Medicare Program; Appeal Rights and Procedures for Beneficiaries Enrolled in Prepaid Health Care Plans

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 417

[OMC-008-F]

RIN 0938-AD79

Medicare Program; Appeal Rights and Procedures for Beneficiaries

Enrolled in Prepaid Health Care Plans

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule modifies or establishes administrative review

procedures for Medicare beneficiaries enrolled in health maintenance

organizations (HMOs), competitive medical plans (CMPs), and health care

prepayment plans (HCPPs). Specifically, it requires that an HMO or CMP

complete a reconsideration, requested by a Medicare enrollee for denied

services or claims, within 60 days from the date of receipt of the

reconsideration request; extends to HMO and CMP enrollees the right to

request immediate review by a Utilization and Quality Control Peer

Review Organization of an HMO's, CMP's, or hospital's determination

that an inpatient hospital stay is no longer necessary; and requires an

HCPP to establish administrative review procedures for its Medicare

enrollees who are dissatisfied with decisions on denied services or

claims.

DATES: These regulations are effective December 21, 1994. HMOs and CMPs

must comply with the requirements of this final rule beginning February

21, 1995. HCPPs must comply with the requirements of this final rule

beginning May 22, 1995.

FOR FURTHER INFORMATION CONTACT: Maureen Miller, (202) 619-0129.

SUPPLEMENTARY INFORMATION:

I. General Background

Payment for services provided to Medicare beneficiaries under title

XVIII of the Social Security Act (the Act) is generally made on a fee-

for-service basis or on a prepayment basis. This rule deals with

Medicare services provided to beneficiaries by entities paid on a

prepayment basis. We refer to these entities collectively as ``prepaid

health care organizations.'' Under the prepayment method, health

maintenance organizations (HMOs), competitive medical plans (CMPs), and

health care prepayment plans (HCPPs), enter into contracts or

agreements with us to provide a range of services to Medicare

beneficiaries who voluntarily enroll in these plans.

Section 1876 of the Act provides the authority for us to enter into

contracts with HMOs and CMPs to furnish Medicare covered services to

beneficiaries and specifies the requirements these organizations must

meet. Contracting HMOs and CMPs may be paid on either (1) a risk basis,

under which they are paid a prospectively determined per capita monthly

payment, or (2) a cost basis under which interim per capita payments

are made on the basis of a budget and a retrospective cost settlement

occurs to reflect the reasonable costs actually incurred by the HMO or

CMP for the covered services it furnishes to enrolled members.

Section 1833 of the Act provides the basis for regulations under

which we enter into written agreements with HCPPs to furnish or arrange

to have furnished covered Medicare Part B services to a defined

population on a prepayment basis.

II. Additional Background and Provisions of the Proposed Rule

On October 7, 1992, we published a proposed rule (57 FR 46119) in

which we proposed to amend the Medicare regulations governing

administrative review rights and procedures for Medicare enrollees in

prepaid health care organizations to: (1) Impose a 60-calendar-day

limit for an HMO or CMP to complete a reconsideration requested by a

Medicare enrollee (or authorized representative) for denied services or

claims; (2) permit an HMO or CMP enrollee (or authorized

representative) to request immediate Utilization and Quality Control

Peer Review Organization (PRO) review of an HMO, CMP, or hospital

notice of a determination that an inpatient hospital stay is no longer

necessary; and (3) require HCPPs to establish administrative review

procedures for Medicare enrollees similar to those that we require HMOs

and CMPs to establish for Medicare enrollees.

A. Time Limit on Reconsiderations

Section 1876(c)(5)(A) of the Act requires a contracting HMO or CMP

to establish procedures for hearing and resolving grievances between

the organization and its Medicare enrollees. Section 1876(c)(5)(B)

provides specific administrative and judicial review rights to Medicare

enrollees who are dissatisfied with determinations by the HMO or CMP

regarding services and claims. These rights are similar to those

available to beneficiaries in the fee-for-service system, except that,

under the existing regulations at 42 CFR 417.614 and 417.620, the

initial level of review is by the HMO or CMP rather than by a PRO,

intermediary, or carrier. Issues that are subject to the full scope of

administrative and judicial review are those in which beneficiaries

believe they: (l) Have been denied access to a service to which they

are entitled, or (2) are required to pay an amount that is the

responsibility of the HMO or CMP. (Other issues are only subject to the

HMO's or CMP's internal grievance procedures.)

Regulations at Secs. 417.600 through 417.638 describe the

administrative and judicial review process. Under the first step of the

process, the rules provide that the HMO or CMP must make a timely

determination and notify the beneficiary of the reasons for the

determination. A determination regarding a request for payment must be

made within 60 days of receiving the claim. If the decision is

unfavorable (in whole or in part), the beneficiary (or his or her

authorized representative) may request that the HMO or CMP reconsider

the decision. (The beneficiary must request reconsideration before

proceeding to the next step in the review process.) An organization may

issue a reconsidered determination on a case only if the reconsidered

determination is entirely favorable to the beneficiary. If the

organization reaffirms its denial of payment or services, in whole or

in part, the organization may not issue a reconsidered decision to the

beneficiary. Instead, the organization must prepare a written

explanation and refer the case to us, along with a justification for

its initial denial, so that we may make a new and independent

determination concerning coverage of the services at issue. This step

is considered part of the reconsideration process. If our

reconsideration determination is not fully favorable to the

beneficiary, the beneficiary has a right to request a hearing before an

administrative law judge (ALJ) of the Social Security Administration if

the amount remaining in controversy is $100 or more. If the ALJ hearing

does not result in a fully favorable determination, the beneficiary may

request Appeals Council review of the ALJ decision. Following the

administrative review process, the beneficiary is entitled to judicial

review of the final determination if the amount remaining in

controversy is $1,000 or more.

Existing regulations do not establish time limits for an HMO or CMP

to complete a reconsideration. A beneficiary may not proceed to the

next level of administrative review, however, until the HMO or CMP

issues its decision or refers the matter to us. Therefore, we proposed

to amend Sec. 417.620 (``Responsibility for reconsideration; time

limits'') to require the following:

That an HMO or CMP act on the beneficiary's

reconsideration request within 60 calendar days from the date of

receipt of the request.

That, if the decision made by the organization is entirely

favorable to the beneficiary, the organization so notify the

beneficiary within the 60-calendar-day period.

That, if the organization cannot make a decision that is

fully favorable to the beneficiary, the organization must submit the

case file to us (or our designated agent) within the 60-calendar-day

period described above.

B. PRO Review of Decisions for Hospital Discharges

Section 1154(e) of the Act, as amended by section 9351 of the

Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), provides

Medicare beneficiaries with the right to an immediate review by a PRO

and, in some cases, certain financial protections when a hospital, with

the concurrence of the attending physician, determines that the

beneficiary no longer requires inpatient hospital care. To exercise the

immediate review right, after receiving the hospital's notice of

noncoverage, the beneficiary must request (by telephone or in writing)

that the PRO review the validity of the hospital's decision. The

beneficiary must make the request by noon of the first working day

after receipt of the notice. The PRO then must determine within 1 full

working day of the request (and receipt of pertinent information and/or

records from the hospital) the appropriateness of the hospital's

decision that the beneficiary no longer requires inpatient hospital

care. The hospital cannot charge the beneficiary for the cost of

additional hospital days until noon of the day after receipt of the

PRO's determination that the hospital's decision was correct.

