a)). All accompanying exhibits must be submitted in a form to be decided by the Board. Finally, proposed § 405.1840(b) would require that exhibits regarding the merits of the provider's appeal are to be submitted pursuant to the schedule set by the Board.

Proposed § 405.1853(c) and (d), would set forth requirements relating to “initial” and “further” status conferences. We would clarify that the Board may conduct status conferences for a wide variety of purposes, borrowing the criteria set forth in 42 CFR § 1005.6(b). Proposed § 405.1853(e) would make changes in discovery procedures for Board proceedings, and we would propose similar changes to § 405.1821 for proceedings before an intermediary hearing officer(s). In developing our proposals, we have attempted to balance competing considerations. On the one hand, and in accordance with the view that discovery generally is not available in record review cases before the courts, we believe that discovery should be limited, especially for non-parties. In this regard, we note that under our proposed revisions to § 405.1853(a) we would require that the intermediary, or CMS, as applicable, place in the record a copy of all evidence that the intermediary or CMS considered in making its determination, thus lessening any need for extra-record discovery. We are also concerned with the effect that broad discovery procedures may have on the Board's ability to schedule and hold hearings in an efficient manner. On the other hand, we recognize that reasonable discovery procedures can enhance the fairness of proceedings and the accuracy of decisions. Additionally, there may be circumstances where an entity that is not a party to a Board hearing, for example, CMS, is the only entity able to respond to provider discovery requests. A provider that seeks to obtain discovery materials from its servicing intermediary before a Board hearing is sometimes unable to do so because only a non-party has the requested information. We do not believe that it is fair to providers to deny them access to discovery material in these types of situations, and would therefore include non-parties within the scope of our proposed procedures.

Proposed § 405.1853(e)(1), and proposed § 405.1821(b)(1) would specify the basic requirements for discovery, including the requirement that the matter sought to be discovered must be relevant to the specific subject matter of the Board or intermediary hearing.

Proposed § 405.1853(e)(2) would specify that the method of discovery permitted would generally be limited to reasonable requests for the production of documents for inspection and copying, and a reasonable number of interrogatories, with depositions permitted in limited circumstances. A party would not be permitted to take an oral or written deposition of another party or a non-party, unless the proposed deponent agrees to the deposition, or the Board finds that the proposed deposition is necessary and appropriate under Federal Rules of Civil Procedure 26 and 32. (Under proposed paragraph (e)(1), the applicable provisions of the Federal Rules of Civil Procedure and Rules 401 (relevant evidence) and 501 (privileges) of the Federal Rules of Evidence would be used as guidance for all discovery permitted under this section or by Board order.) We would specifically state in paragraph (e)(2) that requests for admission, or any other form of discovery (other than requests for production of documents, interrogatories and depositions) are not permitted. Proposed § 405.1821(b)(2) would be similar, except that we would not permit depositions in proceedings before an intermediary hearing officer(s), as we do not believe the potential expense and inconvenience of a deposition is warranted given the limited amount in controversy in intermediary hearing officer hearings.

In § 405.1853(e)(3), we would revise the time limits for requesting discovery. Section 405.1853(b) provides that the Board must allow all timely requests for prehearing discovery, that is, requests made before the beginning of a hearing. Under this rule, a party is within its rights to file a discovery request as late as 1 day before a scheduled hearing, and the Board is bound to honor the request. We do not believe this is a reasonable requirement, especially in light of the current backlog of cases at the Board, and the substantial length of time between filing an appeal and the Board determination. We propose that a party's discovery request would be timely if the date of receipt of such a request by another party or non-party, as applicable, is no later than 90 days before the scheduled starting date of the Board hearing. A party would not be permitted to conduct discovery any later than 45 days before the scheduled starting date of the Board hearing. We would further provide that, upon request and upon a showing of good cause, the Board may extend the time for making a discovery request or may extend the time for performing discovery. Before ruling on an extension request, the Board would be required to give the other parties to the appeal (and any non-party subject to a discovery request) a reasonable period to respond to the extension request. The Board would be permitted to extend the time for requesting discovery or for conducting discovery only if the requesting party establishes that it was not dilatory or otherwise at fault in not meeting the original discovery deadline.

