Medicare Program: Changes to the Medicare Claims Appeal Procedures

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 401 and 405

[CMS-4064-IFC]

RIN 0938-AM73

Medicare Program: Changes to the Medicare Claims Appeal Procedures

AGENCY:

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

ACTION:

Interim final rule with comment period.

SUMMARY:

Medicare beneficiaries and, under certain circumstances, providers and suppliers of health care services, can appeal adverse determinations regarding claims for benefits under Medicare Part A and Part B under sections 1869 and 1879 of the Social Security Act (the Act). Section 521 of the Medicare, Medicaid, and SCHIP Benefits Act of 2000 (BIPA) amended section 1869 of the Act to provide for significant changes to the Medicare claims appeal procedures. This interim final rule responds to comments on the November 15, 2002 proposed rule regarding changes to these appeal procedures, establishes the implementing regulations, and explains how the new procedures will be implemented. It also sets forth provisions that are needed to implement the new statutory requirements enacted in Title IX of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).

DATES:

Effective date:

These regulations are effective on May 1, 2005. However, in view of the wide span of applicability of these rules and the complex, intertwined nature of the affected appeal procedures, not all of these provisions can be implemented simultaneously. Please see section I.E. of the preamble for a full description of the implementation approach.

Comment date:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on May 9, 2005.

ADDRESSES:

In commenting, please refer to file code CMS-4064-IFC. 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 on specific issues in this regulation to

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

. (Attachments should 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-4064-IFC, P.O. Box 8011, Baltimore, MD 21244-8011.

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) 786-7195 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 below.

FOR FURTHER INFORMATION CONTACT:

Michele Edmondson-Parrott, (410) 786-6478 (for issues relating to general appeal rights). Janet Miller, (410) 786-1588 (for issues relating to assignment or authorized representatives). Jennifer Eichhorn Frantz, (410) 786-9531 (for issues relating to initial determinations and redeterminations). Arrah Tabe-Bedward, (410) 786-7129 or Jennifer Eichhorn Frantz, (410) 786-9531 (for issues relating to Qualified Independent Contractor (QIC) reconsiderations). Arrah Tabe-Bedward, (410) 786-7129 or John Scott (410) 786-3636 (for issues relating to expedited access to judicial review, Administrative Law Judge (ALJ) hearings and Medicare Appeals Council (MAC) reviews). Jennifer Collins, (410) 786-1404 or Rosalind Little, (410) 786-6972 (for issues relating to reopenings).

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-4064-IFC 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 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.

Copies:

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This

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, a service of the U.S. Government Printing Office. The web site address is:

http://www.access.gpo.gov/nara/index.html

.

To assist readers in referencing sections contained in this preamble, we are providing the following table of contents.

Table of Contents

I. Background

A. Overview of Existing Medicare Program

B. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA) of 2000

C. Related Provisions of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003

D. Codification of Regulations

E. Implementation of the New Appeal Requirements

II. Analysis of and Responses to Public Comments

A. Overview of Comments on November 15, 2002 Proposed Rule

B. Appeal Rights (§ 405.900 through § 405.912)

1. Basis and Scope, Definitions, General Rules, and Parties to Initial Determinations, Redeterminations, Reconsiderations, Hearings and Reviews (§ 405.902 through § 405.906)

2. Medicaid State Agencies (§ 405.908)

3. Appointed Representatives (§ 405.910)

4. Assignment of Appeal Rights (§ 405.912)

5. Initial Determinations (§ 405.920 through § 405.928)

6. Redeterminations (§ 405.940 through § 405.958)

7. Redetermination, Notification, and Subsequent Limitations on Evidence (§ 405.954, § 405.956, § 405.966)

8. Reconsiderations (§ 405.960 through § 405.978)

9. Conduct of a Reconsideration (§ 405.968 and § 405.976)

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

11. Expedited Access to Judicial Review (§ 405.990)

12. ALJ Hearings (§ 405.1000 through § 405.1066)

13. Remand Authority (§ 405.1034)

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

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

16. Content of ALJ’s Decision (§ 405.1046)

17. Appeals Involving Overpayments (§ 405.1064)

18. Review by the MAC and Judicial Review (§ 405.1100 through § 405.1140)

III. Response to Comments

IV. Collection of Information Requirements

V. Regulatory Impact Analysis

VI. Waiver of Proposed Rulemaking

I. Background

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

A. Overview of Existing Medicare Program

The original Medicare program consists of two parts (Part A and Part B). Part A, known as the hospital insurance program, covers certain care provided to inpatients in hospitals, critical access hospitals, and skilled nursing facilities, as well as hospice care and some home health care. Part B, the supplementary medical insurance program, covers certain physicians' services, outpatient hospital care, and other medical services that are not covered under Part A.

In addition to the original Medicare program, beneficiaries may elect to receive health care coverage under Part C of Medicare, the Medicare Advantage (MA) program. Under the MA program, an individual is entitled to those items and services (other than hospice care) for which benefits are available under Part A and Part B. An MA plan can provide additional health care items and services that are not covered under the original Medicare program. Beginning in January 2006, beneficiaries also can elect to receive prescription drug coverage under Part D of Medicare through the Medicare prescription drug benefit.

Under the original Medicare program, a beneficiary can generally obtain health services from any institution, agency, or person qualified to participate in the Medicare program that undertakes to provide the service to the individual. After the care is provided, the provider or supplier (or, in some cases, a beneficiary) can submit a claim for benefits under the Medicare program to the appropriate government contractor, either a fiscal intermediary (FI) (for all Part A claims and certain Part B claims) or a carrier (for most claims under Part B). If the claim is for an item or service that falls within a Medicare benefit category, is reasonable and necessary for the individual, and is not otherwise excluded by statute or rule, then the contractor pays the claim. However, the Medicare program does not cover all health care expenses. Therefore, if the Medicare contractor determines that the medical care is not covered under the Medicare program, then it denies the claim.

Generally, when a contractor denies a claim, it notifies the provider, supplier, or beneficiary of the denial and offers the opportunity to appeal the denial. The existing appeal procedures for original Medicare are set forth in regulations at 42 CFR part 405, subparts G and H. Separate procedures for appealing determinations made under the Part C program are set forth at subpart M of part 422. There is a similar, separate appeals process for Part D claim determinations set forth at subpart M of Part 423. After an appellant has exhausted the administrative appeal procedures offered under the Medicare program, the Medicare statute provides the opportunity for a dissatisfied individual to seek review in Federal court.

Consistent with section 1852(g)(5) of the Act, the MA regulations provide that enrollees in MA plans who are dissatisfied with determinations regarding their Part C benefits have the right to a hearing before an Administrative Law Judge (ALJ), review by the Departmental Appeals Board (DAB), and judicial review at the Federal district court level in much the same manner as beneficiaries have under the fee-for-service Medicare program. These regulations are codified at §§ 422.600 through 422.612. Section 1860D-4(h) of the Act establishes similar rights for enrollees in Medicare prescription drug plans. To the extent that there are any differences in the appeal procedures for these enrollees, we will address those differences in future Part C and Part D rulemaking documents.

The regulations in part 405 subpart G beginning at § 405.701 describe reconsiderations and appeals under Medicare Part A. When a Medicare contractor makes a determination for a Part A claim, the beneficiary or, in some circumstances, the provider, can appeal the determination. (Consistent with sections 1861(u) and 1866(e) of the Act and § 400.202, the term “provider” generally includes hospitals, skilled nursing facilities (SNFs), home health agencies (HHAs), comprehensive outpatient rehabilitation facilities (CORFs), and hospices, as well as certain clinics, rehabilitation agencies, and public health agencies.) If the determination is appealed, then the contractor reconsiders the initial determination. If the contractor upholds the original determination, a party can request a hearing before an ALJ, provided that the amount in controversy is at least $100. If a party is dissatisfied with the ALJ's decision, a party can request review by the DAB. The component within the DAB that is responsible for Medicare claim appeals is the Medicare Appeals Council (MAC). (Although the Medicare appeals regulations in part 405 contain some limited provisions regarding ALJ and MAC proceedings, these proceedings are generally governed by the Social Security Administration (SSA) regulations at 20 CFR part 404, subpart J.) MAC decisions constitute the final decision of the Secretary and can be appealed to a Federal court. Generally, the lower level of appeal must be exhausted before the appeal can be elevated to the next level.

Medicare Part B appeal procedures are set forth in part 405 subpart H (§ 405.801

et seq.

). Under these

regulations, beneficiaries and suppliers that accept assignment for Medicare claims can appeal to a Medicare contractor for a review of the contractor's initial determination that a claim cannot be paid, either in full or in part. (The term “supplier” is defined under section 1861(d) of the Act, as amended by section 901(b) of the MMA, and means a physician or other practitioner, a facility, or other entity (other than a provider of services that furnishes items or services) under Medicare. This regulation will use the term “supplier” to include physicians.) Suppliers that do not take assignment and providers, in some circumstances, also have appeal rights.

If the contractor's review results in a continued denial of the claim, and the amount in controversy is at least $100, the appellant can request a second level appeal known as a “fair hearing.” If the hearing officer upholds the denial, the appellant can request a hearing before an ALJ, provided that the appellant meets the amount-in-controversy requirement. (We published a ruling, CMS Ruling No. 02-1, which implemented the $100 amount-in-controversy requirement for Part B ALJ hearings specified in section 521 of BIPA for initial determinations made on or after October 1, 2002.

See

67 FR 62478, 62480 (Oct. 7, 2002). For initial determinations prior to October 1, 2002, the amount in controversy threshold was $500 for all services other than home health ($100).) Subsequent aspects of the appeals process for Part B claims are identical to those described above for a Part A claim.

B. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000

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

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

• Revising the time frames for filing a request for Part A and Part B appeals;

• Imposing a 30-day time frame for certain “redeterminations” made by the contractors;

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

• Establishing a uniform amount in controversy threshold of $100 for Part B appeals at the ALJ level;

• Imposing 90-day time limits for conducting ALJ and DAB appeals and allowing appellants to escalate cases to the next level of appeal if ALJs or the MAC do not meet the 90-day deadline; and

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

On November 15, 2002, we published in the

Federal Register

a comprehensive proposed rule (67 FR 69312) to implement the provisions of section 521 of the BIPA, as well as other complementary changes needed to improve the Medicare claim appeal procedures.

Revised section 1869 of the Act also requires that the Secretary establish a process by which a beneficiary can obtain an expedited determination if the beneficiary receives a notice from a provider of services that the provider plans to terminate all services or discharge the beneficiary from the provider. Previously, this right to an expedited review existed under statute only for hospital discharges (under sections 1154 and 1155 of the Act). On November 26, 2004, we published a separate final rule, Expedited Determination Procedures for Provider Service Terminations (69 FR 69252), to respond to comments on that aspect of the November 15, 2002 proposed rule and to set forth the regulations needed to establish new expedited review procedures for provider service terminations.

C. Related Provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)

On December 8, 2003, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted. The MMA includes a number of provisions that affect the Medicare claim appeals process, each of which is summarized below. To the extent that the new statutory language has necessitated revisions or additions to our proposed regulations to ensure that they conform to the MMA, we have incorporated the needed changes into this interim final rule. A brief summary of these provisions follows. To the extent that the MMA provisions entail regulatory changes, a discussion of those changes is set forth in the appropriate section of this preamble.

1. Requirement To Transfer the Administrative Law Judge Function to the Department of Health and Human Services (Section 931 of the MMA)

Section 931 of the MMA requires transfer of the functions of administrative law judges (ALJs) responsible for hearing appeals under title XVIII of the Act (and related provisions of title XI of the Act) from the Commissioner of SSA to the Secretary of the Department of Health and Human Services (DHHS). These ALJs are required to be organizationally and functionally independent from CMS and must report to and fall under the general supervision of the Secretary of DHHS. The DHHS and SSA were required to jointly develop a plan to facilitate this transfer not later than April 1, 2004, and the transfer will take place no earlier than July 1, 2005, but not later than October 1, 2005. On March 25, 2004, DHHS and SSA submitted a report to the Congress that describes the process through which DHHS and SSA will accomplish the transfer of responsibility for the ALJ function. A copy of that report is available online at

http://www.hhs.gov/medicare/appealsrpt.pdf

.

2. Process for Expedited Access to Judicial Review (Section 932 of the MMA)

Section 1869(b) of the Act provides for expedited access to judicial review in situations involving Medicare claims appeals. Section 932 of the MMA amends section 1869(b) of the Act by requiring a review entity to respond to a request for expedited access to judicial review in writing within 60 days after receiving the request. The term “review entity” means up to three reviewers who are ALJs or members of the Departmental Appeals Board as determined by the Secretary. If the review entity does not act within the 60-day deadline, then the party can request judicial review. Expedited access to judicial review can be granted when the MAC does not have authority to decide questions of law or regulation relevant to matters in controversy and there is no material issue of fact in dispute.

See

§ 405.990.

3. Revisions to the Medicare Fee-for-Service Appeals Process (Section 933 of the MMA)

a. Requirement for Full and Early Presentation of Evidence (Section 933(a))

Section 933(a) of the MMA amends section 1869(b) of the Act to require providers and suppliers to present any evidence for an appeal no later than the

QIC reconsideration level, unless there is good cause that prevented the timely introduction of the evidence. In this interim final rule with comment, we are adopting regulations to specify that in the absence of good cause, a provider, supplier, or beneficiary represented by a provider or supplier must present evidence at the QIC level. Evidence not presented by the parties at the QIC level cannot be introduced at a higher level of appeal.

See

§ 405.956(b)(8), § 405.966(a), § 405.1018, and § 405.1122(c).

b. Use of Patients' Medical Records (Section 933(b))

Section 933(b) of the MMA amends section 1869(c)(3)(B)(i) of the Act to require QICs to review an individual's medical records when conducting a reconsideration involving medical necessity.

See

§ 405.968(a).

c. Notice Requirements for Medicare Appeals (Section 933(c))

Section 933(c) of the MMA amends sections 1869(a), 1869(c), and 1869(d) of the Act to require appeal notices issued at the initial determination, redetermination, reconsideration, and ALJ levels to include certain information. As amended, section 1869(a)(4) of the Act requires that a notice of an initial determination include the reasons for the determination, including whether a local medical review policy (LMRP) or local coverage determination (LCD) was used. The notice of initial determination must also include procedures for obtaining additional data concerning the determination and notification of any applicable appeal rights, including instructions on how to request a redetermination.

