Medicare Program; Part B Advance Payments to Suppliers Furnishing Items or Services Under Medicare Part B

DEPARTMENT OF HEALTH AND HUMAN SERVICES

42 CFR Part 421

[BPO-105-F]

RIN 0938-AF85

Medicare Program; Part B Advance Payments to Suppliers Furnishing

Items or Services Under Medicare Part B

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule establishes requirements and procedures for advance

payments to suppliers of Medicare Part B services. An advance payment

will be made only if the carrier is unable to process a claim timely;

the supplier requests advance payment; we determine that payment of

interest is insufficient to compensate the supplier for loss of the use

of the funds; and, we expressly approve the advance payment in writing.

These rules are necessary to address deficiencies noted by the

General Accounting Office in its report analyzing current procedures

for making advance payments. The intent of this rule is to ensure more

efficient and effective administration of this aspect of the Medicare

program.

EFFECTIVE DATE: This rule is effective October 21, 1996.

FOR FURTHER INFORMATION CONTACT: Robert Shaw, (410) 786-3312.

SUPPLEMENTARY INFORMATION:

I. Background

A. General

The Medicare Supplementary Medical Insurance (Part B) program is a

voluntary program that pays all or part of the costs for physicians'

services; outpatient hospital services; certain home health services;

services furnished by rural health clinics, ambulatory surgical centers

and comprehensive outpatient rehabilitation facilities; and certain

other items or medical and hospital health services not covered by the

Medicare Hospital Insurance program (Part A).

B. Use of Carriers

1. Statutory basis. Under section 1842(a) of the Social Security

Act (the Act), public and private organizations and agencies may

participate in the administration of the Medicare program under

contracts entered into with the Secretary. These Medicare contractors,

known as ``carriers,'' process and pay Part B claims.

Usually, these payments are made on a claim-by-claim basis.

Regulations at 42 CFR part 421, subpart C--Carriers, set forth the

functions performed by Medicare carriers, which include the following:

Determining the eligibility status of a beneficiary.

Determining whether the services for which payment is

claimed are covered under Medicare, and if so, the correct payment

amounts.

Making correct payment to the beneficiary or the supplier

of the items or services, as appropriate.

Carriers must also observe the ``prompt payment'' requirements set

forth in section 1842(c) of the Act. As amended by section 13568 of the

Omnibus Budget Reconciliation Act of 1993 (OBRA '93) (Public Law 103-

66), enacted on August 10, 1993, this provision currently requires

interest to be paid on all ``clean'' claims for which payment is not

issued within 30 calendar days.

[[Page 49272]]

2. Advance payments to suppliers. Under Part B, a carrier may make

an advance partial payment to a supplier if the carrier is not able to

process a claim. (For purposes of the Medicare program, Sec. 400.202

defines ``supplier'' as a physician or other practitioner, or an entity

other than a provider, that furnishes health care services under

Medicare. Section 400.202 defines ``services'' as medical care or

services and items, such as medical diagnosis and treatment, drugs and

biologicals, supplies, appliances, and equipment, medical social

services, and use of the facilities of a hospital, a rural primary care

hospital, or a skilled nursing facility.) An advance payment may be

made to a supplier eligible to receive Medicare payments.

At the present time, there are no regulations or guidelines for

making advance payments. In rare instances, such as when major

administrative changes are made in processing Part B claims, a backlog

of pending claims may occur. To avoid or reduce the payment of interest

on claims that are not processed timely, we sometimes authorize advance

payments for pending backlogged claims, subject to later recoupment

from amounts we owe, once the claims are processed.

II. General Accounting Office Report Finding--``HCFA Should Improve

Internal Controls Over Part B Advance Payments''

As a result of administrative changes made in processing Part B

claims at two carriers in two States during 1988, a large backlog of

pending claims occurred. In order to minimize the effects of these

claims payment disruptions on suppliers, in 1989 we authorized the two

carriers to make advance payments for pending backlogged claims,

subject to later recoupment, once the claims were actually processed.

The difficulties experienced by the suppliers resulted in the General

Accounting Office investigating these two carriers and their claims

processing systems. This investigation led the General Accounting

Office to question whether we had sufficient guidelines and safeguards

in place to ensure that advance payments were promptly recouped. A full

report of the General Accounting Office findings is included in the

proposed rule published in the Federal Register on July 18, 1994 (59 FR

36415).

As a result of its review of these cases, the General Accounting

Office recommended that we determine whether it is appropriate for

carriers to make advance payments to suppliers and that we be in

compliance with the Federal Managers' Financial Integrity Act (31

U.S.C. 3512) when making these determinations. A full discussion of the

requirements of the Federal Managers' Financial Integrity Act was

included in the proposed rule (59 FR 36416).