If the Board grants the extension request, it would be required to impose a new deadline and, if necessary, reschedule the hearing date so that all discovery ends no later than 45 days before the hearing. Proposed § 405.1821(a) would be similar for proceedings before an intermediary hearing officer(s).

In § 405.1853(e)(4) and § 405.1821(c), we propose to specify the rights of non-parties with respect to discovery requests. A non-party would have the same rights as a party in responding to a discovery request. These rights would include, but would not be limited to, the right to select and use any attorney or other representative, and to submit discovery responses, objections, motions, or other pertinent materials to the Board.

In § 405.1853(e)(5) and § 405.1821(c)(3), we propose a specific procedure for motions to compel and for protective orders. In order to conserve Board resources and promote an efficient hearing process, each party would be required to make a good faith effort to resolve or narrow any discovery dispute, including a dispute with a non-party. Any motion to compel discovery and any motion for a protective order, and any response thereto, would have to include a self-sworn declaration describing the movant's or respondent's efforts to resolve or narrow the discovery dispute.

In § 405.1853(e)(6), and in § 405.1821(d)(2), we would include a general rule, and an exception thereto, for the reviewability of Board or intermediary hearing officer(s) orders on discovery. Our general rule would be that any discovery or disclosure ruling issued by the hearing officer(s) or the Board is non-final and not subject to immediate review by the Administrator. Rather, such a ruling could be reviewed solely during the course of Administrator review of one of the Board decisions specified as final, or deemed to be final by the Administrator, under § 405.1875(a)(2), or of judicial review of a final agency decision as described in § 405.1877(a) and (c)(3), as applicable. However, we also propose that where the Board or hearing officer(s) authorize discovery, or compel disclosure, of a matter for which a party or non-party made an objection based on privilege, or some other protection from disclosure, that portion of the discovery ruling would be reviewable immediately by the Administrator. If a party or non-party were required, over its objection, to disclose privileged materials or comply with an unduly burdensome request, the damage could not be undone by a reversal of the order by the Administrator in the context of review of the Board's or hearing officer(s)’ final decision. For Administrator review of an order to be meaningful, it has to be available immediately to the party or non-party. We would provide for an automatic stay where the party or non-party, as applicable notifies the Board or intermediary hearing officer(s) of its intention to seek immediate review. The duration of the stay would be limited to no more than 15 days in the case of Board proceedings and to no more than 10 days in the case of intermediary hearing officer(s) proceedings. Under proposed §§ 405.1875(c)(1) and 405.1834(c)(3), a request for a review would have to be made within 5 business days after the party or non-party received notice of the Board's or intermediary hearing officer's ruling. If the Administrator grants a request for review or takes own motion review before the expiration of the stay, the stay would continue until the Administrator or CMS reviewing official renders a written decision, but if the Administrator does not grant or take review within the time allotted for the stay, the stay is lifted and the Board's or hearing officer(s)’ ruling stands. We believe our proposal strikes an appropriate balance between the need to maintain the orderly flow of cases before the Board or the hearing officers, and a party's right to assert privilege or to be free from unduly burdensome requests.

O. Subpoenas (§ 405.1857)

We propose to revise and clarify our procedures for the Board issuance of subpoenas. In addition to specifying in some detail the procedures for requesting subpoenas and the required contents for subpoenas, we would make the subpoena process similar to the discovery process under § 405.1853 in several respects.