Under current law, if the hospital (rather than the HMO or CMP)

sends the discharge notice, the beneficiary is entitled to request

immediate review by a PRO whether or not he or she is enrolled in an

HMO or CMP. However, while a beneficiary enrolled in an HMO or CMP may

be protected from being charged by the hospital, he or she is not

necessarily protected from potential financial liability. If the PRO

upholds the hospital's notice of noncoverage, there is no regulation

prohibiting the HMO or CMP from billing the beneficiary for the extra

days of care while the PRO is reviewing the case if the extra days

result in additional costs to the HMO or CMP. (Depending on the payment

arrangement with the hospital, it is possible that the HMO or CMP will

not incur any additional costs by virtue of the patient's additional

days in the hospital. For example, if there is no contract between the

HMO and the hospital, the hospital may not charge more than the amount

Medicare would pay. Under the prospective payment system (PPS), that

amount remains the same regardless of the length of the hospital stay,

unless outlier payment is involved, that is, additional payment for

covered services for extended length-of-stay cases. Similarly, a

contract between an HMO and a hospital might provide that the hospital

is paid on a basis similar to PPS, rather than on a per diem basis.)

If the HMO or CMP, rather than the hospital, makes the

determination of noncoverage, the current regulations do not

specifically afford an immediate PRO review right to the enrollees.

Therefore, we proposed to amend Sec. 417.440 (``Entitlement to health

care services from an HMO or CMP''), Sec. 417.454 (``Charges to

Medicare enrollees''), and Sec. 417.604 (``General Provisions'') and

add a new Sec. 417.605 (``Immediate PRO review of a determination of

noncoverage of inpatient hospital care'') to provide the Medicare HMO

or CMP enrollee with the same administrative review rights and

financial protection as are available to beneficiaries under the fee-

for-service system.

We proposed to require that an HMO or CMP that has not delegated

the discharge decision to the hospital and attending physician: (l)

Have the concurrence of the attending physician before making a

determination that an enrollee no longer needs inpatient hospital care;

and (2) give the beneficiary a written notice of noncoverage that

specifies the effective date of his or her liability, states why the

HMO or CMP believes he or she no longer requires a hospital level of

care, and explains immediate review procedures.

We proposed to revise the beneficiary administrative review

procedures to offer an immediate review by the PRO with which the

hospital has an agreement under Sec. 466.78. We proposed to adopt the

same timeframes for immediate PRO reviews for HMO and CMP enrollees

that are applicable to fee-for-service beneficiaries. Upon receiving a

written notice from the HMO or CMP or a hospital of a determination

that an inpatient hospital stay is no longer necessary, the enrollee

(or authorized representative) would have until noon of the first

working day after receipt of the notice to file (by telephone or in

writing) a request for immediate PRO review. The PRO would notify the

HMO or CMP that an appeal has been filed and require the HMO or CMP to

provide any pertinent records or information by close of business of

the first working day immediately following the day the beneficiary

made the appeal. Further, in response to a request from the HMO or CMP,

the hospital would be required to submit medical records and other

pertinent information to the PRO by close of business of the first full

working day immediately following the day the HMO or CMP makes its

request. The PRO would also solicit the views of the enrollee who

requested immediate PRO review (or the enrollee's authorized

representative). The PRO would have 1 working day after receipt of the

information from the HMO or CMP to make a determination. The HMO or CMP

would be financially liable for the costs of the hospital stay until

noon of the calendar day following receipt of the PRO determination.

In addition, we also proposed to prohibit the HMO or CMP from

billing the Medicare beneficiary for the added cost of hospital days

during the immediate review process. An enrollee who requests immediate

PRO review would not be entitled to any subsequent review, under the

HMO's or CMP's administrative review process, of the issue of whether

hospitalization was still needed. However, the PRO determination would

be subject to appeal under the administrative and judicial review

process set forth in 42 CFR part 473 (that is, PRO reconsiderations and

hearings and judicial review of PRO reconsiderations). As under the

current fee-for-service system, the beneficiary who requests that a PRO

reconsider its determination would not be protected from financial

liability.

Under the proposed rule, the hospital would not be required to be a

concurring party in a discharge decision if the HMO or CMP issues the

notice of noncoverage. However, the hospital could submit the request

to the PRO for immediate review on behalf of the HMO or CMP enrollee.

We proposed to clarify that, with one exception, the HMO or CMP is

financially responsible for the costs of the hospital stay until noon

of the calendar day following the day the PRO notifies the enrollee of

its review determination. Under the exception, a hospital may not

charge the HMO or CMP (or the beneficiary) for the costs of the

continued hospital stay during the PRO review process if the hospital

files the request for immediate PRO review on behalf of a beneficiary

and the PRO upholds the noncoverage determination made by the HMO or

CMP.

C. Providing Administrative Review Rights to HCPP Members

Section 1833(a)(l)(A) of the Act provides that an organization that

furnishes services on a prepayment basis may elect to receive payment

for Part B services on a reasonable cost basis rather than a reasonable

charge basis. There is no indication that the Congress intended to deny

Medicare beneficiaries enrolled in these organizations (referred to in

these regulations as health care prepayment plans (HCPPs)) their full

administrative review rights under section 1869 of the Act because they

receive services through an organization that chooses this alternate

payment option. The regulations at 42 CFR part 417, subpart D,

applicable to HCPPs, do not, however, specifically address

administrative review rights for Medicare enrollees of HCPPs.

The fact that existing regulations do not specifically provide for

administrative review of HCPP decisions is an oversight we proposed to

correct by amending Sec. 417.801 (``Agreements between HCFA and health

care prepayment plans'') and adding new Secs. 417.830 through 417.840

to establish administrative review procedures for Medicare enrollees of

HCPPs who are dissatisfied with denied services or claims. We proposed

to adopt under these sections administrative review procedures for HCPP

enrollees that are the same as those for HMO and CMP enrollees.

D. Technical Changes

We also proposed to make several clarifying technical changes to

the regulations relating to administrative reviews for HMO or CMP

enrollees:

Subpart Q, Secs. 417.600, 417.604, 417.606, 417.608,

417.610, 417.612, 417.614, 417.616, 416.618, 416.620, 417.622, and

417.638--We proposed to change the term ``initial determination'' to

``organization determination'' to distinguish between a determination

made by the HMO or CMP and one made by us. We also proposed to delete

references to carriers and intermediaries making determinations on

behalf of HMOs and CMPs. Carriers and intermediaries now make only fee-

for-service determinations.

Sections 417.604 and 417.610--We proposed to revise

Sec. 417.604(a)(4) to clarify that physicians and other individuals who

furnish items or services under arrangements with an organization do

not have a right to appeal under the regulations. We proposed to make a

conforming change to Sec. 417.610(b).

Section 417.614--We proposed to clarify the language by

making a distinction between an original determination and a revised or

reopened determination.