See

§ 405.921(a).

Section 1869(a)(5) of the Act specifies that a notice of redetermination must include the specific reasons for the redetermination, a summary of the clinical or scientific evidence used to make the redetermination, if applicable, information on how to obtain additional information concerning the redetermination, and notification of any applicable appeal rights.

See

§ 405.956.

Reconsideration notices, under the amended section 1869(c)(3)(E) of the Act, are required to include information about applicable appeal rights.

See

§ 405.976. Section 1869(d) of the Act is also amended to require that notices of ALJ decisions give the specific reasons for the decision, including, if applicable, a summary of the clinical or scientific evidence used in making the decision, the procedures for obtaining additional information about the decision, and any applicable appeal rights.

See

§ 405.1046(b). Additionally, section 933 of the MMA amends sections 1869(a), 1869(c), and 1869(d) of the Act to require all appeal notices to be written in a manner calculated to be understood by a beneficiary.

d. Qualified Independent Contractors (QICs) (Section 933(d))

Prior to the MMA, section 1869(c) of the Act, as amended by section 521 of BIPA, required the Secretary to enter into contracts with at least 12 entities called qualified independent contractors (QICs) to conduct reconsiderations of contested claim determinations. Section 1869(c) sets forth certain requirements for the QICs and their reviews and panels. Section 933(d) of the MMA makes a number of revisions to section 1869(c) of the Act, including providing additional detail regarding the eligibility requirements for QICs (section 933(d)(1) of the MMA) and the eligibility requirements for QIC reviewers (section 933(d)(2) of the MMA). We have added § 405.968(c)(3) to reflect the requirement of section 1869(g)(1)(C) that where a claim pertains to the furnishing of treatment by a physician, or the provision of items or services by a physician, a reviewing professional must be a physician. In addition, section 933(d)(3) of the MMA amended section 1869(c)(4) of the Act to reduce from 12 to 4 the minimum number of QICs with whom the Secretary must contract.

4. Process for the Correction of Minor Errors or Omissions Without Pursuing an Appeal (Section 937 of the MMA)

Section 937 of the MMA requires that the Secretary develop a means of allowing providers and suppliers to correct minor errors or omissions to claims submitted under the programs under title XVIII without initiating an appeal. The statute specifies that this process be available no later than December 8, 2004. We have revised § 405.980 to allow providers and suppliers to make these corrections through the reopenings process.

See

§ 405.927 and § 405.980.

This process was developed in consultation with Medicare contractors and representatives of providers and suppliers, as required by section 937 of the MMA. We published an article on April 30, 2004 that is available online at

http://www.cms.hhs.gov/medlearn/matters/mmarticles/2004/SE0420.pdf

to address the implementation of section 937 and consulted with providers and suppliers about this implementation during open door forums held between August 3 and August 31, 2004. We also created an e-mailbox,

PBG937@cms.hhs.gov,

for providers and suppliers to comment on our proposed implementation. The comment period closed September 10, 2004.

5. Appeals by Providers When There Is No Other Party Available (Section 939 of the MMA)

In situations where a beneficiary dies and there is no other party available to appeal an unfavorable determination, section 939 of the MMA amends section 1870 of the Act to permit a provider or supplier to file an appeal.

See

§ 405.906(c).

6. Revisions to the Appeals Time Frames and Amounts in Controversy (Section 940 of the MMA)

Sections 1869(a)(3)(C)(ii) and 1869(c)(3)(C)(i) of the Act as added by section 521 of BIPA established 30-day decision making time frames at both the redetermination and reconsideration levels. Additionally, section 1869 (b)(1)(E) of the Act established the amount in controversy (AIC) requirement for ALJ hearing requests and judicial review as $100 and $1000, respectively. Section 940 of the MMA amended these provisions so that the decision-making time frame for redeterminations and reconsiderations is 60 days and the AICs for ALJ hearings and judicial review will now be adjusted annually, beginning on January 1, 2005, by the percentage increase in the medical care component of the consumer price index (CPI) for all urban consumers and rounded to the nearest multiple of $10.

See

§ 405.950(a), § 405.970(a), and § 405.1006. A conforming amendment applies these AICs to the Part C MA program as well, and we have proposed that they apply to Part D when the new prescription drug benefit becomes available in January 2006.

See

69 Fed. Reg. 46,866, 46,910, and 46,911, 46,722 for the MA proposed rule and 69 Fed. Reg. 46,632 for the Part D proposed rule. (The medical care component of the CPI increased by 4.5 percent in 2004. Consequently, the AIC in 2005 for ALJ hearings will remain $100, and the AIC for judicial review will be $1,050.)

7. Determinations of Sustained or High Levels of Payment Errors (Section 935(a) of the MMA)

Consistent with section 1893(f)(3) of the Act, as amended by section 935(a) of the MMA, determinations by the Secretary of sustained or high levels of payment errors are precluded from administrative or judicial review.

See

§ 405.926(p).

8. Limitations on Further Review of Prior Determinations (Section 938(a) of the MMA)

Section 1869(h)(6) of the Act, as amended by section 938(a) of the MMA, requires that there must be no administrative or judicial review of “prior determinations” on coverage of physicians” services, a new aspect of the Medicare program that the MMA specifies must begin by June 2005. See § 405.926(q).

D. Codification of Regulations

The current regulations governing Medicare administrative appeals are set forth in 42 CFR part 405, subparts G and H. These regulations will continue to be necessary for an indefinite transition period until the completion of all appeals that result from initial determinations made before the implementation of the new procedures set forth in this interim final rule. However, the new BIPA and MMA provisions make possible a largely uniform set of appeals procedures that can be applied for claims under both Parts A and B of Medicare. Therefore, this interim final rule establishes a new subpart I of part 405 that sets forth in one location the administrative appeals requirements for Medicare carriers, fiscal intermediaries (FIs), QICs, ALJs, and the MAC. The major subjects covered in subpart I of part 405 are as follows:

•

General Rules (§ 405.900 through § 405.912)

—Definitions and requirements concerning initial determinations, parties to appeals, appointing a representative, and assigning appeal rights.

•

Initial Determinations (§ 405.920 through § 405.928)

—Requirements concerning the processing time frames for initial claim determinations, descriptions of actions that are initial determinations, and the effect of an initial determination.

•

Redeterminations (§ 405.940 through § 405.958)

—Requirements concerning requesting a redetermination, the redetermination process, applicable notice requirements, and the effect of a redetermination.

• QIC Reconsiderations (§ 405.960 through § 405.978)—Requirements concerning requesting a reconsideration, the reconsideration process, applicable notice requirements, and the effect of a reconsideration.

•

Reopenings (§ 405.980 through § 405.986)

—Requirements concerning reopening of determinations and decisions, including the good cause standard, content requirements for notices of revised determinations or decisions, and the effect of a revised determination or decision.

•

Expedited Access to Judicial Review (§ 405.990)

—Requirements concerning obtaining expedited access to judicial review.

•

ALJ Hearings (§ 405.1000 through § 405.1064)

—Requirements concerning requesting a hearing, the hearing process, applicable notice requirements, the effect of an ALJ's decision, and the applicability of national and local coverage determinations.

•

MAC Review (§ 405.1100 through § 405.1140)

—Requirements concerning requesting a review, the review process, applicable notice requirements, the effect of a review decision, and the requirements for requesting judicial review.

E. Implementation of the New Appeal Requirements

We believe that the changes set forth in this interim final rule, in conjunction with the introduction of a new case-specific appeal data system that we are now developing, will produce substantial improvements in the efficiency of the Medicare claims appeal process. We expect that the implementation of these new appeal procedures, along with the transfer of the ALJ function from SSA to DHHS, will reduce appellants' concerns over the fairness and timeliness of Medicare appeal decisions. The introduction of QICs, in particular, will not only reassure appellants of the independence of the reconsideration process, but also offer them for the first time routine reconsideration, by a panel of physicians or other health care professionals, of all medical necessity issues. As a result, we believe these new procedures will lead, over time, to significant reductions in the need to pursue appeals at the later stages of the appeals system, such as ALJ hearings and MAC reviews.

In the short term, however, we recognize that implementing the changes set forth in this interim final rule may prove challenging both for the entities responsible for conducting appeals and for appellants themselves. For example, there may be an initial increase in requests for second level appeals (that is, reconsiderations by QICs), given the availability of these new independent appeal entities and the introduction of physician review panels, as well as the fact that the time frame for a QIC decision is only half of the current time frame for a contractor fair hearing. Similarly, increases in requests for ALJ hearings or MAC reviews are also possible, in view of the establishment of relatively short decision-making time frames for these entities.

Another challenge involves the need for appeal entities to process appeals that were filed before and after the implementation of these new appeal procedures. For example, the DHHS ALJs and the MAC will need to continue processing appeals received before the implementation of QICs at the same time that they begin to receive appeals of QIC reconsiderations. Thus, until all appeals that were filed under the rules in effect before full implementation of these regulations are completed, different administrative deadlines and procedures may apply, depending on the timing and source of the previous, lower-level appeal decision. Based on previous experience, the need for parallel procedures could extend over a year, as all cases currently in the appeals pipeline are resolved.

In addressing these challenges and implementing the new procedures, we need to balance the goal of implementing the new procedures as quickly as possible with our responsibility to facilitate a clear and well-organized transition to the new procedures for appellants and appeals entities alike. We also need to ensure that existing appeals continue to be carried out as expeditiously as possible as we transition fully to the new appeals procedures. These goals drive the implementation approach described below.

The appeal procedures set forth in section 521 of BIPA were to take effect for initial determinations made on or after October 1, 2002. As discussed in the proposed rule, we were unable to fully implement the BIPA provisions by that date without disrupting other fundamental functions of the Medicare program (for example, the processing and payment of claims). We were also aware of the possibility of additional statutory changes, as were subsequently enacted in the MMA. Additionally, we recognize that the MMA has, in some cases, established specific deadlines for implementation of certain appeals provisions. For example, section 933(a)(2) of the MMA establishes an effective date of October 1, 2004 for the prohibition on submission of new evidence, absent good cause, by providers or suppliers in any ALJ or MAC appeal if that evidence was not presented at the QIC reconsideration. For other provisions, the MMA either makes no explicit reference to an effective date, or specifies (under section 933(d)(4)) that certain MMA amendments will be effective as if included in the BIPA legislation; that is, as of October 1, 2002. In the absence of

a specific effective date, the provisions became effective on the date of enactment of the MMA.

Given the unavoidable delays in full implementation of the BIPA changes, it will not be possible to meet all of the MMA deadlines. As a practical matter, full, effective implementation of both the MMA and BIPA provisions can be achieved only in concert with the availability of QICs in the Medicare appeals process. Thus, we believe that full implementation of these regulations must be premised on, and linked to, QIC implementation.

As noted above, another important related MMA provision is the transfer of the ALJ hearing function for Medicare claims appeals from SSA to DHHS. Section 931(b) of the MMA mandates that this transition take place not earlier than July 1, 2005, and not later than October 1, 2005. We have also taken this impending change into account in establishing the implementation schedule for the new appeals provisions set forth in this interim final rule.

Based on all of these considerations, the table below illustrates the implementation approach that we are following for the provisions of this interim final rule:

Implementation Approach

Section(s)

Effective

§ 401.108

Effective date of interim final rule.

§ 405.900-§ 405.928

Effective date of interim final rule.

§ 405.940, § 944(a), and § 944(b)

FI initial determinations issued on or after May 1, 2005. Carrier initial determinations issued on or after January 1, 2006.

§ 942(a)

Effective date of interim final rule.

§ 405.942(b), § 405.944(c), § 405.946 through § 405.958

All requests for redeterminations received by FIs on and or after May 1, 2005. All requests for redeterminations received by Carriers on or after January 1, 2006.

§ 405.960-§ 405.978

May 1, 2005 for redeterminations issued by FIs January 1, 2006 for redeterminations issued by Carriers.

§ 405.980-§ 405.990

Effective date of interim final rule.

§ 405.1000-§ 405.1018

Effective for all appeal requests stemming from a QIC reconsideration.

§ 405.1020

July 1, 2005 for all ALJ hearing requests.

§ 405.1022-§ 405.1140

Effective for all appeal requests stemming from a QIC reconsideration.

As the table reflects, we have concluded that the best approach to implement the new appeal procedures is to phase in the new procedures beginning in FY 2005. QIC reconsiderations will become available in two stages depending on if an FI or carrier carries out the redetermination. For all FI redeterminations issued on or after May 1, 2005, appellants will have a right to reconsideration by a QIC within 60 days of their request for reconsideration, as well as escalation to an ALJ if the reconsideration is not completed timely. Similarly, the new reconsideration and escalation procedures will take effect for all carrier redeterminations issued on or after January 1, 2006. Thus, in 2006, all new appeals will be carried out under the regulations set forth in this interim final rule, including provisions on—

• Reconsiderations by QICs;

• The new statutory time frames for reconsiderations, ALJ hearings, and MAC reviews;

• The possibility of escalation of cases where the time frames are not met;

• The new notice and evidence rules; and

• Medicare-specific ALJ procedures.

The phased-in approach enables at least two QICs to begin carrying out reconsiderations of appealed FI redeterminations beginning in May 2005, and thus to provide the second level reconsideration envisioned by the statute for Part A claims as soon as possible. In January 2006, at least four QICs will begin carrying out reconsiderations of appealed carrier redeterminations. We believe that this phased-in approach to QIC implementation constitutes the only viable approach for an undertaking of this magnitude and is critical to ensuring that we: (1) Minimize disruption among the current Medicare contractors and current appellants; and (2) have adequate opportunity to educate providers, suppliers, and beneficiaries about the new procedures. Phasing in the transition from the current process serves to eliminate any unnecessary risk in terms of our ability to manage major appeal transitions at all of our FIs and carriers simultaneously. In addition, these contractors are dealing at the same time with numerous statutorily mandated changes (such as the contracting reform changes required under Title IX of the MMA).

We have chosen to implement the changes initially for redeterminations conducted by fiscal intermediaries for several reasons. Fiscal intermediaries are responsible for all appeals involving Part A claims, as well a limited number of Part B claims. The Part A process currently does not include a second level of contractor appeal prior to an ALJ hearing, unlike the Part B fair hearing procedure. Thus, introducing the QIC reconsideration step first for these claims ensures that Part A appellants have access to a second pre-ALJ appeal process as soon as possible. Implementing the new procedures for appeals resulting from FI determinations also gives us an opportunity over several months to identify and address any process problems or other technical difficulties involved in the first stages of QIC reconsiderations before transitioning the much larger Part B appeals workload that is now performed by carriers.