In proposed § 405.1857(a), we would impose time limits for requesting subpoenas that are similar to those we propose for discovery requests and orders. For subpoenas requested for purposes of discovery, a party would be allowed to request a subpoena no later than 90 days before the scheduled starting date of the Board hearing, and for subpoenas requested for purposes of an oral hearing, a request would have to be made at least 45 days before the scheduled starting date of the Board hearing. In addition, for purposes of a discovery subpoena or a hearing subpoena, the Board would not be allowed to issue a subpoena any later than 75 days, or 30 days, respectively, before the scheduled starting date of the Board hearing. For good cause, the Board would be allowed to extend the time for requesting a subpoena or for issuing a subpoena, provided that it gave certain procedural protections (including allowing any party, and CMS or any other non-party affected by the subpoena, the opportunity to comment on the proposed extension).

Consistent with our view that discovery should be available in appropriate circumstances from non-parties, we propose to specifically state in § 405.1857(a) that a subpoena may be issued to a non-party. Section 205(d) of the Act authorizes the Secretary to issue subpoenas requiring attendance, testimony, and production of evidence relevant to the matter under investigation. Section 1878(e) of the Act provides that the provisions of section 205(d) apply to the Board to the same extent that they apply to the Secretary. Section 405.1857 currently provides that the Board, either upon its own motion or upon the request of a party, may issue subpoenas “when reasonably necessary for the full presentation of a case.” There may be instances when the Board or a requesting party believes that a non-party should be subpoenaed to produce documents or testify. This section does not specify whether the Board's subpoena authority extends to non-parties. Therefore, we propose to revise § 405.1857 to clarify that a non-party may be subpoenaed by the Board. We believe this proposed revision is justifiable in view of the authority to issue subpoenas granted to the Board under section 1878(e) of the Act. We believe a non-party's rights would be adequately protected by extending to it the same rights a party would have in responding to a subpoena or subpoena request, see proposed § 405.1857(c)(3), and by allowing it to seek immediate Administrator review of a Board subpoena in some circumstances, (see proposed § 405.1857(d)(2)).

In proposed § 405.1857(d), we would propose the same general rule and exception for Administrator review of Board subpoenas that we propose for Administrator review of Board discovery rulings. That is, the rule would be that any subpoena issued by the Board would be non-final and not subject to immediate review, with the exception that immediate Administrator review could be had where the Board issued a subpoena for a matter for which a party or non-party made an objection based on privilege, or some other protection from disclosure. Our general rule and exception for Administrator review of Board subpoenas are based on the same considerations that led us to propose our general rule and exception

for Administrator review of Board discovery rulings.

In proposed § 405.1857(e), we would specify that only the Administrator has the authority to seek enforcement of a Board subpoena. We believe that because the Administrator is the Secretary's designee as the final administrative authority for appeals under section 1878 of the Act and has the authority to review Board issuances of subpoenas, it is appropriate that the Administrator have sole authority to seek enforcement of a subpoena. For example, it would make little sense to have the Board seek enforcement of a subpoena that the Administrator in the course of its review authority later determines to have been issued erroneously. Our proposal would also avoid any potential conflict whereby the Board would attempt to enforce a subpoena directed at CMS or the Secretary that the Administrator believes should not be enforced.

P. Record of Administrative Proceedings (§ 405.1865)

Section 405.1865, entitled “Record of Board Hearing,” requires that a “complete” record be made of the proceedings at the hearing before the Board, but does not specify what materials are to be made part of the record. It also does not explain how evidence or other material that is excluded by the Board or the Administrator is to be segregated in order to ensure that such excluded material is not inadvertently considered by the Administrator or by a court. We propose to amend § 405.1865 to address with specificity the required contents of the record on appeal and to explain how excluded material is to be treated. We would change the title from “Record of Board Hearing” to “Record of administrative proceedings,” to reflect that the recordkeeping requirements apply not only to Board review but to Administrator review as well. New paragraph (a) would specify that all evidence, argument and any other tangible material (admissible or inadmissible) received by the Board, as well as a transcript of the proceedings of any oral hearing before the Board, be made part of the record of the appeal. Paragraph (a) would also provide that a copy of such transcript must be made available to any party upon request. Proposed new § 405.1865(b) and (c) would make a distinction between the unappended record and an appendix to the record (although, as indicated above in the discussion of proposed paragraph (a), the term “record” is intended to encompass both the unappended and any appendix to the record). For purposes of the Board's decision, paragraph (b) would provide that the record would consist of such evidence and other materials accepted by the Board, as well as the transcript(s) of any oral hearing(s) before the Board. Any evidence ruled inadmissible by the Board, and any other material not considered by the Board in making its decision, must be, to the extent practicable, clearly identified and segregated in an appendix to the record for the purpose of any review by the Administrator and/or the judiciary.