Section 417.630--We proposed to clarify that the reference

to the ``amount in controversy'' as a condition for a party to request

a hearing is the amount ``remaining'' in controversy, not the amount of

the total bill. We also proposed to add a phrase to clarify that if

beneficiaries combine bills to meet the amount in controversy

requirements, they can use both Part A and Part B bills.

III. Analysis of and Response to Public Comments

We received timely comments from 16 commenters. The commenters

included HMOs, a CMP, national and local professional associations, a

State department of health, and consumer advocacy groups.

A. Time Limits

Comment: While many of the commenters supported the proposed time

limit for issuing reconsideration determinations, two commenters

expressed concern about the initial organization determination. The

concern is that HMOs and CMPs deny (or delay) referrals and other

services without providing a written notice and, because there is no

record of a denial or a decision date, it is unclear whether and when a

request for reconsideration may be filed. One commenter proposed that

written notices be given for all services granted or denied.

Response: Regulations at Sec. 417.608(c) state that failure by an

HMO or CMP to make timely notification of an adverse organization

determination constitutes an adverse determination and may be appealed.

In addition, no provision of Sec. 417.616 (``Request for

reconsideration'') prevents or impedes a Medicare enrollee from filing

a request for reconsideration if the HMO or CMP failed to provide the

enrollee with written notice that a service is denied. Thus, if a

Medicare enrollee maintains that he or she is being denied a covered

service but is unable to obtain an explicit denial, we believe that the

regulations permit the enrollee to move to the next step of the appeals

process and file a request for reconsideration.

Written notices for all decisions to grant or deny services, as

proposed by the commenter, would require an inestimable amount of

additional paperwork, with marginal benefit. This requirement would

also eliminate the current flexibility of the regulations which allows

enrollees to file for a reconsideration without a written denial.

Comment: Two commenters expressed concern that the Medicare appeals

process does not recognize the need for expedited determinations in

time-sensitive medical situations. One commenter proposed incorporation

of an expedited appeals process for denied services, depending on the

relative urgency of the perceived need for the service.

Response: We recognize that there are medical situations in which

outcomes are greatly affected by the promptness of treatment. We also

recognize that our regulations do not specifically address these

situations. In order to establish an expedited process for organization

determinations, however, we would need the benefit of proposed

rulemaking and public comment. We will consider the need for

regulations in this area in the near future. In the interim, we believe

that regulations at Sec. 417.608(c), as noted above, permit the

Medicare enrollee some flexibility in assuming a service is denied and

seeking a timely reconsideration. Medicare enrollees also may obtain

denied services outside the plan and use the appeals process to pursue

payment, or complain in writing or by telephone to the HCFA regional

office for the area. Complaints to the regional office are not intended

to, and usually will not, circumvent the appeals process, but introduce

Federal followup and tracking of HMO/CMP responses in these situations.

Even in the absence of specific regulatory requirements, we expect

Medicare contracting HMOs and CMPs to expedite any initial coverage

determination and reconsideration if a delay in the decision, and a

subsequent postponement or suspension of treatment, could have serious,

adverse consequences on the health status of the beneficiary (for

example, cause impairment of any bodily function and/or serious

dysfunction of any bodily organ or part).

Comment: Two commenters believed that the 60-day time period

frequently is not long enough, and that the time limit should apply

only to ``clean cases'' or should begin after all materials are

received.

Response: The 60-day limit is consistent with the time period

allowed in making the initial organization determination, is supported

as reasonable by most commenters on the proposed rule, and should be

adequate in most circumstances. Nonetheless, while we do not agree with

the specific suggestion of the commenters, we are amending Sec. 417.620

(Responsibility for reconsideration; time limits) to allow extensions

for ``good cause.'' The ``good cause'' extension authority will not

diminish the new time limit requirement, but will allow for unusual

circumstances such as natural disasters or circumstances that make it

difficult or impossible for the enrollee to provide necessary

information in a timely way. This will benefit both the enrollee and

the health plan.

Comment: Several commenters believed that a time limit similar to

the 60-day limit on reconsiderations that is placed on HMOs/CMPs should

be placed on HCFA's reconsiderations. In support of this position, one

commenter cited the stipulated settlement in the case of Levy v.

Sullivan concerning HMO appeal delays.

Response: We do not accept this comment. In order to provide

meaningful review of the HMO's/CMP's decision, we (or the independent

reviewer with which we contract) must have the complete record of the

dispute. When the HMO/CMP conducts a reconsideration of its original

decision, it presumably has all of the documentation it considered

relevant to its initial decision. However, our experience demonstrates

that the independent reviewer must often request that additional

material be submitted. Our current policy allows the HMO time to obtain

the additional information. If the information is not received, the

contractor will make its decision based on the record available. Since

legitimate delays may occur, however, we believe it would be to the

parties' advantage to have a flexible deadline for the independent

review.

We are, on the other hand, concerned that beneficiaries not suffer

undue financial hardship during an appeal. We monitor the activities of

the contractor and the status of reconsiderations as part of our

overall monitoring of compliance with program requirements. Our

contract with the independent reviewer also contains a 30-day

timeliness standard for clean claims, as stipulated in Levy v.

Sullivan, Civ. No. 88-3271 DT (TX) (S.D. Cal., filed March 13, 1989).

That agreement, however, did not require that this be incorporated into

regulations and does not preclude us from revising the contract to

reflect intervening circumstances.

Comment: One commenter suggested that the 60-day period begin with

the date of receipt of the request by the health plan.

Response: Section 417.620(c) specifies that the HMO must act within

60 calendar days ``from the date of receipt of the request for

reconsideration.''

Comment: One commenter suggested that the appeals regulations

explain the consequences of failure to meet the 60-day time limit or to

issue written determinations. One commenter urged a system of

intermediate sanctions for HMOs/CMPs that fail to make timely

organization or reconsideration determinations.

Response: We agree with the commenter that there should be

consequences for failure to provide determinations in a timely manner

and within established time standards. As explained in an earlier

response to a comment, we believe that the regulations at

Sec. 417.608(c) permit a Medicare enrollee to move to the

reconsideration process if timely notification of an adverse

organization determination is not made. To ensure that the 60-day limit

serves as a time ceiling for this stage of the appeals process, we are

adding a provision to Sec. 417.620. This provision clarifies that

failure to complete the reconsideration within the time allowed, or to

obtain a ``good cause'' extension from us, constitutes an adverse

determination and the appeals file must be submitted to us.

Regulations were published on July 15, 1994 (59 FR 36072) that

allow us to impose intermediate sanctions and civil money penalties for

a number of performance violations on the part of HMOs and CMPs. Though

the sanction and penalty authorities are untested at this time, we will

be assessing how information from the appeals process may be used to

improve plan performance or initiate a sanctions process in response to

suspected violations such as a substantial failure to provide required

medically necessary services and the failure adversely affects the

enrollee.

B. Requests for Immediate PRO Review of Decisions for Hospital

Discharges

Comment: While many of the commenters supported the proposed

provision, several commenters opposed it on several accounts, including

that it would have an adverse economic impact on HMOs/CMPs, that

adequate enrollee protections already exist, and that it would

interfere with the patient-physician relationship.