One unavoidable consequence of this change will be that some employees of current contractors will need to be either reassigned or discharged since the FIs and carriers will no longer be conducting fair hearings. However, we believe that the slightly longer transition for the much larger carrier workforce will help to ameliorate the potential human costs of this change.

Finally, we note that wherever it was feasible (that is, where the BIPA and MMA appeals provisions are not fundamentally premised on the introduction of QIC reconsiderations into the appeals process), we have already taken a series of steps to implement the new appeal provisions mandated by the statute, including most notably the transition to a uniform redetermination process by our FIs and carriers. We issued instructions (CR 2620) to effect this change beginning on October 1, 2004. The instructions incorporate both the redetermination decision-making time frames and notice requirements required by the statute

(under sections 1869(a)(2), 1869(a)(3) and 1869(a)(5) of the Act, as amended by section 521 of BIPA and sections 933 and 940 of the MMA). We have also issued instructions to the contractors regarding the implementation of section 939 of the MMA (which took effect upon enactment of the MMA) concerning appeals by providers when there is no other party available because of the death of the beneficiary appellant. These regulations codify those changes.

II. Analysis of and Responses to Public Comments

A. Overview of Comments on November 15, 2002 Proposed Rule

We received 37 timely comments from organizations representing providers and suppliers, beneficiary advocacy groups, administrative law judges, law offices, health plans, and others. The issues most frequently raised by commenters include: Beneficiary protections, particularly for unrepresented beneficiaries; deadlines for filing appeals and time frames for decision-making; notices; differences between an assignee and an appointed representative of a beneficiary; authority of representatives of parties; time frames for the escalation of cases from one level to the next when adjudicators fail to meet their deadlines; the role of the new entities, qualified independent contractors (QICs), that will perform reconsiderations; evidentiary requirements; the perceived formality of administrative law judge (ALJ) procedures, especially adversarial proceedings whereby we enter the process in general, and the impact on beneficiaries in particular; whether an ALJ's role changes and how much deference the ALJ gives to our policies; dismissals and remands of appeals; and distinctions between reopenings and appeals.

These comments and our responses are discussed below, in order of the new regulations text. (For the convenience of the reader, we are presenting below a chart offering a sequential overview of the available procedures and related time frames associated with the former and current appeals process. This chart is for illustrative purposes only, and certain details (such as when escalation of a case is permissible) have been omitted for ease of presentation. For a full description of the applicable requirements, please consult the preamble material that follows and the regulations text.)

ER08MR05.000

B. Appeal Rights (§ 405.900 Through § 405.912)

1. Basis and Scope, Definitions, General Rules, and Parties to Initial Determinations, Redeterminations, Reconsiderations, Hearings and Reviews (§ 405.900 Through § 405.906)

[If you choose to comment on issues in this section, please include the caption “Appeal Rights—Basis and Scope, etc.” at the beginning of your comments.]

In the proposed rule, we proposed that providers would be allowed to file an administrative appeal of Medicare initial determinations to the same extent as beneficiaries. Currently, providers have limited rights to appeal Medicare initial determinations: providers can appeal Medicare determinations only when the determination involves a finding that: (1) The item or service is not covered because it constitutes custodial care, is not reasonable and necessary, or for certain other reasons; and (2) the provider knows, or reasonably could have been expected to know, that the item or service in question is not covered under Medicare (that is, there is a finding with respect to the limitation of liability provision under section 1879 of the Act). Regarding non-participating providers and suppliers, however, we proposed maintaining the current appeal policies.

Consistent with section 940 of the MMA, in this interim final rule, we are making a change to § 405.904(a)(2) concerning the amounts in controversy for ALJ hearings and judicial review. Section 940 of the MMA requires the amount in controversy to be adjusted annually based on the medical care component of the consumer price index for all urban consumers. Accordingly, we have deleted specific references to the previous $100 and $1,000 threshold requirements.

We have made two revisions to proposed § 405.906. In the proposed rule, we inadvertently omitted certain nonparticipating suppliers as potential parties to an initial determination. The interim final rule corrects that error by specifying under § 405.906(a)(2) that a nonparticipating supplier who has accepted assignment can be a party to an initial determination.

Also, consistent with section 1870(h) of the Act, as amended by section 939(a) of the MMA, we have added a conforming provision to § 405.906(c) concerning parties to appeals. Where a provider or supplier is not already a party, revised § 405.906(c) permits the provider or supplier to appeal an initial determination relating to services it rendered to a beneficiary who subsequently dies. This provision is intended to give appeal rights to nonparticipating suppliers who are not considered parties to the initial determination and who may not have secured an assignment of appeal rights from the beneficiary.

Comment:

Several commenters sought clarification on whether the intent of the proposed rule was to give party status to providers on the basis of a “technical denial.” (A technical denial is a denial based on an item or service failing to meet all of the requirements of a Medicare-covered benefit, rather than on a determination that an item or service is not reasonable and necessary under section 1862(a)(1)(A) of the Act, or on a determination that an item or service constitutes custodial care.) Many interpreted the proposed rule as maintaining the current policy that providers do not have appeal rights for these types of denials. Other commenters believed that our intent was to allow providers to appeal to the same extent as beneficiaries and agreed with the proposal. Still other commenters questioned whether the change in policy to expand appeal rights for providers would mean that contractors would no longer deny claims because the claims failed to meet the requirements of the Medicare benefit.

Response:

A provider or supplier can appeal a properly submitted claim only after the contractor has issued an initial determination on that claim. Thus, if a contractor rejects a claim because the claim was improperly submitted (for example, the claim was missing the basic information needed to process it), that rejection does not constitute an initial determination.

Currently, § 405.710(b) allows a provider to appeal an initial determination on Part A coverage only when a contractor determines: (1) That an item or service is not covered because it constitutes custodial care; (2) that an item or service is not covered because it did not qualify as covered home health services because the beneficiary was not confined to the home or did not need skilled nursing care on an intermittent basis; (3) that an item or service is not covered because it was a hospice service provided to a non-terminally ill individual; (4) that the item or service is not covered because it is not reasonable and necessary; and (5) either the beneficiary or provider of services, or both, knew, or could reasonably have been expected to know, that the item or service is excluded from Medicare coverage. Historically, only beneficiaries were afforded the right to appeal claims that were denied because the items or services failed to meet the requirements of the Medicare covered benefit (for example, a denial of home health services due to the lack of a physician certification). Despite this restriction, however, providers routinely accessed the appeals process by acting as the beneficiary's appointed representative in situations where they would otherwise not have had appeal rights.

As discussed in the proposed rule, a clear goal of the BIPA legislation was to establish a uniform appeals process for Part A and Part B claims, and thus for all beneficiaries, providers, and participating suppliers. In keeping with this goal, we believe that the interests of the appeals process would be best served by ensuring that providers are afforded an equal opportunity to be heard with regard to all Medicare initial determinations. Therefore, as proposed, we are specifying that Medicare providers may file administrative appeals of initial determinations to the same extent as beneficiaries. With this change, we achieve consistency in our approach to which individuals or entities can bring an appeal under Part A and Part B.

This interim final rule does not change the available bases for claim denials. Contractors may continue to deny claims on the basis that the item or service is not a Medicare benefit, or more precisely, that the item or service in question does not adhere to all the requirements set forth in the definition of the Medicare benefit. Rather, this interim final rule changes the appeals status of providers and participating suppliers, allowing them to appeal all denials on their own accord.

Comment:

One commenter requested clarification on whether a beneficiary can appeal even if the beneficiary has appointed a representative or initiated a valid assignment of appeal rights. The commenter expressed concern that under proposed § 405.906, any party to the initial determination can request a redetermination. A literal reading of this section would permit a beneficiary to pursue an appeal even if the beneficiary has an appointed representative or has assigned appeal rights to a provider or supplier. In addition, the commenter asked if beneficiaries could pursue an appeal at the same time as the provider.

Response:

The commenter raises two sets of issues: (1) The appeal rights of a beneficiary who has appointed a representative; and (2) the appeal rights of a beneficiary who has assigned these rights to a provider or supplier.

Beneficiaries can either exercise their appeal rights themselves or through an appointed representative, or they can assign their appeal rights to the provider

or supplier that delivered the service or item. (We note that appointment of a representative and assignment of appeal rights are two different and unrelated actions.) Unlike assignment, appointment of a representative does not entail transferring one's appeal rights, nor does it make the appointed representative a separate party to the appeal. An appointed representative is chosen by a party to assist a beneficiary in exercising appeal rights with respect to one or more initial determinations. The beneficiary retains party status during the appeals process, and therefore, never loses the right to appeal to subsequent levels of the appeals process. To avoid confusion regarding representation, either the beneficiary or the appointed representative (but not both the beneficiary and the appointed representative) should request the appeal.

On the other hand, when a beneficiary completes a valid assignment of appeal rights, the beneficiary assigns appeal rights for the particular claim or claims to a provider or supplier who is not otherwise a party to the initial determination. If the beneficiary assigns appeal rights in accordance with § 405.912(f), then the beneficiary transfers any right to request a redetermination, reconsideration, hearing, or MAC review with respect to the item or services at issue, unless the assignment is revoked in accordance with § 405.912(g). While it is not permissible for a beneficiary to file an appeal when a valid assignment of appeal rights is in force, it is possible for more than one party to file a request for an appeal on the same claim when no assignment of appeal rights has been made (for example, a beneficiary and a supplier that has accepted assignment of a claim). We are providing under §§ 405.944(c) and 405.964(c) that if more than one party timely files a request for redetermination or reconsideration on the same claim before a redetermination or reconsideration is made on the first timely filed request, the contractor or the QIC will consolidate the separate requests into one proceeding and issue one determination. These provisions are consistent with the longstanding policy that multiple parties have t he right to appeal the same claim. We note, however, that has been very rare for more than one party to exercise this right.

Comment:

One commenter pointed out that § 405.906(a)(1) lists a beneficiary who has filed a claim for payment or has had a claim for payment filed as a party to the initial determination. The commenter suggested that we revise this provision since beneficiaries in most instances do not file claims.

Response:

As a general rule, we require providers and suppliers to submit claims to seek reimbursement for items or services that they have delivered to beneficiaries. Thus, beneficiaries generally do not need to file claims, but they continue to have the right to do so. (In some situations, however, beneficiaries are prohibited from filing claims on their own, such as for glucose test strips.) Accordingly, we believe that it is necessary to maintain this language in the interim final rule to accommodate those rare instances where beneficiaries may submit claims (for example, because a supplier improperly refuses or fails to submit a timely claim with Medicare for reimbursement). For clarity, we have added § 405.926(n) and § 405.926(o) to reflect that a provider or supplier's failure to request an initial determination or submit a timely claim does not constitute an initial determination, and that determinations with respect to whether an entity qualifies for an exception to the electronic claims submission requirement under 42 CFR, part 424, are not considered initial determinations.

2. Medicaid State Agencies (§ 405.908)

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

In the proposed rule, we drafted a separate provision acknowledging the right of a Medicaid State Agency to pursue an appeal on behalf of a beneficiary who is entitled to benefits under both Medicare and Medicaid. We proposed that a Medicaid State Agency would not be considered a party, unless the agency actually pursued a redetermination on behalf of a dually eligible beneficiary. A contractor would not automatically send a Medicaid State Agency notice of determinations made during the administrative appeals process, nor would the agency be permitted to request QIC reconsiderations, ALJ hearings or MAC reviews, unless the agency actually filed a request for redetermination for a beneficiary. If a Medicaid State Agency filed a request for a redetermination, it would retain party status for the claim throughout the rest of the appeals process.

Comment:

With regard to a Medicaid State Agency filing an appeal on behalf of an individual that is entitled to both Medicare and Medicaid benefits, one commenter recommended that we clarify the definition of a dual eligible.

Response:

A dual eligible beneficiary is one who is eligible for and enrolled to receive benefits under both the Medicare and Medicaid programs. To clarify this concept, we have replaced the proposed text “dually eligible for Medicare and Medicaid” in § 405.908. Instead, the text now states that “[w]hen a beneficiary is enrolled to receive benefits under both Medicare and Medicaid, the Medicaid State Agency may file a request for an appeal with respect to a claim for items or services furnished to a dual eligible beneficiary.” We note that we further clarified in this provision that the Medicaid State Agency's appeal is only with respect to services for which has made payment or for which it may be liable.

Comment:

A commenter recommended that we clarify what qualifies as a timely filed redetermination request under § 405.908.

Response:

A request for a redetermination by a Medicaid State Agency will be considered timely if it meets the requirements at § 405.942. Section 405.942(a) specifies that a request for a redetermination must be filed within 120 calendar days from the date the party receives the notice of the initial determination. Although the Medicaid State Agency is not a party to the initial determination, it is filing a redetermination request with respect to a claim for items and services furnished to a beneficiary. Therefore, the timeliness of the request will be determined by the date that the beneficiary receives the initial determination notice, otherwise known as the Medicare Summary Notice (MSN). For purposes of calculating the date of receipt of the MSN under § 405.942(a)(1), it is presumed that the beneficiary received the MSN 5 days after the date on the MSN, unless there is evidence to the contrary.

3. Appointed Representatives (§ 405.910)

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

Under proposed § 405.910, we incorporated and modified several of the provisions in 20 CFR part 404, subpart R, and 42 CFR part 405, subparts G and H, as they relate to the representation of parties. These provisions eliminated the need for incorporation of the existing SSA regulations regarding appointment of representatives.

Proposed § 405.910(a) sets forth the definition of appointed representative as an individual authorized by a party, or

under State law, to act on the party's behalf in dealing with any of the levels of the appeals process. Appointed representatives do not have independent party status and take action only on behalf of the individual or entity they represent.

Under proposed § 405.910(d), we set forth that in order to be valid, an appointment both needs to be in writing, and signed by the party making the appointment and the individual agreeing to accept the appointment (even when the individual being appointed is an attorney). Proposed section § 405.910(e) establishes the time frame governing the duration of representation as: (1) The life of an individual appeal, and (2) for purposes of appeals of other initial determinations, one year from its original effectuation.