For purposes of Administrator review, § 405.1865(c) would provide that the administrative record also includes all documents and any other tangible matter submitted to the Administrator by the parties to the appeal or by any non-party, in addition to all correspondence from the Administrator or the Office of the Attorney Advisor and all rulings, orders, and decisions by the Administrator. It would also specify that the provision in proposed § 405.1865(b), that excluded evidence and other non-considered matter should be segregated and placed in an appendix, also pertains to evidence or other matter submitted to the Administrator and found inadmissible or not considered by the Administrator. Finally, paragraph (c) would also provide that the Administrator has the authority to reverse the Board's determination regarding the admissibility of evidence or other matter. That is, the Administrator may exclude evidence or other matter that was admitted and considered by the Board if the Administrator determines that such evidence or other matter should not have been admitted and considered, and the Administrator may admit and consider evidence or other matter that was excluded and not considered by the Board if the Administrator determines that such evidence or other matter should have been admitted and considered by the Board.

Q. Board Actions in Response to Failure To Follow Board Rules (§ 405.1868)

Section 1878(e) of the Act provides the Board with “full power and authority to make rules and establish procedures, not inconsistent with the provisions of this title or regulations of the Secretary, which are necessary or appropriate to carry out the provisions of this section.” In accordance with the broad latitude granted the Board under this provision, we propose to add a new § 405.1868 to specify that the Board has authority to take appropriate actions for failure to follow its established procedural requirements or for inappropriate conduct during hearings. In proposed § 405.1868(a), we would set forth this statutory language in the regulations to clarify the basis and breadth of the Board's authority for conducting hearings under section 1878 of the Act.

As discussed previously, the Board has an unusually large backlog of cases that results in substantial delays in hearings. The Board is not able to dispose of cases expeditiously, in part, because of deliberate tactics by the parties to the hearing to delay the proceedings. One of the major objectives of administrative dispute resolution is to provide a decision as quickly as possible, while still allowing each party a fair opportunity to present its case. Therefore, we are proposing to specify in the regulations how the Board would exercise its authority to take appropriate action in response to undue delay and/or a violation of its orders or rules. We propose to add a new § 405.1868(b) to provide that if the provider fails to meet any filing or procedural deadlines or other requirements established by the Board, the Board may dismiss the appeal, issue an order requiring the provider to show cause why the Board should not dismiss the appeal, or take other appropriate action. Also, proposed § 405.1868(c) would specify that if the intermediary fails to meet any filing or procedural deadlines or other requirements set by the Board, the Board may issue a decision based on the written record submitted to that point or take other appropriate action. We note that, as discussed above, the Board would also have discretion to grant an extension of time to a party that has failed to meet a filing or procedural deadline, but only if the party shows good cause for the delay in accordance with proposed § 405.1835(e).

R. Scope of Board's Authority in a Hearing Decision § 405.1869)

Section 1878(d) of the Act and § 405.1869 give the Board the power to affirm, modify, or reverse the intermediary's findings on each specific matter at issue in the intermediary determination for the cost reporting period under appeal, and to make additional revisions on specific matters regardless of whether the intermediary considered these matters in issuing the intermediary determination. We would clarify in § 405.1869(a) and (b) that the Board's power to make additional revisions in a hearing decision does not authorize the Board to consider or decide a specific matter at issue for which it lacks jurisdiction (see § 405.1840(b)) or which was not timely raised in the provider's hearing request.

We would also revise the title of § 405.1869 slightly.