Response: We are aware that the right to immediate PRO review may

add to the costs of caring for Medicare enrollees. It is difficult to

assess the degree to which this will affect HMOs and CMPs, because many

Medicare-contracting plans delegate the discharge decision to the

physician and hospital. In these circumstances, PRO review has already

been in effect and no additional financial impact is anticipated. In

addition, some HMOs/CMPs pay hospitals on a diagnosis-related group

basis and hospital payments may not be affected. In circumstances where

the HMO/CMP makes the discharge decision in conjunction with its

affiliated physicians and pays the hospital on a per diem basis and

thus faces additional hospital charges, we do not concur with the

commenters' position, that is, that the HMO/CMP not be held financially

accountable for the additional hospital days. For risk-contracting

HMOs/CMPs, the Medicare payment rate is based on fee-for-service costs,

and the costs of extra hospital days during the PRO review process are

incorporated into these calculations. Therefore, the average cost for

hospital inpatient days during the PRO review period in the HMO's/CMP's

area are already included in the adjusted average per capita cost rate.

Since all cost-contracting HMOs/CMPs currently choose to have the

hospital seek payment directly from the fiscal intermediary, there

should be no additional costs to the health plan.

While we do not have evidence of early discharge complaints against

HMOs and CMPs, it is possible that some Medicare enrollees are

dissatisfied but have no mechanism for expressing it. Moreover, in the

interests of due process, we believe it is important to provide

beneficiaries comparable rights whether they do or do not enroll in an

HMO/CMP, and whether or not they have the need to take advantage of

those rights. Moreover, if there really are no complaints, then this

will not be a burdensome requirement on HMOs and CMPs.

Lastly, in response to concern about the patient-physician

relationship, there has been no problem of this type arising out of the

right to immediate PRO review under the fee-for-service program. Also,

HMOs/CMPs, because they coordinate their enrollees' total health care

needs, generally have a strong relationship between their Medicare

enrollees and physicians (as well as other health plan staff). We

believe that HMOs/CMPs that maintain positive communications and

relationships with their Medicare enrollees will not experience any

difficulty in this area.

Comment: One commenter was concerned about frivolous claims and the

potential incentives to appeal to the PRO for review. This commenter

suggested that either the Medicare program or the enrollee be

responsible for the expense of extra hospital days if the noncoverage

decision is upheld.

Response: Our experience with immediate PRO review of hospital

discharge (noncoverage) decisions does not support a concern about

frivolous claims. Relative to the number of discharges under the

Medicare fee-for-service program, the number of appeals to the PRO is

extremely small. We expect that HMOs/CMPs, because they are more

involved in the health care of their enrollees, would have a similar

experience, and may even experience fewer PRO appeals if they

communicate effectively with their enrollees and have adequate

safeguards against premature discharges.

With respect to financial liability for extra hospital days, the

adjusted average per capita cost calculation includes these costs. We

would be overpaying if a separate payment was made to plans for these

charges.

We will not shift these costs to the Medicare enrollee because fee-

for-service beneficiaries are already protected, and we believe that

beneficiaries should be treated similarly whether they choose managed

care or fee-for-service. We do not believe this difference in

protections should have to be a factor in the beneficiaries' choice.

Further, we believe that financial responsibility for extra hospital

days related to an appeal would be a strong disincentive to any

beneficiary who questions the appropriateness of a discharge decision.

Such a requirement would undermine the intent of an appeals process.

Comment: One commenter stated that we mischaracterized the HMO's

and CMP's responsibility for discharge decisions in the preamble of the

proposed rule. The commenter stated that the final authority for

discharge rests with the physician and that HMOs/CMPs cannot discharge

enrollees from a hospital.

Response: We agree that the preamble should have referred to

``noncoverage'' decisions by the HMO/CMP rather than ``discharge''

decisions. The right to immediate PRO review affects noncoverage

decisions in cases in which the HMO/CMP and its affiliated physicians

agree that a Medicare enrollee no longer requires hospitalization and

the hospital does not make the noncoverage decision. We also believe

that the use of the term ``attending physician'' in proposed

Secs. 417.440 (f)(2) and (f)(4) (which require concurrence of a

physician in the discharge decision) does not clearly express the

relationship between the HMO/CMP and its affiliated physician

providers. Therefore, in the final rule we have removed the term

``attending physician'' and inserted ``its affiliated physician

responsible for the hospital care of the enrollee, or other physician

as authorized by the HMO or CMP'' in its place.

Comment: One commenter stated that the attending physician should

be allowed to represent his or her patients and request PRO review of

noncoverage decisions.

Response: Usually, the HMO/CMP-affiliated physician makes the

decision that a Medicare enrollee is ready for discharge. Some HMOs/

CMPs make use of an extended treatment team, such as case managers,

discharge coordinators, or utilization review coordinators, and a

member of this team may believe an enrollee is ready for discharge when

the physician does not. In these situations, the health plan's internal

procedures will provide guidance for making the discharge decision.

HMO/CMP physicians have legal arrangements or contracts with their

health plans, and must abide by the plan's procedures. We support the

HMO/CMP structure for the delivery of health care, and we would not

support a policy that undermines the nature of managed care operations.

In cases in which the physician caring for a hospitalized enrollee

is not under contract or bound by the terms of an arrangement with an

HMO/CMP, the physician could represent the patient.

Comment: One commenter believed that the time period (1 working

day) for the HMO/CMP to submit information to the PRO is unreasonable

and is concerned that PROs may take longer than 1 day to complete their

review.

Response: We do not agree with the commenter. Under the fee-for-

service Medicare program, hospitals have their charts ready to submit

to the PRO at the same time that the notice of noncoverage is given.

This, in effect, gives the PRO another working day to review the

medical chart. We believe HMOs/CMPs can adopt the same efficiencies and

that it is in the financial interest of the HMO/CMP to ensure that all

records are submitted as soon as possible. In regard to PRO timeliness,

the PROs have an excellent record for completing these reviews in the

time allotted and, in many cases, earlier.

Comment: Two commenters believed that the proposed appeals process

should be available to Medicare enrollees in nursing homes and those

receiving home health services.

Response: We will consider this comment for regulatory action at a

later date. This modification is significant enough to require issuance

of a second proposed rule, and we believe that this final rule should

not be delayed.

Comment: One commenter asked that Sec. 417.440(f)(3) be revised to

add the date of discharge to the list of information the notice of

noncoverage will include.

Response: We believe that HMOs and CMPs should have the flexibility

either to use the Medicare hospital notice of noncoverage or to develop

their own. In our interactions with PROs and hospitals on this matter,

the inclusion or absence of the discharge date on the notice has not

been identified as a problem or a concern. Therefore we have not

modified this provision in the final rule.

Comment: Several provisions of Sec. 417.454 appear to have been

dropped as part of the proposed rule.