New section 1869(b)(1)(B)(iv) of the Act makes clear that section 206(a)(4) does not apply in the case of Medicare appeals. This section permits the award of attorney's fees (not to exceed 25 percent) from a claimant's entitlement to past-due disability benefits. Therefore, in proposed § 405.910(f), we are explicit that no award of attorney fees can be made against the Medicare trust funds. However, we requested comments on petitions to ALJs to review and approve attorney fees.

In proposed § 405.910(g) through § 405.910(k), we delineated the responsibilities and rights of an appointed representative. In proposed § 405.910(l), we established the rules regarding delegation. (Delegation is the act of empowering another to act as a representative.) In order for an appointed representative to designate another person to act as a representative (the designee), the appointed representative must: (1) Give the designee's name to the party; (2) secure the designee's acceptance of both the representation and the requirements of that representation; and (3) secure the represented party's acceptance of the new arrangement with a signed, written document. We note that the decision on whether to have an appointed representative belongs to the party, and we neither encourage nor discourage representation. Therefore, under proposed § 405.910(m), a party would have the ability to revoke an appointment for any reason, at any time.

Comment:

A commenter suggested amending the regulation to require that appointed representatives for providers be members of the bar. However, this commenter also recommended permitting non-attorneys to act as representatives for beneficiaries, but only if these representatives waived receipt of a fee for their services.

Response:

Section 1869(b)(1)(B)(iv) of the Act establishes that the requirements set out in sections 205(j) and 206 of the Act govern who may serve as a representative for a Medicare beneficiary. Section 405.910 of the regulations permits anyone who satisfies the requirements outlined in section 205(j)(2) to act as a representative. The provisions of § 405.910(b) discuss persons not qualified to act as an appointed representative. Nothing in section 205(j)(2) requires appointed representatives to be members of the bar. Therefore, we do not agree that it is appropriate or necessary to limit providers' access to the administrative appeals process by requiring them to retain attorneys if they wish to appoint a representative.

Similarly, there is nothing in section 205(j)(2) that requires non-attorneys who represent beneficiaries to waive their fees. However, we agree with the commenter that certain precautions be taken to prevent a conflict of interest when the party that provides an item or service is the same party representing the beneficiary in a claim appeal. Therefore, in accordance with section 1869(b)(1)(B)(iii) of the Act, new § 405.910(f)(3) requires that a provider or supplier who both furnished the service being appealed and represents the beneficiary in the Medicare claim appeal, must waive the right to collect a fee for acting as the appointed representative. Additionally, if the appeal involves a question of liability under section 1879 of the Act, the provider or supplier may not represent the beneficiary unless the provider or supplier also waives the right to collect payment for the item or service at issue.

Comment:

We solicited comments on our proposal to require attorneys to petition ALJs for review and approval of fees. A few commenters suggested that appointed representatives who are members of the bar of one of the fifty States, the District of Columbia, or Puerto Rico, not be required to petition an ALJ in order to collect a fee. Instead, one commenter suggested that oversight should be left to the bar of which the attorney is a member.

There were also a number of comments regarding the ability of appointed representatives to charge fees. The commenters noted that the proposed rule addressed only fees charged by attorney representatives, and recommended that we address fees for non-attorneys in this interim final rule. One commenter recommended that the final rule include explicit language requiring non-attorney representatives to waive any right to charge and receive a fee. Finally, other commenters inquired about the applicability of the Equal Access to Justice Act (EAJA) to the new appeals process and recommended that the final rule reference the availability of attorney's fees.

Response:

Section 1869(b)(1)(B)(iv) of the Act establishes that the provisions of sections 205(j) and 206 (other than subsection (a)(4)) of the Act apply to representation for Medicare claim appeals in the same manner as they apply to representation for Social Security claims. By incorporating these sections, the Congress maintained that for appeals before the Secretary, appointed representatives, including attorneys, must obtain approval of fees before charging a party.

Consistent with the current practice of fee petitions before ALJs, and sections 205(j) and 206 (other than subsection (a)(4)) of the Act, as applied by section 1869(b)(1)(B)(iv) of the Act, we are requiring in new § 405.910(f)(1) that an attorney or other person who represents a beneficiary, and who wishes to charge a fee for services rendered in connection with an appeal before the Secretary, must seek approval of the fee from the Secretary. Although it would be up to the Secretary to determine the reasonableness of the fee, we do not believe the provisions in sections 206(a)(2) and 206(a)(3) of the Act will be relevant in determining whether a fee is reasonable. In Social Security appeals, those provisions limit a representative's fee, in certain instances, to the lesser of 25 percent of past due benefits or $4,000 (with the $4,000 cap subject to an update factor determined by the Commissioner of Social Security). Unlike Social Security appeals, Medicare appeals do not involve past-due cash benefits; moreover, the benefits at issue can vary from as little as $100 (the minimum amount in controversy for an ALJ appeal) to $100,000 or more, and we do not believe that applying a 25 percent test to these divergent figures is reasonable. Therefore, the test in sections 206(a)(2) and 206(a)(3) of the Act is irrelevant in determining the reasonableness of representatives' fees. Also, section 206(a)(4) does not apply, because the Medicare program does not involve past-due cash benefits. The process for obtaining fee approval will be further described either in future rulemaking or in ALJ and MAC level procedural manuals or other issuances, as appropriate.

We do not consider services below the ALJ hearing level in connection with

claims in proceedings before Medicare contractors (such as intermediaries, carriers, QICs, QIOs and other independent review entities) to be services provided in connection with proceedings before the Secretary. Section 206(a) authorizes the Commissioner of Social Security to prescribe rules and regulations to govern the representation of claimants in proceedings before the Commissioner. This provision has been interpreted to include proceedings at the ALJ level and above. Thus, appeals before the Secretary of HHS have long been interpreted to include only the ALJ level and above. Therefore, the fee petition provisions do not apply to services rendered below the ALJ hearing level, nor do they apply to representatives of non-beneficiary appellants.

We also agree that fee limitations are appropriate for certain non-attorneys who represent beneficiaries. Accordingly, § 405.910(f)(3) requires providers and suppliers who furnished the items or services in question to waive the right to charge and collect any fee for representing a beneficiary in a claim appeal. This is required by section 1869(b)(1)(B)(iii) of the Act. To ensure that this policy is followed consistently, we will revise the Appointment of Representative form, CMS-1696-U4, to reflect this policy. In § 405.910(f)(4), we also added that the Secretary does not review fee arrangements made by a beneficiary for the purposes of making a claim for third party payment (as defined in 42 CFR § 411.21) even though that representation may ultimately include representation for a Medicare Secondary Payer recovery claim.

Guidelines for the application of Equal Access to Justice Act (EAJA) to claims before the Department may be found at 45 CFR part 13. (The final rule was published in the

Federal Register

at 69 FR 2843 (January 21, 2004)). The final rule governs the applicability of EAJA to the Medicare claim appeals process. The Department intends to review the EAJA provisions to determine what, if any, amendments may be necessary to reflect the changes being implemented in this regulation.

Comment:

A commenter asked what, if anything, are the consequences of failing to satisfy all seven of the requirements set out in proposed § 405.910(d) for making out a valid appointment.

Response:

All of the requirements in new § 405.910(c) are necessary to complete a valid appointment of representation. To clarify this matter, we are specifying under new § 405.910(d) that if any of the required elements are missing or defective, adjudicators must contact the party with a description of the missing documentation or information. Unless the defect is cured, the prospective appointed representative lacks the authority to act on behalf of the party, and is not entitled to obtain or receive any information related to the appeal, including the appeal decision. An individual may also use a CMS-1696 form to appoint a representative. That form contains all of the required elements to complete a valid appointment of representation.

Comment:

We received several responses to our request for comments regarding alternative time frames for the duration of an appointment of representative. Some commenters simply wanted clarification of the policy in the proposed rule. Others understood our proposal to make appointments valid for one year, but wondered if the one-year period began on the date-of-service for the appealed claim, or on the date that the beneficiary, provider or supplier authorized another individual to appeal on their behalf. One commenter argued that because we offered no indication that representatives were initiating appeals without the consent of the appellants, limiting the duration of appointments would serve only to create unnecessary hardships for appellants. Providers, and suppliers would be prevented or delayed from entering the claim appeals process, and beneficiaries with chronic conditions would be required to renew the appointment every year.

Response:

A number of the comments that we received indicate some confusion between the appointed representative provisions at § 405.910 and the assignment provisions at § 405.912. Appointing a representative and assigning appeal rights are two different and unrelated actions under the new appeals process. Beneficiaries have the option of either assigning their appeal rights to a provider or supplier, or appointing a representative to exercise their appeal rights for them.

Under the assignment provision, a beneficiary transfers his or her right to appeal a specific claim or claims to a provider or supplier who is not already a party to the initial determination. In doing so, the beneficiary completely relinquishes any right to appeal the claim or claims at issue and the provider or supplier becomes a party and may appeal.

Appointing a representative, however, does not transfer a party's appeal rights, nor does it make the appointed representative a party to the appeal. An appointed representative is chosen by a party for the duration of one year to assist the party in exercising appeal rights for one or more initial determinations. We believe that once an appeal of an initial determination has been filed, the appointed representative retains the right to manage that appeal through the entire appeals process, regardless of how long it takes to reach a final decision. In § 405.910(e)(3), we state that unless revoked, an appointment is valid for the life of the appeal.

In § 405.910(e)(4), we made an exception for appointments signed in connection with Medicare Secondary Payer recovery claims, because liability, no-fault, and worker's compensation claims often take more than one year to resolve. Where an appointment of representative is related to these recovery claims, the appointment is valid from the date that it is signed through the duration of any subsequent appeal.

We do not agree that either an appointment or the representative's ability to file appeals of future claims continues indefinitely. Appointed representatives have unlimited access to protected health care information, and as we stated in the proposed rule, we have an affirmative duty to ensure that our adjudicators only disclose protected health information to authorized third parties. Taking this into consideration, we believe that it is both necessary and appropriate to limit the duration of an appointment and a representative's ability to file additional appeals to a period of one year, beginning on the day that the appointment becomes effective.

In § 405.910(i)(4), we specifiy that for initial determinations involving MSP recovery issues, the notice of initial determination must be sent to the beneficiary and appointed representative. This differs from non-MSP determinations where only the beneficiary receives the notice of initial determination to prevent more than the minimum amount of personally identifiable health information from being disclosed. Unlike other notices of initial determination, which may include information on claims not at issue, MSP notices of initial determination are limited to include only the minimum necessary amount of information related to the claims at issue.

Section 405.910(e)(1) clarifies that the effective date of the appointment is the day that the Appointment of Representative (AOR) form or other written instrument contains the signatures of both the party and appointed representative. Also, we are

requiring under § 405.910(e)(2) that during this one-year period, representatives must submit a copy of the signed and dated original appointment with each additional appeal that they file on behalf of the party.

Finally, we made one other significant change to § 405.910. Although we proposed provisions in the context of appeals, we solicited comments on whether the appointment of representative procedures should apply for initial determination purposes as well. We did not receive comments on this issue, but we believe there is no reason to imply that different procedures or rules apply to initial determinations. Therefore, we have provided under § 405.910(a) of this interim final rule that the appointment of representative provisions apply for initial determinations, as well as for appeals. Also, under § 405.910(e)(3), an appointment signed in connection with the party's efforts to request payment of a claim is valid from the date that appointment is signed for the duration of any subsequent appeal, unless the appointment is specifically revoked. When a contractor issues an initial determination, it sends a notice of that action only to the party, and not to the party's appointed representative.

Comment:

One commenter was concerned about the inability of an appointed representative to delegate an appointment to another person without first obtaining the party's signature. The commenter opined that requiring a beneficiary's signature in order to delegate an appointment would greatly impede a beneficiary's ability to receive timely representation. By way of example, the commenter noted that a signature requirement would prevent a family member acting as a representative for an incapacitated beneficiary from retaining an attorney or paralegal to represent the beneficiary in a Medicare claim appeal. Additionally, the commenter stated that the signature requirement would prevent appointed representatives who are members of a law firm or a legal services organization from designating a new representative within the firm or organization when program turnover or workload necessitated a change.

Response:

Although we appreciate the administrative benefits to be gained from allowing an appointed representative to delegate an appointment to another individual, the privacy concerns that we noted previously seriously impact our ability to permit delegation in most instances. We believe that the benefits that are gained by ensuring that a beneficiary is made aware when an appointment has been delegated outweigh the burden of obtaining the beneficiary's consent. We also do not believe that this requirement will greatly impede the beneficiary's ability to receive timely representation.

In the case where a beneficiary is no longer mentally capable of giving consent or signing the appointment of representative form, the family member or friend should refer to State law. As defined in § 405.902, an authorized representative is an individual authorized under State or other applicable law to act on behalf of a beneficiary or other party involved in the appeal. Unlike an appointed representative, an authorized representative “stands in the shoes” of the beneficiary. State requirements differ with respect to what is required to legally represent an incompetent beneficiary. Individuals appointed or designated under State statutes may act as authorized representatives. For example, some States have health care consent statutes providing for health care decision-making by surrogates on behalf of patients who lack advance directives and guardians. Other States have laws that grant authority to individuals with durable powers of attorney. In an emergency, a disinterested third party, such as a public guardianship agency, may be an authorized representative, for example, in a situation where the beneficiary's inability to act has arisen suddenly (for example, a medical emergency, a traumatic accident, an emotionally traumatic incident, disabling drug interaction, or stroke), and there is no one who can be genuinely considered to be the beneficiary's choice as his or her authorized representative. Thus, an individual who has legal authority under State law is able to make decisions on behalf of a beneficiary, including the ability to delegate the appointment to another person, without first obtaining the beneficiary's signature.

Attorneys in law firms and legal service organizations present a unique situation. As a general rule, attorneys within the same law firm already are obligated to observe strict confidentiality rules with respect to client information, and therefore, the common practice of delegating cases to other attorneys within the firm does not warrant privacy concerns. Thus, we believe it is appropriate to permit attorneys to delegate another attorney within the same firm or organization as a substitute representative. Section 405.910(l)(2) is amended to reflect this policy.

Comment:

A commenter asked that we provide information on how to change an appointed representative during the appeals process.