S. Board Hearing Decision (§ 405.1871)

We propose to revise current § 405.1871 to provide more specificity as to the types of findings of fact and conclusions of law each Board decision must contain. We believe these revisions are appropriate as they will help ensure that the parties are fully informed as to the basis and reasoning of the Board's decision, and will also assist the Administrator or a court in determining whether or to what extent a Board decision should be upheld. Section 405.1871(a) states that the Board's decision must be based on evidence “as may be obtained or received by the Board.” We would revise this statement by clarifying that the Board's decision must be based on the admissible evidence from the Board hearing and such other admissible evidence and written argument or comments as may be received by the Board and included in the record. Consistent with our proposed revisions to § 405.1840 (Board jurisdiction) and § 405.1842 (expedited judicial review), we would require that the Board's decision contain findings of fact and conclusions of law regarding the Board's jurisdiction over each specific matter at issue. (We propose to delete current § 405.1873, Board's jurisdiction, as no longer necessary.) We would also require the Board's decision to state whether the provider carried its burden of production of evidence and burden of persuasion, by establishing by a preponderance of the evidence that the provider is entitled to relief on the merits of the matter at issue. This requirement would ensure that the Board correctly allocated the burden of production and burden and proof on the provider, in accordance with our regulations at 42 CFR, part 413, CMS Ruling 79-60C, caselaw (see,

for example, Butler County Mem'l. Hosp.

v.

Heckler

, 780 F.2d 352 (3d Cir. 1985);

Fairfax Hosp. Ass'n

v.

Califano

, 585 F.2d 602 (4th Cir. 1978)), and general principles of administrative law. We would also require the Board's decision, with respect to any issue for which the policy expressed in a CMS instruction (other than a regulation or ruling) is dispositive but for which the Board would not affirm the intermediary's adjustment, to explain how it gave great weight to such instruction (as required by § 405.1867) but did not affirm the intermediary's adjustment. This requirement would ensure that the Board is giving proper weight to CMS instructions (other than regulations and Rulings, which are binding on the Board) and would allow a reviewing entity to discern the Board's specific disagreement with the policy expressed in the instruction.

In proposed § 405.1871(b), we would revise the statement in current paragraph (b), that the Board's decision is final and binding unless reviewed by the Administrator (or reopened and revised), to say that the Board's decision is final and binding unless the Administrator renders a decision reversing, modifying, affirming, or remanding the Board's decision (or unless the Board's decision is reopened and revised). The purpose of the proposed revision is to clarify that the act of taking review, by itself, that is, without a subsequent timely decision by the Administrator, will not provide a Board decision non-final and non-binding. However, consistent with proposed changes to §§ 405.1836(e)(2), 405.1842(g)(1), 405.1853(e)(6)(ii), 405.1857(d)(2), and 405.1868(f)(2), we also propose to clarify in paragraph (b) that the Board's decision is inoperative during the 60-day period of review by the Administrator.

T. Administrator Review (§ 405.1875)

[If you choose to comment on issues in this section, please include the caption “Administrator Review” at the beginning of your comments.]

We propose to clarify the existing procedures for obtaining Administrator review of a Board hearing decision, and to address what other types of Board decisions are subject to Administrator review, the timing of such review, and the procedures for obtaining such review.

We would revise § 405.1875(a) in several ways. We would revise the material in current paragraph (a)(2) relating to the role of the Office of the Attorney Advisor, and place it in the introductory language of paragraph (a). We would require all requests for Administrator review, as well as all written submissions to the Administrator specified in § 405.1875(c), whether they be from a party, or from an affected non-party such as CMS, to be sent to the Office of Attorney Advisor. We would also specify that the Office of Attorney Advisor must examine each Board decision and each review request and written submission, of which it becomes aware, in order to assist the Administrator in the exercise of his or her discretionary review authority. We say “of which it becomes aware” because we do not propose that the Board would be required to send all jurisdictional decisions and interlocutory orders and rulings to the Office of Attorney Advisor, as we do not believe it would be practicable to require the Board to do so, given the large number of such decisions and rulings. The Board does send a copy of all its decisions on the merits, including EJR decisions, to the Office of Attorney Advisor, and we would codify this practice in paragraph (a).