Response: The revision to Sec. 417.454 as published in the proposed

rule does remove existing paragraphs (a)(1) through (a)(3). This was

done in error and is corrected in the final rule. In the final rule, a

paragraph heading is added to existing paragraph (a); the new provision

that limits charges for inpatient hospital stays is added as a new

paragraph (b); and a paragraph heading is added to existing paragraph

(b), and the paragraph redesignated as paragraph (c). No modification

is made to other existing text in section Sec. 417.454.

C. Administrative Review Requirements for HCPPs

Comment: Two commenters expressed concern about our regulations

extending the section 1876 managed care administrative review

requirements to HCPPs and disagreed with our interpretation of the

intent of the Congress in this regard. It was the opinion of both

commenters that the Congress should expressly legislate these

requirements.

Response: As noted previously, section 1833 of the Act simply

permits entities that provide Part B services on a prepayment basis to

be paid reasonable costs rather than reasonable charges. There is no

indication that the Congress intended to deprive enrolled beneficiaries

of meaningful appeal rights. Our regulations governing HCPPs were

designed to establish a workable mechanism for reimbursing them, in

light of the fact that the way they do business is more comparable to

HMOs and CMPs than it is to physicians, suppliers, and providers who

are paid under Part B.

As certain aspects of the Medicare program have been improved over

the years, such as the addition of beneficiary protections, we have not

revised HCPP regulations to reflect these changes. Recently, we have

embarked on an effort to identify actions that are within our

authority, to ensure that the HCPP program is administered prudently

and that Medicare beneficiaries enrolled in these plans have rights and

benefits comparable to those that beneficiaries have in the fee-for-

service system and in HMOs/CMPs. We believe that we have administrative

authority to ensure that these beneficiaries are given appropriate

appeal rights.

Comment: One commenter was concerned that, since HCPPs are not

required to provide all Part B services, the administrative review

process be limited to those Medicare covered services provided by the

health plan under its agreement with us.

Response: Paragraph (b)(2) of Sec. 417.838 (``Organization

determinations'') of the regulation addresses this concern by

specifying that a determination regarding services that are not covered

under the HCPP's agreement with HCFA is not an organization

determination.

Comment: One commenter stated that disputes over the level or

manner in which a service is provided, such as model variations of

durable medical equipment, should not be subject to the appeals

process.

Response: The appeal rights of Medicare enrollees of an HCPP

pertain to disputes involving an organization determination. We believe

that Sec. 417.838(a), which identifies actions that are organization

determinations, responds to this concern. Section 417.838(a) limits the

applicability of the appeals process to a refusal, on the grounds that

the services are not covered by Medicare, to furnish or arrange for

services or pay for services furnished to the beneficiary.

Comment: One commenter sought clarification on whether an HCPP's

refusal to pay coinsurance on services obtained out-of-plan (and paid

for by the carrier) would be subject to the appeals process.

Response: The HCPP's obligation to pay coinsurance amounts, where

the plan's Medicare premium covers such amounts, would depend on the

circumstances. If an enrollee is denied a service by the HCPP, then

obtains the service out-of-plan, and subsequently the service is

determined to be a covered service and paid for by the carrier under

Medicare principles of reimbursement, the enrollee can request that the

health plan pay the coinsurance amount. Then, if the HCPP makes an

organization determination that is adverse to the enrollee, or fails to

complete its review in 60 days, the matter would be referred to us for

reconsideration.

Comment: One commenter suggested allowing HCPP enrollees to retain

existing appeal rights through Medicare carriers if the HCPP review

process proves futile or ineffective.

Response: We disagree. One intent of this rule is to ensure that

HCPP enrollees have the same appeal rights as other beneficiaries in

Medicare managed care. A back-up system does not exist for other

Medicare beneficiaries and cannot be justified on either a cost or

programmatic basis. When this rule takes effect, HCPP performance in

operating an effective administrative review process will be added to

our contractor monitoring process.

Comment: One commenter stated that the estimate for additional

paperwork burden on HCPPs related to these new requirements is grossly

underestimated.

Response: Health plans that contract with us as HCPPs vary in their

administrative systems and capability to adapt to the new requirements.

While we agree that the estimate may underrepresent the additional

burden on some health plans, it may not for others. We attempted to

estimate an ``average'' additional workload, given that most HCPPs have

a grievance system for commercial enrollees on which to build an

appeals system for Medicare enrollees.

Comment: One commenter stated that they opposed a change to

Sec. 417.630 (``Right to a hearing'') regarding ``amounts remaining in

controversy'' to qualify for a hearing.

Response: Addition of this phrase is a clarification of existing

practice, not a substantive change. Beneficiary appeals made to

Medicare managed care organizations may be denied in full or in part.

Once a service or a claim has been covered by an HMO/CMP, even if the

service is only one part of the appeal, Sec. 417.604(a)(2) specifies

that the service or claim is no longer subject to appeal. Only those

services that continue to be denied may be moved through the process of

reconsideration to hearing.

Comment: One commenter opposed the change in terminology from

``initial determination'' to ``organization determination.'' The

commenter is concerned that policy issues may be mislabeled as

``organization issues'' and be misdirected to the appeals process.

Response: The concern of the commenter, we believe, is that

communications to an HMO or CMP questioning the plan's coverage

policies will be misinterpreted and directed to the plan's appeal

process. We believe that HMOs and CMPs can distinguish between

challenges to the plan's coverage policies, in general, and appeals of

coverage decisions for specifically requested services, if clearly

communicated. We do not believe that the commenter's rationale warrants

a change from using the terminology ``organization determination'' as

proposed.

D. Other Comments

Comment: One commenter suggested that HMOs be granted formal appeal

rights.

Response: We have considered this suggestion. However, because the

commenter is suggesting a significant change that was not addressed in

the proposed rule, we cannot address this issue at this time. The issue

of HMO and CMP appeal rights, as well as other appeals process issues,

will be evaluated and considered for development as a separate

regulation.

Comment: One commenter questioned allowing HMOs/CMPs to request a

reopening of a determination and another commenter recommended that an

HMO/CMP request for a reopening should not delay implementation of the

reconsideration determination.

Response: With regard to the first comment, the regulations impose

no limitation on who may request a reopening, although the decision

whether to reopen is discretionary with the decisionmaker. In response

to the second comment, Sec. 417.626 provides that a reconsidered

determination is ``final and binding'' on all parties unless a hearing

request is filed, or the determination ``is revised'' in accordance

with a reopening decision. Therefore, if an HMO's or CMP's denial of a

service or claim is overturned upon reconsideration, the plan must

abide by the determination unless and until the termination is

overturned as the result of the reopening.

We will consider the need for intermediate sanction authority for

HMOs and CMPs failing to abide by reconsidered determinations in a

forthcoming rulemaking initiative.

Comment: Two commenters recommended that we require HMOs/CMPs to

prominently post information about the appeals process and send out a

national notice communicating information about appeal rights.

Response: Existing Sec. 417.604(c) (``Written description of

appeals procedure'') requires HMOs/CMPs to provide enrollees with

written materials on appeal procedures. We believe that this is a

better method for ensuring that all enrollees are informed. Further,

this approach makes the information readily available in the enrollee's

own home. With regard to the need for a national communication, we

agree that beneficiaries should be made aware of the new appeal rights

and procedures. We will modify the Medicare Handbook and other booklets

and pamphlets routinely distributed by us to incorporate the policies

of this final regulation.