Response:

As indicated in the proposed rule, we believe that the decision of whether to retain an appointed representative be left entirely to the party bringing the appeal. Section 405.910(m) permits a party to revoke an appointment at any time and for any reason by submitting a signed, written statement to the entity processing the appeal. The revocation is effective once it is received by the entity hearing the appeal. The party can then appoint a new representative.

4. Assignment of Appeal Rights (§ 405.912)

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

Under proposed § 405.912, we created new regulatory procedures for the assignment of appeal rights by a beneficiary to a supplier or provider of services. We proposed that a provider or supplier that furnished the item or service at issue and that wanted to take assignment of a beneficiary's appeal rights for a particular claim must waive any right to payment from the beneficiary in order to fully protect beneficiaries when their appeal rights are assigned. This does not prohibit the provider or supplier from recovery of any coinsurance or deductible or claiming payment in full where the beneficiary has signed an Advance Beneficiary Notice (ABN) accepting responsibility for payment. We proposed that the assignment be valid for the duration of the appeals process, but only for the items or services listed on the assignment form.

Comment:

One commenter requested clarification on whether an assignment applies to an individual item or service, or to all items or services within an entire claim. The commenter believed that assigning different providers or suppliers for multiple items or services within a claim would be too confusing.

Response:

We do not believe that it is appropriate or necessary to require beneficiaries to relinquish their rights to appeal individual items or services. Consistent with our longstanding policy where we allow beneficiaries to appeal individual items or services within a single claim, § 405.912 permits beneficiaries to assign their appeal rights for individual items or services to providers and suppliers. We believe that this will not cause confusion since each claim originates from a single provider or supplier. The provider or supplier

needs to ensure that the assignment form includes the full range of items or services furnished on the date of service.

Comment:

One commenter expressed concern that obtaining assignment after services were provided would adversely affect providers with transient populations because their beneficiary contact information is usually for temporary residences. The commenter suggested that the assignment form be available to be signed at admission.

Response:

We understand the concerns of the commenter, and agree that the assignment form may be completed at admission. Section 405.912(c) does not prevent a provider and beneficiary from being able to complete and execute the assignment at the time that the beneficiary receives services. When a provider needs to appeal an initial determination that denies payment for the services rendered, the provider can submit the previously signed assignment form with the request for redetermination.

Comment:

One commenter suggested that the regulation be clarified to ensure that the waiver of collection from the beneficiary applies even if the appeal is unsuccessful.

Response:

We agree that the regulation should be clarified to specify that the waiver of the right to collect payment by the assignee remains valid in the event of an unfavorable determination or decision. We have amended our proposed § 405.912(d)(1) to specify that the waiver remains in effect regardless of the outcome of the appeal decision. We have also taken the opportunity to correct an omission in § 405.912(d)(1). The waiver of payment also remains in effect if the assignment is revoked under § 405.912(g)(2) or § 405.912(g)(3). That is, if the assignee fails to file an appeal of an unfavorable decision or if an act or omission by the assignee is determined to be contrary to the financial interests of the beneficiary, the assignee will not be able to collect payment from the beneficiary.

Comment:

One commenter recommended that the waiver of the right to collect from the beneficiary apply regardless of whether there is an ABN in effect. The commenter expressed concern that a provider or supplier might be inclined to require a beneficiary to sign an ABN for any item or service in order to protect any future collection of payment.

Response:

We prohibit providers and suppliers from routinely issuing ABNs for all services. ABNs generally are issued only when the provider or supplier has reason to believe that Medicare is not likely to cover the furnished services. Thus, we are maintaining the provision at § 405.912(d)(2) that an assignee that furnished the item or service is not prohibited from recovering payment when an ABN has been properly executed. We believe an alternative policy would create disincentives for providers and suppliers to bring appeals on behalf of beneficiaries when they believe Medicare is denying coverage improperly. If providers and suppliers are faced with the choice of appealing what they believe to be an erroneous denial or collecting from the beneficiary in the event of an unfavorable decision, they may simply decide to place the burden of appeal on the beneficiary.

Comment:

Some commenters raised concerns about our proposal to permit beneficiaries to revoke an assignment. One commenter recommended that assignment be irrevocable until the appeal is filed or the deadline for filing has expired in order to prevent a provider or supplier from wasting resources pursuing an appeal. The commenter suggested that we establish a time frame for a beneficiary to revoke an assignment. Another commenter requested that we define the specific circumstances that constitute abandonment.

Response:

We believe that it is unnecessary to establish a time frame to limit a beneficiary's right to revoke an assignment. The inherent nature of an assignment protects the interests of a beneficiary since transferring the appeal rights to a provider or supplier precludes the provider or supplier from collecting payment from the beneficiary in the event of an unfavorable determination. We believe that beneficiaries will rarely revoke an assignment; therefore, the possibility of providers and suppliers unnecessarily pursuing appeals is remote. A somewhat more likely scenario involves abandonment, that is, inaction on the part of the assignee to undertake or proceed in the appeals process. Section 405.912(g)(2) addresses this situation by specifying that an assignment may be revoked “[b]y abandonment if the assignee does not file an appeal of an unfavorable decision.”

Comment:

One commenter supported the use of a standardized form for assignment. The commenter suggested that the form include an explanation of assignment and what an assignee does for a beneficiary. The commenter also suggested that proposed § 405.912(d)(2) should be revised to reflect that the assignment may be executed by the beneficiary or his or her representative.

Response:

We agree with the commenter and are developing a standardized form for assignment, as required by section 1869(b)(1)(C) of the Act. This form, which has been consumer-tested with the beneficiary population, contains extensive information to assist beneficiaries in understanding the assignment and execution of their appeal rights.

As mentioned in an earlier response, we added a definition of an “authorized representative” at § 405.902. Authorized representatives (for example, a legal guardian or someone with a power of attorney) possess all the rights associated with the appeals process to the same extent as beneficiaries. Therefore, we do not believe that it is necessary for new § 405.912(c)(2) to reflect that an authorized representative may execute an assignment of appeal rights on behalf of a beneficiary. Appointed representatives under § 405.910, including attorneys, may assist the beneficiary or another party with Medicare appeals, but they do not have any other rights or responsibilities with respect to the beneficiary or another party, and may not sign documents as the beneficiary or party. Thus, an appointed representative may not assign appeal rights under § 405.912 without the beneficiary's or other party's consent.

5. Initial Determinations (§ 405.920 Through § 405.928)

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

Section 1869(a)(2)(A) of the Act establishes that for all claims other than clean claims (a clean claim is a claim that has no defect or impropriety), an initial determination must be concluded, and a notice of that determination must be mailed, by no later than 45 days after the carrier or fiscal intermediary receives the claim. We proposed that interest would not accrue on non-clean claims that were not adjudicated within 45 days. By definition, non-clean claims are often claims that require additional documentation, and therefore take additional time to process.

With respect to clean claims, section 1869(a)(2)(B) of the Act requires that interest accrues if clean claims are not processed within 30 days. This standard remains the same as specified in sections 1816(c)(2) and 1842(c)(2) of the Act.

We proposed to continue to notify parties of the initial determination in writing. The proposed content of the notices included the basis for the determination and notification to the parties of their right to a

redetermination if they were dissatisfied with the outcome of the initial determination. Consistent with existing policy, the Remittance Advice (RA) and Medicare Summary Notice (MSN) would be used as a notice of initial determination.

We also proposed the types of actions that constitute initial determinations, as well as those that do not constitute initial determinations. We generally proposed to maintain the existing policies concerning initial determinations, while at the same time unifying the Part A and Part B rules. We have also included examples specific to Medicare Secondary Payer situations in listing the type of actions that constitute initial determinations. We specified our longstanding policy that SSA will continue to make Part A and Part B entitlement and enrollment determinations. As noted previously in section I.C.1 of this interim final rule, section 931 of the MMA requires the transfer of ALJ hearing functions from SSA to HHS. Although SSA will continue to make Part A and Part B entitlement and enrollment determinations and reconsiderations subject to the requirements set out at 20 CFR Part 404, Subpart J, HHS will be responsible for reviewing entitlement and enrollment decisions at the ALJ and MAC levels. We note, however, that this regulation does not provide the specific procedural requirements that will apply to the adjudication of entitlement appeals. These instructions will instead be provided separately once this interim final rule is published. We believe that this approach will ensure that beneficiaries, providers, suppliers, and other interested parties receive clear guidance regarding the procedures for appealing an entitlement determination at each level of the appeals process.

We addressed the circumstances under which an appeal can be filed when a beneficiary disputes the computation of coinsurance amounts. Previously, our rules stated that beneficiaries could appeal Medicare determinations regarding the “application of the coinsurance feature.” We clarified this provision to state that the contractor's “computation of coinsurance” was considered an initial determination, and therefore, could be appealed. In making this proposal, we considered that for most Part B services, beneficiaries were responsible for a 20 percent coinsurance payment and, since the contractor calculated the percentage, a beneficiary should be able to appeal the contractor's computation. In instances where the coinsurance amount was not computed by the contractor, but rather, was an amount prescribed by regulation (for example, outpatient services), the issue of the appropriateness of the coinsurance amount was not appealable since it was an automatically calculated amount based directly on a fee schedule exempt from review.

We also specified that there be no administrative appeal rights available for certain aspects of initial determinations. For example, under section 1833(t) of the Social Security Act (the Act), administrative appeals are prohibited for issues involving the calculation of coinsurance amounts for outpatient services subject to prospective payment rules, and under section 1848(i) of the Act, the values used to calculate allowable amounts under the physician fee schedule may not be the subject of an administrative appeal. Additionally, we proposed some further examples of actions that are not initial determinations, such as waiver of interest determinations and certain Medicare Secondary Payer actions.

Comment:

One commenter suggested that the initial determination notice contain more details about requesting a redetermination, such as the documentation needed to pursue an appeal. The commenter recommended that the notice give exact citations for the rules and policies upon which the determination is based and explain how to obtain them. The commenter also suggested that the notice include a toll free number that appellants can call to receive copies of coverage rules and policies.

Response:

We agree with the commenter that initial determination notices contain information necessary for beneficiaries to initiate appeals. However, we believe that existing notice requirements are fully compatible with this objective, and we do not believe that additional detail is appropriate.

Currently, beneficiaries receive initial determination notices through the Medicare Summary Notice (MSN), and providers and suppliers receive notices on the Remittance Advice (RA). The MSN is a consumer-tested, customer-friendly monthly statement that lists all of the services or supplies billed to Medicare during a 30-day period. It contains information about requesting an appeal on the bottom of the last page and at the back of each page. The MSN indicates the date that an appeal must be filed in order for it to be considered timely. The MSN also allows beneficiaries to appeal by circling an item, explaining why they disagree, and signing and sending the notice, or a copy of the notice, to a specified address.

We also agree with the commenter that MSNs indicate when the basis for a claim denial involves a local or national coverage determination. Effective during 2003, CMS now requires fiscal intermediaries and carriers to provide references to coverage policies when they describe the basis for claim denials. However, based on nationwide testing of Medicare beneficiary focus groups, CMS does not include regulatory citations in MSNs because they are confusing to beneficiaries. We believe that referring to a local or national coverage determination is more meaningful to beneficiaries in helping them understand the reason their claim has been denied.

The MSN contains the Medicare toll-free number so that beneficiaries can obtain information about various aspects of the Medicare program, including individual claim determinations. Beneficiaries can also use the toll-free number to request a copy of the coverage rule or policy used as the basis to deny a claim, or they may access the policies via the Internet.

Thus, in light of the information already contained in MSNs, we do not believe that it is necessary to modify the initial determination notices sent to beneficiaries. However, we believe it is appropriate to include in the regulations the explicit notice requirements that are set forth under section 933(c)(1) of the MMA. Therefore, § 405.921(a)(1) specifies that contractors must write the MSNs in a manner calculated to be understood by the beneficiary. We have also set forth the statutory content requirements as to the contents of the notice in § 405.921(a)(2). That is, the notice must contain the reasons for the determination, including whether a local medical review policy, local coverage determination, or national coverage determination was applied, the procedures for obtaining additional information concerning the determination, such as the specific provision of the policy, manual, law, or regulation used in making the determination, and notification to the parties of their right to a redetermination if they are dissatisfied with the outcome of the initial determination. The notice also must include instructions on how to request a redetermination. Again, we believe that the existing MSNs meet all the new MMA requirements and have codified these beneficiary notice requirements in § 405.921(a). Furthermore, although the statutory requirements apply only with respect to beneficiary notices, we have adopted very similar requirements for notices to providers and suppliers under

§ 405.921(b). The format and content requirements adopted as the national standard for remittance advice transactions under HIPAA and the corresponding CMS requirements for electronic and paper remittance advice notices already require use of messages or codes to explain initial determinations, and the reasons for any full or partial denial decisions that apply to services on a claim, as well as the appeal rights in relation to the decision. Thus, the MMA requirements for beneficiary notices are generally already in use in the remittance advice notices to providers and suppliers.

Finally, we note that contractors will issue MSNs to beneficiaries only, and not to appointed representatives or assignees. Throughout § 405.910, we have reinforced the concept that appointed representatives have the same right as beneficiaries to receive information on claims only after an appeal has been filed. Consistent with HIPAA, a contractor may not disclose protected health information without a valid appointment. MSNs encompass a range of health services and supplies that were billed to Medicare within a 30-day period. Because an appointed representative may not have authority to receive information on all such services or supplies, we believe that it is appropriate for contractors to disseminate MSNs only to beneficiaries. Furthermore, we believe that it is unnecessary to incur the substantial costs to modify the standard systems to generate MSNs to appointed representatives.

Comment:

We received several comments regarding procedures that should be established when contractors do not meet the statutory deadlines for making initial determinations. Section 521 of BIPA maintains the existing 30-day time frame for 95 percent of clean claims under sections 1816(c)(2) and 1842(c)(2) of the Act, and establishes a 45-day time frame for claims that are defective or require special treatment or substantiating documentation. Some commenters believe that we should create an escalation provision for initial determinations similar to the escalation provisions required by statute for QIC reconsiderations, ALJ hearings and MAC reviews. This would enable parties to proceed to the redetermination level of the appeals process when contractors fail to meet the 45-day statutory time frame. One commenter recommended that when the contractor fails to make an initial determination within 45 days, the claim bypasses the redetermination level and advances to the reconsideration level.