In applying this standard to Part B advance payments, the General

Accounting Office expressed the opinion that HCFA, rather than the

carriers, should authorize advance payments to be executed by the

carriers. In addition, the General Accounting Office asserted that we

should clearly communicate to carriers our approval to make advance

payments and include the terms under which these payments must be made.

Therefore, the General Accounting Office recommended that we develop

regulations and instructions for carriers regarding Part B advance

payments to suppliers. (General Accounting Office report, GAO/HRD-91-81

(April 1991), entitled ``Medicare: HCFA Should Improve Internal

Controls Over Part B Advance Payments.'')

III. Summary of the Proposed Regulations

We published a proposed rule in the Federal Register on July 18,

1994 (59 FR 36415) to announce our intention to establish requirements

and procedures for advance payments to suppliers of Medicare Part B

services. The proposed rule responded to the General Accounting Office

report and recommendation and proposed to add Sec. 421.214 (``Advance

payments to suppliers furnishing items or services under Part B'') to

42 CFR part 421, subpart C.

Proposed Sec. 421.214 would ensure the smooth and uniform issuance

and recoupment of Part B advance payments that may be authorized from

time to time to counter the negative consequences of disruptions in

Medicare Part B claims processing. The regulation, as proposed, would

be entirely self-contained. Advance payments would be made when a

carrier is unable to process a claim timely, not when delay is the

result of late or incomplete submittal of a claim by a supplier.

Processing delays would be highlighted to us to ensure that payment

disruptions and risks to the Medicare trust fund would be minimized.

There are some entities with provider agreements under section 1866

of the Act that are paid for certain Part B services from the Part B

Trust Fund through intermediaries (performing as a carrier when making

Part B payments). These providers generally have access to the existing

accelerated payment provisions under Sec. 413.64(g). The purpose of the

proposed regulation is to create a Part B advance payment procedure for

suppliers, not to supplant the existing Part A advance payment

procedure for some providers. Therefore, this section would not apply

to claims for Part B items or services that are furnished by entities

with provider agreements under section 1866 of the Act that receive

payments from intermediaries.

Proposed Sec. 421.214(b) defines the term ``advance payment'' to

mean a carrier's conditional partial payment to a supplier on a Part B

claim that the carrier is unable to process within the prescribed time

limits.

Proposed Sec. 421.214(c) specifies that an advance payment may be

made if the carrier is unable to process claims timely; if we determine

that the prompt payment interest provision in section 1842(c) of the

Act is insufficient to make claimants whole; and, if the advance

payment is expressly approved by us in writing. The prompt payment

interest provision currently requires us to pay interest on clean

claims when the carrier is unable to make payment within 30 calendar

days. The determination to issue advance payments must take into

consideration elements that are, or may be, subject to changes, such as

legislation related to prompt payment; system enhancements; severity of

system malfunctions; changes to regulations; change in contractors; and

any number of other factors that may necessitate the issuance of

advance payments. Therefore, we stated we would implement the threshold

criterion or criteria through manual instructions to the carriers. This

would give us the flexibility to respond promptly to providers without

going through the rulemaking process each time a unique situation

occurs. We specifically requested public comments on this approach. In

making changes, we would ensure that advance payments would be made in

a way that would ensure budget neutrality.

Section 421.214(d) specifies that no advance payment would be made

to any supplier who is delinquent in repaying a Medicare overpayment,

or one that has been advised that it is under active medical review or

program integrity investigation. Also, an advance payment would not be

made to a supplier that has not submitted any claims, or has not

accepted claims' assignments within the most recent 180-day period

preceding the system malfunction that created the need for the advance

payment.

Proposed Sec. 421.214(e)(1) specifies that a supplier must request,

in writing to the carrier, an advance payment for providing Part B

services. Paragraph

[[Page 49273]]

(e)(2) specifies that a supplier must accept an advance payment as a

conditional payment subject to adjustment, recoupment, or both based on

an eventual determination of the actual amount due on the claim and

subject to the other rules found in Sec. 421.214.

Proposed Sec. 421.214(f)(1) states that a carrier must calculate an

advance payment for a specific claim at no more than 80 percent of the

historical assigned claims payment data paid a supplier. ``Historical

data'' are defined as a representative 90-day assigned claims payment

trend within the most recent 180-day experience before the system

malfunction. Based on this amount, the carrier must determine and issue

an advance payment on a particular claim not to exceed 80 percent of

the average per claim amount paid during the 90-day trend period. If

historical data are not available or if backlogged claims cannot be

identified, the carrier would determine and issue advance payments

based on some other methodology approved by us. Advance payments would

be made no more frequently than once every 2 weeks to a supplier.

Proposed Sec. 421.214(f)(2) specifies that generally, a supplier

would not receive advance payments for more assigned claims than were

paid, on a daily average, for the 90 days before the system

malfunction. This would prevent and discourage suppliers from

submitting assigned claims that may lack merit in order to maximize the

receipt of advance payments. However, an example of a permissible

exception would be when a supplier does not receive payments from a

carrier for services during the early months of the year when

beneficiary deductibles are being met. In this case, the carrier would

use more representative payment months for the suppliers' daily

average.