Comment: One commenter suggested that we require HMOs/CMPs to

notify enrollees, in writing, of the changes adopted in the final rule

and to submit a plan for educating enrollees about the new rights and

procedures.

Response: While we disagree that a special education program is

needed, we agree that HMOs/CMPs must inform Medicare enrollees of these

new protections. HMOs/CMPs have various means of communicating with

enrollees, including written material (for example, newsletters), and

use of these means for informing Medicare beneficiaries of these new

appeal rights is acceptable to us. The requirement at Sec. 417.604,

discussed above, is adequate for this purpose and another regulatory

requirement is unnecessary. HMOs, CMPs, and HCPPs must notify their

enrollees of the changes/additions to the appeal rights and when they

are effective.

Comment: Two commenters recommended that these appeal rights be

extended to Medicaid recipients in prepaid health plans.

Response: Appeal rights for Medicaid beneficiaries is not part of

the scope of this rulemaking effort. These comments, however, have

merit and have been brought to the attention of appropriate persons

within our Office of Managed Care.

Comment: One commenter stated that we changed Sec. 417.801(4)

without addressing it in the preamble.

Response: We assume that the commenter is referring to

Sec. 418.801(b)(4). In the amendatory language of the proposed rule, we

stated that ``In Sec. 417.801, the introductory language of paragraph

(b) is republished, paragraph (b)(4) is revised, paragraph (b)(5) is

redesignated as paragraph (b)(6), and a new paragraph (b)(5) is added

to read as follows:''. That amendatory language contained technical

errors. Paragraph (b)(4) was not revised; the language published in the

proposed rule is the same as existing paragraph (b)(4). Additionally,

existing paragraph (b)(5) should not have been redesignated; existing

paragraph (b)(6) should have been redesignated as paragraph (b)(7) and

a new paragraph (b)(6) added. These errors have been corrected in the

final rule.

IV. Provisions of This Final Rule

We have adopted the provisions of the October 7, 1992, proposed

rule, with the following changes, which have been discussed above:

We have revised proposed Sec. 417.440(f) (``Notice of

noncoverage of inpatient hospital care''). This proposed section

required that, before giving notice of noncoverage, the HMO or CMP must

obtain the concurrence of the attending physician. We have revised

``attending physician'' to ``its affiliated physician responsible for

the hospital care of the enrollee, or other physician as authorized by

the HMO or CMP''.

Proposed Sec. 417.454 (``Charges to Medicare enrollees'')

is revised to restore existing provisions that were erroneously removed

in the proposed rule.

We have revised paragraph (c) of proposed Sec. 417.620

(``Responsibility for reconsiderations; time limits) to require that

the HMO or CMP issue the reconsidered determination to the enrollee, or

submit an explanation and file to us, within 60 days from the date of

receipt of the request for reconsideration.

We have revised proposed Sec. 417.838(b) (``Actions that

are not organization determinations'') by adding a new paragraph (3).

New paragraph (3) specifies that a determination regarding services

that are covered under the HCPP's agreement with us that the enrollee

obtained from unaffiliated providers or physicians, in violation of the

HCPP's enrollment agreement, is not an organization determination for

purposes of administrative review procedures.

In addition to the above changes, in a number of sections, we made

a nomenclature change by substituting ``HMO or CMP'' and its plural and

possessive forms for the words ``organization'', ``organizations'' and

``organization's'', respectively. This change was made to use

consistent terminology throughout part 417.

We also have made technical changes and minor editorial changes

that do not affect the substance of the provisions.

V. Paperwork Burden

Sections 417.440(f), 417.605, 417.620, and 417.836 of this rule

contain additional requirements that are subject to review by the

Office of Management and Budget under the authority of the Paperwork

Reduction Act of 1980 (44 U.S.C. Chapter 35). HMOs and CMPs are

required to notify beneficiaries if the HMO or CMP refers a request for

reconsideration to HCFA. We estimate that this reporting burden will be

approximately 5 minutes per case. Also, before a hospital discharge,

HMOs and CMPs are required to provide Medicare enrollees with a written

notice of a determination that an enrollee's inpatient hospital stay is

no longer necessary. We estimate that the reporting burden for an HMO

or CMP that has not delegated the discharge decision to the hospital to

provide the written notice of noncoverage to be approximately 10

minutes per notice; for a Medicare enrollee of an HMO or CMP to

complete a request for immediate PRO review of a notice of a

determination that an inpatient hospital stay is no longer necessary to

be approximately 10 minutes per request; for the HMO or CMP to submit

requested medical information to the PRO, to be approximately \1/2\

hour per response. HCPPs are required to develop appeal procedures and

inform Medicare enrollees of appeal rights. We estimate that it will

take an HCPP 40 hours to develop these appeal procedures and 1 hour to

process each appeal. A notice will be published in the Federal Register

when OMB approval is obtained.

VI. Regulatory Impact Statement

Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601

through 612), we prepare a regulatory flexibility analysis unless the

Secretary certifies that a rule will not have a significant economic

impact on a substantial number of small entities. For purposes of the

RFA, we consider all HMOs, CMPs, and HCPPs to be small entities.

Also, section 1102(b) of the Act requires the Secretary to prepare

a regulatory impact analysis if a rule may have a significant impact on

the operations of a substantial number of small rural hospitals. This

analysis must conform to the provisions of section 604 of the RFA. For

purposes of section 1102(b) of the Act, we define a small rural

hospital as a hospital that is located outside of a Metropolitan

Statistical Area and has fewer than 50 beds.

This final rule provides the Medicare HMO or CMP enrollee with the

same administrative review rights and financial protections as are

available to beneficiaries in the fee-for-service system. To the extent

that current Medicare membership in HMOs, CMPs, and HCPPs to which this

rule will apply is low (approximately 7 percent of the total Medicare

population), we do not expect any significant increased costs or

savings as a result of this final rule.

We are not preparing analyses for either the RFA or section 1102(b)

of the Act because we have determined, and the Secretary certifies,

that this final rule will not have a significant economic impact on a

substantial number of small entities or a significant impact on the

operations of a substantial number of small rural hospitals.

In accordance with the provisions of Executive Order 12866, this

regulation was not reviewed by the Office of Management and Budget.

Lists of Subjects in 42 CFR Part 417

Administrative practice and procedure, Health maintenance

organization (HMO), Medicare, Reporting and recordkeeping requirements.

42 CFR part 417 is amended as follows:

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL

PLANS, AND HEALTH CARE PREPAYMENT PLANS

1. The authority citation for Part 417 is revised to read as

follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42

U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public

Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9); and 31

U.S.C. 9701.

2. In Sec. 417.440, a new paragraph (f) is added, to read as

follows:

Sec. 417.440 Entitlement to health care services from an HMO or CMP.

* * * * *

(f) Notice of noncoverage of inpatient hospital care. (1) If an

enrollee is an inpatient of a hospital, entitlement to inpatient

hospital care continues until he or she receives notice of noncoverage

of that care.