Some commenters argued for contractor penalties such as strict contractor evaluations, sanctions, or non-renewal of contracts based on noncompliance beyond a reasonable threshold. These commenters believed that any exceptions to the 45-day rule should be narrow. Other commenters urged us to assess interest penalties for non-clean claims that would mirror the provision for clean claims. Still other commenters thought that the 45-day time frame for non-clean claims might be too stringent and that we should set up specific, achievable time frames with appropriate penalties to ensure compliance.

Response:

We understand the commenters' concerns regarding the need for contractors to process claims timely and pay them promptly. It is also important that contractors employ appropriate medical review strategies to ensure the appropriate payment of billed claims. When a contractor undertakes medical review on a claim, it is not always possible to pay within 45 days, particularly if a provider or supplier does not submit the additional documentation requested in a timely manner. We believe that protecting the Medicare Trust Funds through medical review of certain questionable claims that are flagged by our system edits is preferable to making inappropriate payments, absent proper evidence. We retain reputable independent third-party auditing firms to ensure that contractors are following all Medicare laws, rules, and regulations.

In addition, we strongly believe that providers and suppliers play a vital role in the FIs' and carriers' ability to meet their decision-making time frames. If providers and suppliers submit clean claims, they can avoid the delays that are associated with processing non-clean claims. The more complete the claim is upon initial submission, the greater the ability of the Medicare contractor to process the claim quickly. Until a determination can be made, however, we continue to believe that no interest should accrue on non-clean claims. In addition, the Congress has authorized interest only in the case of clean, complete claims.

We also believe that it would be inefficient and result in unnecessary costs to escalate undeveloped claims to the redetermination or reconsideration levels. These claims could not be reviewed or reconsidered because there would be no initial determination to review. Furthermore, the Congress weighed the merits of escalation and chose to implement that option only at the QIC level and above.

Comment:

A few commenters suggested that we define the terms “non-clean” and “clean” in the context of claims.

Response:

As defined in sections 1816(c)(2)(B)(i) and 1842(c)(2)(B)(i) of the Act, “[t]he term “clean” claim means a claim that has no defect or impropriety (including any lack of any required substantiating documentation) or particular circumstance requiring special treatment that prevents timely payment from being made on the claim.” Claims that do not meet this definition are considered “non-clean” claims. Since the term “clean claim” is clearly defined in statute, we are maintaining this definition as proposed in § 405.902.

We have also included in § 405.902 other statutory and regulatory definitions, such as, beneficiary, provider, supplier, carrier and fiscal intermediary. We did not define these terms in the proposed rule because they are defined in 42 CFR part 400. However, for the convenience of Medicare appellants, we have decided to provide definitions in this section as well.

Comment:

One commenter believed that we should clearly state whether a beneficiary who has paid for an item or service up front is entitled to any interest that would accrue if the contractor does not pay the clean claim within the statutory time frame, regardless of whether the claim was submitted by the beneficiary or on the beneficiary's behalf. The commenter argued that in this situation, the beneficiary would suffer irreparable harm by the delay in processing the claim, as opposed to the provider or supplier, and paying interest to them would result in their unjust enrichment.

Response:

In the agreement and attestation statement signed by a provider, the provider agrees not to charge beneficiaries for services for which beneficiaries are entitled to have payment made on their behalf by the Medicare program. In accordance with the provider participation agreement, the provider may only bill the beneficiary upfront for any unmet deductible and the applicable coinsurance. Therefore, institutional providers are always paid directly by the FI, including any applicable interest.

Likewise, participating suppliers and suppliers who accept assignment are also precluded from charging the beneficiary more than the unmet deductible and the applicable coinsurance. If the supplier collects any additional payment from the beneficiary before submitting the claim, the supplier must show on the claim form

the amount collected. The carrier then will refund directly to the beneficiary the additional payment along with any applicable interest on the over collected amount. In situations where the supplier does not accept assignment on a claim, the carrier makes payment directly to the beneficiary and includes any applicable interest regardless of whether he or she paid the supplier up-front for the item or service.

Comment:

One commenter asserted that the proposed rule's reference to SSA making initial determinations with regard to entitlement issues was incorrect.

Response:

We disagree with the commenter and maintain our longstanding policy that SSA makes initial determinations concerning applications for enrollment, as well as determinations regarding Part A and Part B entitlement. Consistent with our current regulations at 42 CFR § 405.704(a)(3) and § 405.704(a)(4), we have also added language to § 405.924(a)(3) to specify that an initial determination includes a denial of a request for withdrawal of an application for hospital or supplementary medical insurance or a denial of a request for cancellation of a request for withdrawal of an application for hospital or supplementary medical insurance. Section 405.904(a)(1) clarifies the jurisdictional authority of SSA and DHHS with respect to initial determinations and appeals for applications and entitlement issues. That is, SSA will continue to perform initial determinations and reconsiderations, and DHHS” ALJs and MAC will conduct hearings and reviews. As noted above, we intend to provide further guidance on how ALJs and the MAC will process entitlement appeals in separate instructions.

Comment:

We received a comment on whether proposed § 405.924(b)(13), which defines an initial determination as a determination having a current or potential effect on the amount of benefits to be paid, includes Resource Utilization Group (RUG) categories. The commenter asked that we clarify in the final rule that the appeal rights for RUG reclassifications established in CMS Transmittal A-00-08 are continued in the final rule. The commenter also believes that proposed § 405.906(a)(3) and § 405.940 appeared to grant providers the right to seek redeterminations when a RUG is down coded to another category. However, the commenter noted that this conflicted with the reopening provisions at § 405.980, which seemed to suggest that all adjustments to claims must be handled through the reopenings process.

Response:

As the commenter points out, CMS Transmittal A-00-08, which is now in the Program Integrity Manual at Chapter 6, allows skilled nursing facilities (SNFs) to appeal denials based on section 1862(a)(1)(A) of the Act. Nothing in this interim final rule limits the right of appeal created by CMS Transmittal A-00-08.

Although down coding a RUG category may be considered an initial determination under new § 405.924(b)(12), if the down coding was alleged to be the result of a clerical error as defined in § 405.980(a)(3), then the request for appeal likely can be processed as a request for reopening. This approach is consistent with section 937(a) of the MMA and the reopening provisions at § 405.980, whereby errors or omissions may be corrected without pursuing appeal. We note that, in this interim final rule, we have added a new section at § 405.927 regarding initial determinations that may be subject to the reopenings.

We also note that we have added specific language to new § 405.924(b)(13) to make it clear that the issue of whether a waiver of adjustment or recovery under sections 1870(b) and 1870(c) of the Act is appropriate is an initial determination with respect to a provider, supplier, or beneficiary in the context of both non-Medicare Secondary Payer overpayments and Medicare Secondary Payer recovery claims.

Comment:

One commenter questioned whether the amount of coinsurance owed under the outpatient prospective payment system (OPPS) would be considered an initial determination, given that § 405.924(b)(5) indicates that the computation of coinsurance amounts constitutes an initial determination. The commenter pointed out that § 405.926(b) states that “coinsurance amounts prescribed by regulation for outpatient services under the prospective payment system” are not initial determinations. The commenter believed that section 1833(t)(12) of the Act does not preclude administrative and judicial review of the computation of OPPS coinsurance amounts.

Response:

Section 4523(a) of the Balanced Budget Act of 1997 (BBA) amended section 1833 of the Act by adding subsection (t) which provides for the implementation of a prospective payment system (PPS) for outpatient services. Section 1833(t)(12) of the Act precludes administrative or judicial review of the calculation of the unadjusted coinsurance amount, as well as administrative or judicial review of coinsurance amounts directly premised on base amounts calculated pursuant to section 1833(t)(3) of the Act. Therefore, the unadjusted coinsurance amount under 1833(t)(3) of the Act is not an initial determination subject to any type of review. On the other hand, if a party believes that an item or service was incorrectly coded, leading to a higher coinsurance amount for that service, the party can challenge that determination in an appeal.

Comment:

One commenter argued that inherent reasonableness is an initial determination under proposed § 405.924(b)(13) because it is an issue that has a present or potential effect on the amount of benefits to be paid under Part A or Part B. Another commenter believed that a party who is dissatisfied with an initial determination should be able to appeal a claim where the amount of payment was determined based on the application of an inherent reasonableness policy.

Response:

Sections 1842(b)(8) and 1842(b)(9) of the Act authorize the Secretary to deviate from the payment methodologies prescribed in the Act if the application of those methodologies would result in a payment amount for a particular service or group of services that is determined to be grossly excessive or deficient, and therefore, is not inherently reasonable. Section 1842(b)(8)(A)(i) of the Act requires the Secretary to describe in regulations the factors to be considered in determining an amount that is realistic and equitable.

Furthermore, pursuant to section 1842(b)(9) of the Act, before making any adjustment for inherent reasonableness, the Secretary is required to publish a notice of proposed determination in the

Federal Register

and allow no less than 60 days for public comment on the proposed determination. The public comment period on proposed inherent reasonableness adjustments gives the public an opportunity to raise issues and concerns regarding these adjustments. All issues and concerns that the public raises are given full consideration, and a final determination is published before the actual adjustments in payments are made. Any adjustment would be broadly applicable to a given service or group of services, rather than just to an individual claim determination. Thus, we do not believe that the Congress intended for inherent reasonableness adjustments to payment amounts to constitute initial determinations that are subject to the appeals process. We have modified § 405.926(c) to clarify this issue.

We agree with the commenter that where the amount of payment on a

claim was determined based on an inherent reasonableness policy, this would result in an initial determination that is appealable. It is important to note the difference between an initial determination made on a specific claim, and the payment policy or methodology used to make that initial determination. The latter is not considered an appealable initial determination under this subpart.

We have added six items that also do not constitute initial determinations under § 405.926. Under § 405.926(n), we incorporated CMS” longstanding policy that a finding that a provider or supplier failed to submit a claim, or failed to submit a timely claim, despite being requested to do so by the beneficiary or the beneficiary's subrogee, does not constitute an initial determination, and would preclude the claim from being subject to the appeals process. Second, consistent with section 1893(f)(3)(A) of the Act, as amended by section 935(a) of the MMA, we have added a conforming provision at § 405.926(p) that determinations by the Secretary of sustained or high levels of payment errors are precluded from administrative or judicial review. Also, consistent with section 938(a) of the MMA, § 405.926(q) provides that a contractor's prior determination related to coverage of physicians' services is not subject to the administrative appeals process or judicial review. However, a negative determination would not prevent an individual from obtaining a service, seeking reimbursement and, in the event of a denied claim, appealing the denial under section 1869(b) of the Act. Finally, consistent with established policies, we have added three items at § 405.926(o), § 405.926(r), and § 405.926(s). Under § 405.926(o), determinations with respect to whether an entity qualifies for an exception to the electronic claims submission requirement under part 424 of this chapter are not initial determinations. Section 405.926” provides that requests for anticipated payment under the home health prospective payment system under § 409.43(c)(ii)(2) are not initial determinations. Lastly, claim submissions on forms or formats that are incomplete, invalid, or do not meet the requirements for a Medicare claim and are returned or rejected to the provider or supplier also do not constitute initial determinations. We welcome comments on these additions.

6. Redeterminations (§ 405.940 through § 405.958)

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

a. Requesting and Filing a Redetermination Request

In the proposed rule, we proposed to continue the policy of permitting parties to file their requests for a redetermination not only with the appropriate CMS contractor, as indicated on the notice of initial determination, but also at a local SSA or CMS office. In maintaining this policy for filing requests, we proposed that the date the redetermination request would be considered to be

filed

meant the date the contractor, SSA, or CMS received the request. Additionally, we specified that for purposes of issuing a redetermination, the date of timely filing would be considered as the date that the contractor responsible for the redetermination received the redetermination request. We proposed to allow extensions to the time frames for redetermination requests if a party showed good cause for missing the 120-day deadline. In order to determine whether a party had shown good cause for missing the deadline, the contractor would consider: the circumstances that kept the party from making the request on time; whether the contractor's actions misled the party; and whether the party had any physical, mental, educational, or language limitations that prevented the party from filing a timely request, or from understanding or knowing the need to file a timely request for redetermination.

We also indicated that redetermination requests would need to be made in writing. Previously, Part B requests for review could be made by telephone; however, we proposed to eliminate telephone requests in order to provide a reliable record of the request, and to encourage the submission of evidence to support the request. We proposed that requests would need to be made using a standard CMS form. Alternatively, when not made on a CMS form, the request would need to contain all the elements listed in § 405.944(b), that is, the beneficiary's name, Medicare health insurance claim (HIC) number, specific date of service, and identification of the item or service for which the party was requesting the redetermination, and the name and signature of the party or appointed representative.

We solicited comments on alternative approaches that would be convenient and easy for appellants. We also proposed that a beneficiary or beneficiary's appointed representative could continue to file a request for an appeal using the instructions on the MSN, that is, he or she could satisfy the requirements by circling an item on the MSN, signing the bottom of the MSN, and returning the MSN to the contractor. In situations where more than one party requested a redetermination on the same claim, we proposed that the contractor would consolidate the requests into one proceeding in order to avoid duplication.

Comment:

Several commenters suggested that we clarify the procedures for how fiscal intermediaries and carriers calculate and record the receipt date for redetermination requests. One commenter recommended that we establish that the receipt date is the date the request first arrives at the appropriate address. Another commenter objected to presuming that the receipt of the initial determination, which is used to calculate the time frame for a redetermination request, will be 5 days after the date of the initial determination notice. The commenter argued that often appellants receive initial determinations much later than the date on the notice. In some cases, the provider does not receive the initial determination until a month later. The commenter believed that 10 days would be a more realistic time frame for contractors to assume receipt and begin calculating whether a party met the 120-day time frame for requesting a redetermination.

A few commenters requested that we define “evidence to the contrary” of the presumed 5-day receipt date in order to prevent discrepancies in how different contractors handle requests for redeterminations. One commenter suggested that “evidence to the contrary” should be a receipt from a mail delivery service containing the date of delivery to the appropriate address. Another commenter asked whether a date stamp by the provider would be an acceptable way to verify the date of receipt of an initial determination.

Response:

We appreciate the concerns about calculating and recording the receipt date for appeal requests based on the delivery time for the initial determination notice. We agree that a uniform process needs to be used for calculating and recording the date of receipt of an appeal request. Thus, we proposed to incorporate into the regulations CMS's clear, longstanding policy that the date of receipt is presumed to be 5 days after the date of the initial determination notice. We will carefully monitor our contractors to ensure that they calculate the time frames appropriately. If we determine that any additional instructions are

needed, we will provide them in manual instructions.