We would specify in proposed § 405.1875(a)(1) that the date of rendering of any Administrator decision must be no later than 60 days after the date of receipt by the provider of a reviewable Board decision or action. The date of rendering is the date the Administrator signs the decision, and not the date the decision is mailed or otherwise transmitted to the parties.

In proposed § 405.1875(a)(2), we would specify the types of final Board decisions that are subject to immediate review by the Administrator. The types of final decisions that the Board may issue, and which are subject to immediate review by the Administrator, would be specified in paragraph (a)(2) as: Board Hearing Decision (see § 405.1871); Board Dismissal Decision (see §§ 405.1836(e)(1) and (e)(2), § 405.1840(c)(2), §§ 405.1868(d)(1) and (2)); and Board Expedited Judicial Review Decision (see §§ 405.1842(h)). In addition to those decisions that would be specified as final in paragraph (a)(2), the Board may issue a decision or take some type of action from time to time that may have the characteristics of a final decision. Therefore, so as not to make the list of Board decisions specified in paragraph (a)(2) exhaustive, we propose that the Administrator would have the authority, in a given case, to deem a Board decision or action to be final and thus subject to immediate review. (For example, the Administrator might deem a Board remand order to be final if it ordered the intermediary or CMS to take certain action, which, if resulting in the reimbursement of costs or the granting of other relief, the Secretary would be unable to appeal. (see

Colon

v.

Sec'y of HHS

, 877 F.2d 148 (1st Cir. 1989);

Stone

v.

Heckler

, 722 F.2d 464 (9th Cir. 1983), and cases cited therein.)) We say “in a given case” because the fact that the Administrator would deem a particular action to be final in one case would not entitle a party to seek immediate review in another case, based on the party's belief that the action in the second case is similar to the action in the first case. Rather, upon request or on his or her own motion, the Administrator would have to specifically deem the Board's action in the second case to be final for purposes of immediate review.

Proposed § 405.1875(a)(3) would then specify that any Board decision or action not specified as final, or deemed to be final by the Administrator in a given case under paragraph (a)(2), would be non-final and not subject to immediate review, except for the following: a Board ruling authorizing discovery or disclosure of a matter for which an objection was made based on privilege or other protection from disclosure as case preparation or confidential material; and, a Board subpoena compelling disclosure of a matter for which an objection was made based on privilege or other protection from disclosure as case preparation or confidential material.

We believe the foregoing revisions would provide greater clarity as to what types of Board decisions may be immediately reviewable by the Administrator. In particular, we note that because the current regulations do not specify that the Board's assumption of jurisdiction in a case is a non-final action and not subject to immediate review by the Administrator, requests have been made by intermediary counsel to have the Administrator immediately rule that the Board incorrectly assumed jurisdiction. (By “immediately,” we mean prior to the issuance of a decision by the Board on the merits of the case.) Such requests have consumed time and resources of the Administrator despite the fact that it has been the Administrator's well-established practice to not immediately review the Board's taking of jurisdiction. By proposing that the Board's finding or assumption of jurisdiction is a non-final action and not subject to immediate review by the Administrator, we hope to avoid any confusion on this matter and to conserve needed resources. Conforming changes on this point would also be made to § 405.1840(d).

We also believe that the two proposed exceptions to the proposed policy that non-final orders would not be immediately reviewable are necessary and appropriate. Our reasons for the exceptions are also grounded in the recognition that certain non-final orders have a practical finality to them. That is, a Board order authorizing discovery or disclosure of, or a Board subpoena compelling disclosure of, a matter for which an objection was made based on privilege or other protection from disclosure as case preparation or confidential material, is for all intents and purposes final unless it is immediately reviewable, for once the disclosure is made the effects of the disclosures cannot be reversed.

In proposed § 405.1875(b), we would specify an illustrative list of criteria the Administrator will use to determine whether he or she will review a reviewa

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