(2) Before giving notice of noncoverage, the HMO or CMP must obtain

the concurrence of its affiliated physician responsible for the

hospital care of the enrollee, or other physician as authorized by the

HMO or CMP.

(3) The HMO or CMP must give the enrollee written notice that

includes the following:

(i) The reason why inpatient hospital care is no longer needed.

(ii) The effective date of the enrollee's liability for continued

inpatient care.

(iii) The enrollee's appeal rights.

(4) If the HMO or CMP delegates to the hospital the determination

of noncoverage of inpatient care, the hospital obtains the concurrence

of the HMO- or CMP-affiliated physician responsible for the hospital

care of the enrollee, or other physician as authorized by the HMO or

CMP, and sends notice, following the procedures set forth in

Sec. 412.42(c)(3) of this chapter.

3. Section 417.454 is amended by adding a paragraph heading to

paragraph (a), redesignating paragraph (b) as paragraph (c) and adding

a paragraph heading, and adding a new paragraph (b), to read as

follows:

Sec. 417.454 Charges to Medicare enrollees.

(a) Charges that are permitted. * * *

(b) Limit on charges for inpatient hospital care. If a Medicare

enrollee who is an inpatient of a hospital requests immediate PRO

review (as provided in Sec. 417.605) of any determination by the

hospital furnishing services or the HMO or CMP that the inpatient

hospital services will no longer be covered, the HMO or CMP may not

charge the enrollee for any inpatient care costs incurred before noon

of the first working day after the PRO issues its review decision.

(c) Reporting requirements. * * *

Secs. 417.600, 417.612, 417.622 [Amended]

4. Nomenclature change: In the following sections of subpart Q, the

term ``initial determination'' or ``initial determinations'' is revised

to read ``organization determination'' or ``organization

determinations'', respectively, wherever it appears:

a. Sec. 417.600.

b. Sec. 417.612, section title and text.

c. Sec. 417.622(b).

5. Section 417.604 is amended by revising paragraphs (a) and (b) to

read as follows:

Sec. 417.604 General provisions.

(a) Applicability. The appeals procedures set forth in this subpart

apply to organization determinations as defined in Sec. 417.606, with

the following exceptions:

(1) If an enrollee requests immediate PRO review (as provided in

Sec. 417.605) of a determination of noncoverage of inpatient hospital

care--

(i) The enrollee is not entitled to subsequent review of that issue

under this subpart; and

(ii) The PRO review decision is subject to the appeals procedures

set forth in part 473 of this chapter.

(2) Any determination regarding services that were furnished by the

HMO or CMP, either directly or under arrangement, for which the

enrollee has no further liability for payment are not subject to

appeal.

(3) Services included in an optional supplemental plan (see

Sec. 417.440(b)(2)) are subject only to a grievance procedure under

Sec. 417.436(a)(2).

(4) Physicians and other individuals who furnish items or services

under arrangement with an HMO or CMP have no right of appeal under this

subpart.

(5) The provisions of subpart R of 20 CFR part 404 dealing with

representation of parties under title II of the Act are, unless

otherwise provided in this subpart, also applicable to appeals under

this subpart.

(b) Responsibility for establishing appeals procedures. The HMO or

CMP is responsible for establishing and maintaining the appeals

procedures that are specified in Secs. 417.604 through 417.638.

* * * * *

6. A new Sec. 417.605 is added to read as follows:

Sec. 417.605 Immediate PRO review of a determination of noncoverage of

inpatient hospital care.

(a) Right to review. A Medicare enrollee who disagrees with a

determination made by an HMO, CMP, or a hospital that inpatient care is

no longer necessary may remain in the hospital and may (directly or

through his or her authorized representative) request immediate PRO

review of the determination.

(b) Procedures. For the immediate PRO review process, the following

rules apply:

(1) The enrollee or authorized representative must submit the

request for immediate review--

(i) To the PRO that has an agreement with the hospital under

Sec. 466.78 of this chapter;

(ii) In writing or by telephone; and

(iii) By noon of the first working day after receipt of the written

notice of the determination that the hospital stay is no longer

necessary.

(2) On the date it receives the enrollee's request, the PRO must

notify the HMO or CMP that a request for immediate review has been

filed.

(3) The HMO or CMP must supply any information that the PRO

requires to conduct its review and must make it available, by phone or

in writing, by the close of business of the first full working day

immediately following the day the enrollee submits the request for

review.

(4) In response to a request from the HMO or CMP, the hospital must

submit medical records and other pertinent information to the PRO by

close of business of the first full working day immediately following

the day the HMO or CMP makes its request.

(5) The PRO must solicit the views of the enrollee who requested

the immediate PRO review (or the enrollee's representative).

(6) The PRO must make a determination and notify the enrollee, the

hospital, and the HMO or CMP by close of business of the first working

day after it receives the information from the hospital, or the HMO or

CMP, or both.

(c) Financial responsibility--(1) General rule. Except as provided

in paragraph (c)(2) of this section, the HMO or CMP continues to be

financially responsible for the costs of the hospital stay until noon

of the calendar day following the day the PRO notifies the enrollee of

its review determination.

(2) Exception. The hospital may not charge the HMO or CMP (or the

enrollee) if--

(i) It was the hospital (acting on behalf of the enrollee) that

filed the request for immediate PRO review; and

(ii) The PRO upholds the noncoverage determination made by the HMO

or CMP.

7. Section 417.606 is revised to read as follows:

Sec. 417.606 Organization determinations.

(a) Actions that are organization determinations. An organization

determination is any determination made by an HMO or CMP with respect

to any of the following:

(1) Payment for emergency or urgently needed services.

(2) Any other health services furnished by a provider or supplier

other than the HMO or CMP that the enrollee believes--

(i) Are covered under Medicare; and

(ii) Should have been furnished, arranged for, or reimbursed by the

HMO or CMP.

(3) The HMO's or CMP's refusal to provide services that the

enrollee believes should be furnished or arranged for by the HMO or CMP

and the enrollee has not received the services outside the HMO or CMP.

(b) Actions that are not organization determinations. The following

are not organization determinations for purposes of this subpart:

(1) A determination regarding services that were furnished by the

HMO or CMP, either directly or under arrangement, for which the

enrollee has no further obligation for payment.

(2) A determination regarding services included in an optional

supplemental plan (see Sec. 417.440(b)(2)).

(c) Relation to grievances. A determination that is not an

organization determination is subject only to a grievance procedure

under Sec. 417.436(a)(2).

8. Section 417.608 is amended by revising the section heading and

paragraphs (a) and (c) to read as follows:

Sec. 417.608 Notice of adverse organization determination.

(a) If an HMO or CMP makes an organization determination that is

partially or fully adverse to the enrollee, it must notify the enrollee

of the determination within 60 days of receiving the enrollee's request

for payment for services.

* * * * *

(c) The failure to provide the enrollee with timely notification of

an adverse organization determination constitutes an adverse

organization determination and may be appealed.

9. In Sec. 417.610, the section heading is revised, the

undesignated introductory text is revised, and paragraph (b) is

revised, to read as follows:

Sec. 417.610 Parties to the organization determination.