We understand that in some cases the initial determination notice will be received later than 5 days from the date of the notice, which is why the regulations allow more than 5 days where there is evidence to the contrary. An example of evidence to the contrary would include a postmark date or a receipt from a mail service containing the date of delivery to the party. We do not believe it would be appropriate to attempt to include in regulations all the possible ways for a party to demonstrate when the party received an initial determination notice. Instead, we will allow adjudicators to exercise their discretion as to whether a party's evidence demonstrates that the party received the initial determination beyond 5 days from the date on the notice. Finally, we note that 120 days is a significant amount of time for a party to file an appeal and that appellants also have an opportunity to request an extension of this deadline; thus, we believe that the calculation of the receipt date for appeal requests based on the prevailing 5-day standard will not pose an undue hardship for most appellants.

Comment:

One commenter requested clarification on whether adjudicators could request appellants to provide proof to support good cause for failing to file an appeal within the allotted time frame.

Response:

Adjudicators may request appellants to provide supporting documentation that demonstrates that they have good cause for filing an appeal beyond the deadline. We strongly encourage appellants to provide supporting documentation when requesting a contractor, QIC, ALJ, or the MAC to consider good cause for filing an appeal late. In fact, an adjudicator can summarily dismiss a request made on the basis of good cause when there is no evidence to support the request.

Comment:

Some commenters raised objections to beginning the decision-making time frame on the date that the contractor received the redetermination request if an appellant filed an appeal at an alternative location. One commenter agreed with this approach, but indicated it would be difficult for appellants to know when the time frame for making a decision started. The commenter suggested that we add a requirement that the contractor notify the appellant when the request has been received and the date the time frame began. Another commenter suggested that we establish a definitive deadline by which an appeal would be presumed received by the appropriate contractor for purposes of tracking the adjudication time frame. The commenter thought that an appellant should be able to presume that a contractor received a request within 60 days; and therefore, the appellant should expect a decision within 90 days. Another commenter suggested that CMS develop a web-based system for local SSA, CMS or contractor staff to enter and immediately transmit the request to the appropriate adjudicator. A few commenters believed that the delayed decision-making time frame penalized beneficiaries for something that was beyond their control. They argued that the policy would be unfair to beneficiaries because they would not receive a timely decision when they used an alternative filing location.

Response:

We recognize the commenters' concerns about the confusion and potential delays involved in transmitting requests filed at alternative locations to the appropriate contractor. Further, as noted above, under section 931 of the MMA, SSA's role in the Medicare claims appeal process will end with the impending transfer of the ALJ function from SSA to DHHS no later than October 1, 2005. In view of the reduced role of SSA in the processing of Medicare appeals, we do not believe it is appropriate to specify in the regulations that appeals may be filed at SSA offices. We have revised § 405.942(a) to eliminate the reference to alternative filing locations. We believe that directing appellants to only one filing location will reduce confusion and eliminate the potential delay in transmitting the request. We will also allow an extension to the filing deadline when a party, in good faith, sends a request to a government agency within the time period to file and the request does not reach the appropriate contractor until after the time period to file expires.

The elimination of alternative locations will obviate any routine need for notices informing appellants of the date of receipt at the adjudicating contractor. Given the elimination of alternative filing locations, we think it would be unnecessarily burdensome on contractors to notify all appellants of the receipt date, given that it could be easily calculated to within a few days. In addition, we are actively exploring the development of a web-based system that would permit appellants to access real-time information about the status of their appeals.

Comment:

We received several comments on whether redetermination requests should be accepted orally or in writing. One commenter disagreed with the elimination of accepting requests over the telephone. The commenter believed that taking requests by telephone is a convenient and simple method for filing an appeal. Another commenter pointed out that telephone requests facilitated meeting the decision-making time frame. The commenter also indicated that telephone appeals are advantageous because additional documentation can be requested while the appellant is on the phone. Other commenters agreed that requests for redeterminations be made in writing only. They stated that when the request and the response are given on the telephone, it leaves room for interpretation on what occurred during the telephone call. Also, it could be difficult for the QIC to construct the case file if the redetermination was handled over the telephone. The commenter suggested alternative methods such as the use of a secure system for fax or electronic mail requests. Another commenter agreed with our discussion in the preamble to the proposed rule that the changes to the reopening process could resolve the types of issues addressed in the current telephone appeals process, and encouraged our efforts to clarify the reopening rules.

Response:

We recognize that initiating a redetermination over the telephone can under some circumstances provide a faster process for appellants than a written appeal. In the past, providers and suppliers generally initiated reviews by phone for routine, uncomplicated matters. However, section 937(a) of the MMA requires CMS to develop a process whereby, in the case of minor errors or omissions that are detected in the submission of claims, a provider or supplier can be given an opportunity to correct these minor errors or omissions without the need to initiate an appeal. Contractors would also continue to handle these types of issues over the telephone through procedures other than appeals, such as reopenings, including any associated adjustments. The reopening process is discussed in more detail later in this preamble under its own heading.

Written requests offer other advantages of efficiency and accuracy. An appellant submitting a written request can submit evidence at the same time as the request. The early submission of evidence leads to resolving appeals at lower levels and promotes more accurate decision-making. Furthermore, many appeals involve judgment calls that require thought, research and analysis, much of which cannot be addressed in a phone call. Also, as noted by a commenter,

written appeals aid contractors in developing case files for use at later appeal stages.

Thus, as proposed, we will require that appellants request redeterminations in writing. We will work on identifying simple and convenient methods for appellants to request redeterminations in writing, such as via facsimile or electronic mail request. Finally, we note that contractors are by no means prevented from communicating with appellants by phone in situations where contact by telephone can provide information needed to resolve an appeal.

Comment:

Some commenters raised questions about requests for redetermination made by more than one party. A few commenters objected to our proposal that where two or more parties requested an appeal on the same initial determination, the contractor's deadline for processing the appeal would be based on the latest filed request. One commenter disagreed with the consolidation of multiple requests into one proceeding, and argued that this would result in unwarranted delays. The commenter suggested that we stipulate in this final regulation that the decision-making time frame starts with the first request for redetermination. The commenter also thought that contractors should be required to act on beneficiary appeals when they are received, rather than waiting to see if another party appeals. Another commenter was concerned whether the contactor would wait until the end of the full 120-day filing deadline to see if another party would request an appeal.

Response:

Instances when more than one party files a request for an appeal of the same claim have always been rare, and we do not expect any change in this regard under the new appeals procedures. Although we appreciate the concern that contractors might wait 120 days to see if another party appeals, contractors could not do so even if they wanted to, given the requirement that they process a redetermination within 60 days of a timely filed request. A delay will occur only if another request is received before the contractor issues a decision. Therefore, we do not believe that consolidating the decision-making time frame for appeals with multiple parties will create an impediment to the efficient resolution of appeals. To the contrary, we believe that when another party subsequently requests an appeal before a decision has been made on the original request, fairness demands that the two requests be combined into one case. We have amended § 405.944(c) to clarify this point.

Comment:

Several commenters made recommendations about the place and method of filing redetermination requests. One commenter suggested that all review organizations have an address for delivery services other than the U.S. Postal Service. The commenter stated that appellants sometimes wish to use private services to deliver their appeals, particularly to ensure that contractors receive the appeals timely. A few commenters suggested that CMS provide appellants an opportunity to submit a redetermination request via facsimile or via e-mail. The commenter believed that these alternatives would create better efficiencies for appellants.

Response:

We encourage appellants to use delivery services that will ensure the timely receipt by contractors of appeal requests. We will explore with contractors ways to achieve efficiencies in the appeals process, including establishing addresses for private delivery services. We also will look into the extent to which contractors can set up a process to accept facsimile and electronic requests in compliance with applicable security and privacy policies and procedures. Should these changes prove feasible, we will implement them through manual instructions.

Comment:

Several commenters urged us to make the standard form for requesting a redetermination widely available to ensure accessibility by beneficiaries. They suggested including the form for requesting a redetermination with the initial determination notice. Alternatively, the initial determination should provide information about where to obtain the standard form. Commenters recommended that the standard form be available upon request by telephone, on the Internet, and at all SSA and CMS contractor offices.

Response:

We agree that standardized forms should be readily accessible to beneficiaries. As mentioned earlier in our discussion about initial determinations, beneficiaries now routinely receive Medicare Summary Notices (MSNs). The MSN contains information on the appeals process and instructions for requesting an appeal. Beneficiaries can use the MSN to request an appeal by circling the item or service with which they disagree, explaining why they disagree, signing the MSN, and returning it or a copy to the specified address. Consumer testing has shown that the information on the MSN is complete and easy for beneficiaries to understand. In most cases, we believe that allowing beneficiaries to use the MSN to request an appeal is a more effective practice than referring them to a required form.

We will ensure that customer service representatives at our 1-800-MEDICARE number provide beneficiaries with accurate information on how they may obtain standardized appeal forms. Updated appeal forms will continue to be available on the Internet at

http://www.cms.hhs.gov/forms

and

http://www.Medicare.gov/Basics/forms,

as well as at CMS contractor offices.

b. Evidence Submitted With the Redetermination Request

In the proposed rule, we specified that a party should explain why he or she disagrees with the contractor's initial determination and include any evidence that the party believes should be considered by the contractor in making its redetermination. We wanted to encourage appellants to make their case at the earliest possible level. To facilitate this goal, we proposed that if appellants could not submit relevant documentation along with their redetermination requests, then they could provide later submissions. However, since it would be difficult to process the redetermination within the appropriate time frame, we proposed to permit contractors to extend the decision-making time frame by up to 14 days based on the later submission of evidence.

Comment:

One commenter suggested that prior to issuing a redetermination, the contractor should request the necessary documentation from the appellant and allow the appellant 14 days to either submit the documentation requested or to certify that there are no additional records to submit. The commenter also indicated that if the appellant failed to provide the documentation, an unfavorable decision should be rendered based on failure to provide the necessary documentation. The commenter also questioned whether it was our intent to preclude the QIC from accepting documentation other than what is requested in the redetermination letter.

Response:

We believe that the efficiency and accuracy of the appeals process is enhanced when appellants submit all necessary documentation with their redetermination requests. Although appellants have the opportunity to submit evidence related to the claim at issue at any time during the redetermination process, we strongly encourage appellants to submit, at the time of their request, all evidence that they want to be considered. If supporting documentation is not submitted with the request, the contractor may contact the appellant to try to obtain the missing information.

The contractor will not necessarily uphold an unfavorable initial determination based solely on the lack of documentation submission. The contractor must make a decision based on the information in the case file.

If the contractor believes that the appellant is missing specific information or documentation necessary for processing the redetermination, but cannot obtain the information before its deadline, the contractor will uphold the claim denial and then list the specific missing information in the redetermination letter. If the appellant requests a QIC reconsideration, the appellant should submit the documentation specified in the redetermination notice with the request for reconsideration. The QIC may accept any additional documentation, even if it is not specified in the redetermination notice. If the appellant fails to submit this evidence before the QIC issues its reconsideration, the appellant may be precluded from introducing the evidence at higher levels of the appeals process, absent a showing of good cause. (See the discussion below regarding the regulatory and statutory requirements for full and early presentation of evidence.)

c. Conducting a Redetermination and Time Frame for Making a Decision

Section 1869 of the Act provides little or no guidance with respect to the conduct of redeterminations, with the exception of establishing the filing and decision-making time frames. Thus, with few exceptions, we did not propose major changes to the existing procedures for first level appeals of claim determinations. To assist appellants who might be unable to submit relevant documentation along with the request for redetermination, and to promote the resolution of appeals at the earliest possible level, we proposed to allow later submission of documentation. If the appellant submitted evidence after the request, an automatic 14-day extension would be added to the decision-making time frame.

See

§ 405.946(b).

Comment:

One commenter contended that CMS exceeded its statutory authority by changing the standard with respect to the established time frame for a decision on a request for redetermination. The commenter disagreed with the proposal of an automatic 14-day extension to the time frame when an appellant submits evidence after the request. Another commenter agreed that additional time might be necessary to issue a decision when a party submits additional evidence. The commenter noted that we did not specify whether a party could submit additional evidence more than once, and if so, what the impact would be on the decision-making deadline. For example, would a 14-day extension apply each time a party submitted additional evidence, or would there by only one extension, regardless of how many times a party submitted additional evidence? The commenter suggested that we specify that there are no limits on evidence submission at the redetermination level and that a party can submit additional evidence as many times as it deems appropriate until a specific point near the time to issue a decision. The commenter recommended that evidence should be permitted until 5 days prior to the decision-making deadline (for example, additional evidence could be submitted until 55 days after the contractor received the redetermination request).

Response:

We believe allowing extensions of decision-making time frames under some circumstances is consistent with the statute. We believe that an appeal request should include the pertinent evidence for an adjudicator to make an appropriate determination, as indicated in § 405.946(a). If the evidence is not submitted with the request, the 14-day extension allows time for an adjudicator to carefully review and consider additional evidence. It is unreasonable first to expect an adjudicator to prepare a decision based on incomplete information submitted with the appeal request, and then in as little as a few days, potentially rewrite a decision based on new evidence.

While a party, by regulation, may submit additional evidence as many times as it deems appropriate until the contractor issues a decision, the impact is that the contractor may extend its decision-making deadline by up to 14 days each time. The only way to avoid the need for extended decision-making time frames would be to preclude the submission of additional evidence by appellants after they file their redetermination requests. Note that although the contractor may extend the deadline, this does not mean that we expect the contractor to take the maximum time to issue the decision in all cases. As mentioned in the comment above, we urge appellants to submit all necessary documentation with their requests in order to avoid delays. We note that from the outset, appellants have twice the amount of time to request an appeal as adjudicators do to conduct the appeal.

Comment:

Some commenters argued that we should impose penalties on fiscal intermediaries and carriers that fail to meet the 60-day deadline for issuing a redetermination. In addition, the commenters recommended that we establish specific remedies for appellants, such as the ability to escalate cases to QICs, when contractors fail to meet their time frames. One commenter argued that non-enforcement of the time frame would have a negative impact on beneficiaries, since they cannot proceed to the QIC until the contractor issues a redetermination.