The parties to the organization determination are--

* * * * *

(b) An assignee of the enrollee (that is, a physician or other

supplier who has provided a service to the enrollee and formally agrees

to waive any right to payment from the enrollee for that service);

* * * * *

10. Section 417.614 is revised to read as follows:

Sec. 417.614 Right to reconsideration.

Any party who is dissatisfied with an organization determination or

with one that has been reopened and revised may request reconsideration

of the determination in accordance with the procedures of Sec. 417.616.

11. In Sec. 417.616, the introductory text of paragraph (a) is

republished, and paragraphs (a)(1), (b), (c)(1), and (c)(2)

introductory text are revised, to read as follows:

Sec. 417.616 Request for reconsideration.

(a) Method and place for filing a request. A request for

reconsideration must be made in writing and filed with--(1) The HMO or

CMP that made the organization determination;

* * * * *

(b) Time for filing a request. Except as provided in paragraph (c)

of this section, the request for reconsideration must be filed within

60 days from the date of the notice of the organization determination.

(c) Extension of time to file a request--(1) Rule. If good cause is

shown, the HMO or CMP that made the organization determination may

extend the time for filing the request for reconsideration.

(2) Method of requesting an extension. If the time limit in

paragraph (b) of this section has expired, a party to the organization

determination may file a request for reconsideration with the HMO or

CMP, HCFA, SSA, or, in the case of a qualified railroad retirement

beneficiary, an RRB office. The request to extend the time limit must--

* * * * *

Sec. 417.618 [Amended]

12. In Sec. 417.618, ``, carrier, or intermediary'' is removed.

13. Section 417.620 is revised to read as follows:

Sec. 417.620 Responsibility for reconsiderations; time limits.

(a) If the HMO or CMP can make a reconsidered determination that is

completely favorable to the enrollee, the HMO or CMP issues the

reconsidered determination.

(b) If the HMO or CMP recommends partial or complete affirmation of

its adverse determination, the HMO or CMP must prepare a written

explanation and send the entire case to HCFA. HCFA makes the

reconsidered determination.

(c) The HMO or CMP must issue the reconsidered determination to the

enrollee, or submit the explanation and file to HCFA, within 60

calendar days from the date of receipt of the request for

reconsideration.

(d) For good cause shown, HCFA may allow exceptions to the time

limit set forth in paragraph (c) of this section.

(e) Failure by the HMO or CMP to provide the enrollee with a

reconsidered determination within the 60-day limit described in

paragraph (c) of this section or to obtain a good cause extension

described in paragraph (d) of this section constitutes an adverse

determination, and the HMO or CMP must submit the file to HCFA.

(f) If the HMO or CMP refers the matter to HCFA, it must

concurrently notify the beneficiary of that action.

14. In Sec. 417.622, the introductory text is republished, and

paragraph (a) is revised to read as follows. [For a nomenclature change

in paragraph (b), see amendatory item 4.]

Sec. 417.622 Reconsidered determination.

A reconsidered determination is a new determination that--

(a) Is based on a review of the organization determination, the

evidence and findings upon which it was based, and any other evidence

submitted by the parties or obtained by HCFA or the HMO or CMP; and

* * * * *

15. Section 417.630 is revised to read as follows:

Sec. 417.630 Right to a hearing.

If the amount remaining in controversy is $100 or more, any party

to the reconsideration who is dissatisfied with the reconsidered

determination has a right to a hearing. (The amount remaining in

controversy, which can include any combination of Part A and Part B

services, is computed in accordance with Sec. 405.740 of this chapter

for Part A services and Sec. 405.820(b) of this chapter for Part B

services. If the basis for the appeal is the refusal of services, the

projected value of those services is used in computing the amount

remaining in controversy.)

16. Section 417.638 is revised to read as follows:

Sec. 417.638 Reopening determinations and decisions.

An organization, reconsidered, or revised determination made by an

HMO, CMP, or HCFA, or a decision or revised decision of an ALJ or the

Appeals Council, may be reopened in accordance with the provisions of

Sec. 405.750 of this chapter.

17. In Sec. 417.801, the introductory language of paragraph (b) is

republished, paragraph (b)(6) is redesignated and republished as

paragraph (b)(7), and a new paragraph (b)(6) is added to read as

follows:

Sec. 417.801 Agreements between HCFA and health care prepayment plans.

* * * * *

(b) Terms. The agreement must provide that the HCPP agrees to--

* * * * *

(6) Establish administrative review procedures in accordance with

Secs. 417.830 through 417.840 for Medicare enrollees who are

dissatisfied with denied services or claims; and

(7) Consider any additional requirements that HCFA finds necessary

or desirable for efficient and effective program administration.

* * * * *

18. New Secs. 417.830, 417.832, 417.834, 417.836, 417.838, and

417.840 are added under subpart U to read as follows:

Sec. 417.830 Scope of regulations on beneficiary appeals.

Sections 417.832 through 417.840 establish procedures for the

presentation and resolution of organization determinations,

reconsiderations, hearings, Appeals Council review, court reviews, and

finality of decisions that are applicable to Medicare enrollees of an

HCPP.

Sec. 417.832 Applicability of requirements and procedures.

(a) The administrative review rights and procedures specified in

Secs. 417.834 through 417.840 pertain to disputes involving an

organization determination, as defined in Sec. 417.838, with which the

enrollee is dissatisfied.

(b) Physicians and other individuals who furnish items or services

under arrangements with an HCPP have no right of administrative review

under Secs. 417.834 through 417.840.

(c) The provisions of subpart R of 20 CFR part 404 dealing with

representation of parties under title II of the Act are, unless

otherwise provided, also applicable.

Sec. 417.834 Responsibility for establishing administrative review

procedures.

The HCPP is responsible for establishing and maintaining the

administrative review procedures that are specified in Secs. 417.830

through 417.840.

Sec. 417.836 Written description of administrative review procedures.

Each HCPP is responsible for ensuring that all Medicare enrollees

are informed in writing of the administrative review procedures that

are available to them.

Sec. 417.838 Organization determinations.

(a) Actions that are organization determinations. For purposes of

Secs. 417.830 through 417.840, an organization determination is a

refusal to furnish or arrange for services, or reimburse the party for

services provided to the beneficiary, on the grounds that the services

are not covered by Medicare.

(b) Actions that are not organization determinations. The following

are not organization determinations for purposes of Secs. 417.830

through 417.840:

(1) A determination regarding services that were furnished by the

HCPP, either directly or under arrangement, for which the enrollee has

no further obligation for payment.

(2) A determination regarding services that are not covered under

the HCPP's agreement with HCFA.

Sec. 417.840 Administrative review procedures.

The HCPP must apply Secs. 417.608 through 417.638 to organization

determinations that affect its Medicare enrollees, and to

reconsideration, hearings, Appeals Council review, and judicial review

of those organization determinations.

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance; and Program No. 93.774, Medicare--

Supplementary Medical Insurance.)

Dated: May 20, 1994.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: November 4, 1994.

Donna E. Shalala,

Secretary.

[FR Doc. 94-28399 Filed 11-18-94; 8:45 am]

BILLING CODE 4120-01-P