Response:

We do not believe that it is appropriate to permit escalation of redeterminations when contractors do not meet their deadlines. We believe this is consistent with the statute in that the Congress seems to have weighed the merits of escalation and chose to implement that option only at the QIC level and above. The statute also already directs that the Secretary monitor the timeliness of all contractors' redeterminations. Sections 1816(f) and 1842(b)(2) of the Act require us to develop criteria, standards and procedures to evaluate a fiscal intermediary's or carrier's performance of its functions. Measuring the timeliness of redeterminations is a critical part of this process, and a contractor's inability to process redeterminations within the required 60-day time frame will be enforced through corrective action plans and other tools that CMS has available to ensure that carriers and fiscal intermediaries fulfill their statutory and contractual obligations. Under our ongoing Contractor Performance Evaluation (CPE) process, CMS devotes extensive resources to onsite surveys of contractors to ensure that they meet these obligations.

Comment:

One commenter recommended that we prohibit Medicare contractors and QICs from raising new issues during an appeal. Any issues that are different from those in dispute should be raised through the reopening process. The commenter stated that bringing up new issues creates great confusion for appellants.

Response:

A redetermination consists of a fresh examination of all the issues involved in a claim to determine whether it is payable. Therefore, the redetermination is not limited to validating the original reason for the denial of the claim at issue in the appeal. All applicable statutory and regulatory provisions, as well as CMS-issued policies and procedures, bind contractors making redeterminations (for example, CMS Rulings, Medicare manual instructions, program memoranda, national coverage determinations, local coverage

determinations, and regional medical review determinations). As a result, all these authorities must be considered as part of the redetermination.

d. Withdrawals and Dismissals

In the proposed rule, we proposed to allow parties to withdraw redetermination requests within 14 days of the original request in order to avoid situations where the request for withdrawal and the decision crossed in the mail. We also proposed several reasons a contractor might dismiss a request (for example, where a request for redetermination did not contain the minimum elements for a redetermination request set forth in proposed § 405.944). We also proposed to dismiss a request if the party filing the request died and there was no information in the record to determine whether another party might be prejudiced by the redetermination.

We also proposed that when a contractor dismissed a request, a written notice would be sent to the parties. Also, a dismissal could be vacated at any time within 6 months from the date of the dismissal notice for good and sufficient cause. Finally, an appellant could request a QIC reconsideration of the dismissal within 60 days of the dismissal notice. See proposed § 405.974(b).

Comment:

A commenter recommended that the dismissal notice under § 405.952(c) should inform the appellant of the right to request that the contractor vacate the dismissal within 6 months.

Response:

We agree that the dismissal notice should include information about vacating the dismissal. We have revised § 405.952(c) to require that the dismissal notice state that there is a right to request that the contractor vacate the dismissal action.

Comment:

Proposed § 405.952(a) permits a party to withdraw its appeal request by filing a written and signed request for withdrawal within 14 calendar days of the filing of the redetermination request. A commenter questioned whether a contractor would disregard a request for withdrawal made after the 14th day. The commenter argued that there was no legitimate reason to issue a redetermination if someone wanted to withdraw an appeal request. The commenter recommended that as long as the withdrawal request was received before the contractor issued a redetermination, then the request for redetermination should be dismissed.

Response:

We agree with the commenter and will not limit requests for withdrawal to within 14 days of filing the request for redetermination. Under this interim final rule, a request for withdrawal must be received before a redetermination has been issued. We encourage appellants to submit written requests early to avoid having the notice of a redetermination and a request to withdraw cross in the mail.

Comment:

Proposed § 405.952(b)(2) requires a contractor to dismiss a request for a redetermination if the contractor determines that a party has failed to make out a valid request for redetermination that substantially complies with § 405.944. Proposed § 405.944(b) requires an appellant to either use a standard CMS form or submit a written request containing four elements: (1) The beneficiary's name; (2) the beneficiary's health insurance claim number; (3) the specific services(s) and item(s) for which the redetermination has been requested, as well as the specific date(s) of service; and (4) the name and signature of the party or appointed representative of the party. Two commenters pointed out that these elements do not mirror the requirements contained on the current standard CMS form to request a review.

The commenters requested us to clarify if the current review form would comply with § 405.944. They also inquired as to whether we would develop a new form. If CMS developed a new form, the commenters suggested providing space on the form for all of the required elements listed in the proposed rule. Additionally, one commenter requested that CMS develop and disseminate a standard form as quickly as possible so that parties can become familiar with the information required in the form.

Response:

We realize that the current standard forms for requesting a review and reconsideration, CMS forms 1964 and 2649 respectively, do not contain all of the elements required under § 405.944. However, we are in the process of revising all of our current appeal forms. The standard CMS form will contain all of the elements specified in § 405.944. Once we complete the new forms, they will be released and made available to appellants at contractor offices, CMS offices, on the Internet, and by calling 1-800-MEDICARE. We intend to release the new forms in conjunction with the implementation of these interim final regulations.

Comment:

One commenter contended that allowing contractors to dismiss redeterminations when appellants fail to make out valid requests effectively denies appellants the ability to pursue appeals. Other commenters maintained that requiring specific elements in order to make a request would penalize unrepresented beneficiaries or those that have limited English-speaking abilities or mental capacity. One commenter argued that unrepresented beneficiaries should be given notice of any deficiencies and an opportunity to correct and file an amended redetermination request within a reasonable time period (for example, 10 business days after receipt of the notice). The commenter also recommended that the notice of an incomplete request should inform the party of the information necessary to request a redetermination; otherwise, the party would not know what information was missing.

Response:

We do not agree that contractors should be required to inform appellants of the defects in their redetermination requests instead of being able to issue dismissals. Section 405.944(b) requires only four elements for making out a valid redetermination request: (1) The beneficiary's name; (2) the Medicare health insurance claim number; (3) the specific services(s) and item(s) for which the redetermination is requested and the specific date(s) of service; and (4) the name and signature of the party or representative of the party. This constitutes the minimum information needed to process an appeal, and we believe that it is entirely appropriate to require the party appealing to provide this basic information. Absent this information, it would be difficult, if not impossible, to ascertain whether the individual requesting the appeal is in fact a party or representing a party, or to identify the claim at issue. We believe that accepting appeal requests with insufficient basic information about the claim and requiring contractors to inform appellants of the defects in their appeal requests would make for an inefficient appeals process. Note that identification of the specific items or services for which a redetermination is being requested can be accomplished in a variety of relatively simple ways. For example, a beneficiary may simply circle the denied service in question on the MSN. Alternatively, for revised initial determinations (for example, overpayment cases or Medicare Secondary Payer recovery cases), appellants can meet this criterion by including a copy of the “demand letter” used to initiate these cases. Thus, meeting these minimum requirements is not onerous.

In arriving at the decision to allow contractors to dismiss invalid redetermination requests under § 405.952(b)(2), we considered the fact that a dismissal does not necessarily

terminate a party's right to file an appeal. If the 120-day time frame for filing a redetermination has not expired at the time a contractor issues a dismissal, then a party may correct the defect and resubmit the appeal. Also, a contractor may vacate a dismissal at any time within 6 months from the date of the dismissal notice, if good and sufficient cause is shown. Alternatively, if a party believes that the contractor inappropriately dismissed a request, the party can request a reconsideration by the QIC within 60 days of the dismissal.

Therefore, we are adopting our proposed policy in this interim final rule of dismissing requests that do not meet the requirements of § 405.944. A contractor may, but is not required to, contact appellants to give them an opportunity to cure a defect in their redetermination request before dismissing it. We believe that this policy is reasonable given that it is clear how a party must make out a valid redetermination request. As under the former appeals process, we will continue to allow a beneficiary to file an appeal by following the requirements detailed on the MSN. We will instruct our contractors to take into consideration any special needs of unrepresented beneficiaries, or those with limited capacities or abilities. Also, we are in the process of creating a redetermination form that will assist appellants who are unfamiliar with the process (for example, unrepresented beneficiaries) with their requests.

Comment:

One commenter requested clarification on the circumstances under which a request for redetermination would be dismissed when a beneficiary dies. The commenter requested clarification about any potential liability of the deceased beneficiary's estate, including recovery by a State. The commenter believed that § 405.952(b)(4) also should clarify the situations an adjudicator must consider to determine whether dismissing the redetermination request may prejudice another party. The commenter indicated that in almost every situation, the beneficiary's estate would be prejudiced by the determination and argued that a dismissal would preclude the beneficiary's family or estate from protecting its right to seek reimbursement.

Response:

We have revised the proposed language in § 405.952(b)(4) to make the needed clarifications. A contractor will dismiss a redetermination request when the beneficiary whose claim is being appealed dies while the request is pending, under the following circumstances: (1) The beneficiary's surviving spouse or estate has no remaining financial interest in the case based on whether either remains liable for the services or subsequent similar services; (2) no other individual or entity with a financial interest in the case wishes to pursue the appeal; and (3) no other party filed a valid and timely redetermination request. For example, the contractor will dismiss the request if the beneficiary or the beneficiary's representative filed the request for redetermination but the beneficiary was not held liable for the services at issue. The contractor will inquire whether another party wishes to continue the appeal. However, the contractor will not be required to inquire whether any other party wishes to continue the appeal unless a valid and timely request for redetermination is filed. We wish to note that when a beneficiary dies and the request for redetermination is subsequently dismissed, a party, including the beneficiary's estate, may request the contractor to vacate the dismissal under § 405.932(c) for good and sufficient cause. Examples of good and sufficient cause include when there is the possibility of Medicaid liability or when there is a possibility the State (which pays Medicaid funds) will attempt recovery of its payment from the estate.

As mentioned in our discussion above on parties to initial determinations and appeals, § 405.906(c) now establishes that in the event of the death of a beneficiary, a provider or supplier may appeal if there is no other party available to appeal an initial determination. Thus, the provider or supplier of the item or service may request a redetermination in these situations, consistent with the clear direction of section 939 of the MMA.

Comment:

A commenter requested that we clarify the meaning of “otherwise transmit” in proposed § 405.952(d) in terms of a contractor providing a dismissal notice to the parties at their last known addresses. The commenter pointed out that the type of transmission is particularly important for beneficiaries who do not have access to facsimile and electronic mail.

Response:

The dismissal notice, like a redetermination notice, will be delivered through first class U.S. mail. Although contractors do not currently transmit notices by facsimile or electronic mail, we want to ensure that the regulations allow them the flexibility to do so in the future should CMS believe that other notification methods are appropriate. Nevertheless, even if contractors use alternate means to provide dismissal notices, we will instruct contractors to allow parties to elect their preferred method of delivery.

7. Redetermination, Notification, and Subsequent Limitations on Evidence” (§ 405.954, § 405.956, and § 405.966)

[If you choose to comment on issues in this section, please include the caption “Redetermination, Notification, and Subsequent Limitations on Evidence” at the beginning of your comments.]

When a contractor's redetermination fully reverses the initial determination, we proposed to maintain the current policy that proper notification would be achieved through the MSN or the RA, which contractors send to beneficiaries, and providers and suppliers, respectively. If a redetermination affirmed the initial determination, either in whole or in part, we proposed that a redetermination notice contain: (1) A clear statement indicating the extent to which the redetermination is favorable or unfavorable; (2) a summary of the facts; (3) an explanation of how the pertinent laws, regulations, coverage rules, and CMS policies apply to the facts of the case; (4) a summary of the rationale for the redetermination; (5) notification to the parties of their right to a reconsideration, the procedures that a party would follow in order to request a reconsideration, and the time limit for requesting a reconsideration; (6) a statement of the specific missing documentation that would need to be submitted with a request for a reconsideration; (7) an explanation that if the specific supporting documentation specified in the notice is not submitted with the request for a reconsideration, the evidence will not be considered at an ALJ hearing, unless the appellant demonstrates good cause as to why the evidence was not provided previously; and (8) any other requirements specified by CMS. When a redetermination notice is sent to a provider or supplier announcing a full or partial reversal of the initial determination, the Medicare contractor must also issue an electronic or paper remittance notice to the provider or supplier to explain the payment.

In general, the proposed requirements for the redetermination notice were similar to existing instructions concerning the content of contractor appeal determinations. However, our proposal that contractors also specify supporting documentation that would need to accompany a reconsideration request was a new requirement.

Comment:

We received many comments on the requirement for the redetermination notice to include a statement of the specific missing

documentation that must be submitted with the reconsideration request. In general, the commenters agreed with the requirement to identify additional supporting documentation in the redetermination notice. They also agreed that this change would improve the efficiency of the appeals process by assisting appellants in knowing the type of documentation to submit.

Several other commenters objected to this provision. Two commenters argued that the statute and Medicare regulations require filing certain documentation with particular types of claims (for example, claims for power wheel chairs require submission of a power wheelchair Certificate of Medical Necessity (CMN)). They argued that if the statute and regulations do not require the submission of a particular piece of documentation, but a contractor needs that documentation before it will pay a claim, then the contractor should be required to explain why it needs the documentation and consider the impact of requiring compliance with the a request (consistent with the Paperwork Reduction Act of 1995 (PRA)). They proposed that the carrier or fiscal intermediary explain in detail the rationale for collecting any additional documentation not required for submitting a particular claim. The commenter argued that the rationale should include the legal and medical necessity reason for such collection.

Response:

We believe that the appeals time frames and procedures mandated by section 521 of BIPA and Title IX of the MMA clearly require greater efficiency in the Medicare appeals process. This belief is reinforced by section 933(a) of the MMA, which requires that a provider or supplier may not, in any subsequent level of appeal, introduce evidence that was not presented at the reconsideration conducted by the QIC, unless there is good cause that precluded the introduction of that evidence at or before that reconsideration. However, absent advance notice of what documents are needed to support a claim, appellants may have difficulty determining what constitutes relevant evidence for their claim appeals. Thus, although not required by the statute, we believe that requiring contractor redetermination notices to identify necessary missing documentation will provide very valuable information for appellants to present their cases to QICs. Therefore, we believe this provision is advantageous to appellants since it should result in a better understanding of the basis for the unfavorable redetermination and lead to more accurate reconsiderations.

Comment:

One commenter recommended revising the new evidence provisions to preclude the subsequent submission of information only to the extent that it involves objective medical information (for example, a specific blood gas percentage or patient height and weight). Another commenter suggested that we distinguish between the submission of new evidence that involves readily available clinical documentation directly implicated in the claim dispute and other evidence (for example, expert opinions, clarifying treating physicians' opinions, or evidence from providers not directly involved in the dispute). The commenter recommended only precluding cli

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