Proposed Sec. 421.214(f)(3) specifies that a carrier must recover

an advance payment by applying it against the amount due on the claim

on which the advance payment was made. Under the proposal, if the

advance payment exceeds the Medicare payment amount, the carrier must

apply the unadjusted balance of the advance payment against further

Medicare payments due the supplier.

It is not our intent to permit repayment of an advance payment by

an option that could delay the recovery process or that would create a

duplicate payment or an overpayment. Thus, a supplier of Part B

services could not elect to receive the full payment amount for a claim

and repay the advance payment separately at some other time.

Proposed Sec. 421.214(f)(4) specifies that in accordance with our

instructions, a carrier must maintain financial records in accordance

with the Statement of Federal Financial Accounting Standards for

tracking each advance payment and its recoupment.

Proposed Sec. 421.214(g)(1) permits us to waive the requirements of

paragraph (e)(1) if we determine it is appropriate to make advance

payments to all affected suppliers. Paragraph (g)(2) specifies that if

adjusting Medicare payments fails to recover an advance payment, we may

authorize the use of any other recoupment method available (for

example, lump sum repayment or an extended repayment schedule).

Paragraph (g)(2) also allows an unpaid balance from a past advance

payment to be converted into an overpayment. In the unlikely event

that, after the adjustment process is completed, more money has been

advanced to the supplier than was due, we would consider that amount to

be an overpayment. We could then attempt to recover the overpayment

under the Medicare recovery procedures in part 401, subpart F and part

405, subpart C.

Proposed Sec. 421.214(h) clarifies that the advance payment would

be considered a payment that would satisfy the ``prompt payment''

requirements of section 1842(c)(2) of the Act for the amount of the

advance. Therefore, if an advance payment is made before the ``prompt

payment'' time limit and the actual amount of payment for the claim is

determined after the time limit, interest would be paid only on the

balance due the supplier after the carrier deducts the amount of the

advance. (Of course, no interest would accrue if the amount of the

advance exceeds the actual payment amount to be made on the claim.) If

the advance payment is issued after the time limit for making a prompt

payment, interest would accrue on the advance (or on the amount of the

claim, whichever is smaller) up to the date that the advance payment is

issued, and on the balance due the supplier, if any, up to the date of

payment.

Proposed Sec. 421.214(i) explains that the decision to advance

payments and the determination of the amount to be advanced on any

given claim are committed to agency discretion and are not subject to

review or appeal. However, the carrier would notify the supplier

receiving the advance payment about the amounts advanced and recouped,

and how any Medicare payment amounts have been adjusted. If the

supplier believes the carrier's reconciliation of the amounts advanced

and recouped is incorrectly computed, it may request an administrative

review from the carrier. If a review is requested, the carrier would

provide a written explanation of the adjustments. This review and

explanation would be separate from a supplier's right to appeal the

amount and computation of benefits paid on the claim, as provided at 42

CFR part 405, subpart H. The carrier's reconciliation of amounts

advanced and recouped would not be an initial determination as defined

at Sec. 405.803, and any written explanation of this reconciliation

would not be subject to further administrative review. We expect that

this review process would help to eliminate unnecessary appeals that

might result from errors in computation.

IV. Analysis of Public Comments

In response to the July 1994 proposed rule, we received three

timely items of correspondence. Comments were received from two

national trade associations--one is a nonprofit association comprised

of over 2,100 home medical equipment suppliers and one represents over

850 wholesale and retail distributors of health and medical products.

The third comment was sent by a 30,000-member professional association

representing pharmacists in various health settings. These comments and

our responses are discussed below.

Comment: One commenter stated that the term ``established time

limit'' that is referenced in the definition of advance payment

(Sec. 421.214(b)) should be specific for purposes of this rule. The

commenter suggested that after 30 to 60 days, interest should be paid

by the carrier on outstanding claims and after 60 days, advance

payments should be made automatically.

Response: Carriers must adhere to the ``prompt payment''

requirements set forth in section 1842(c) of the Act. As amended by

section 13568 of OBRA '93, this provision currently requires interest

to be paid on all ``clean'' claims for which payment is not made within

30 calendar days. We expect that the need for advance payment would be

determined in much less than 60 days. Additionally, as outlined in

Sec. 421.214(c) (``When advance payments may be made'') and

Sec. 421.214(d) (``When advance payments are not made''), advance

payments will be paid when the requirements of the rule are met.

However, it would be presumptuous for us or the carrier to assume that

all suppliers would want an advance payment.

Comment: Two commenters stated that it should be the obligation of

the carrier to notify suppliers as soon as the carrier discovers that

payment would not be made in a timely manner and

[[Page 49274]]

advance payments would be necessary. One of the commenters suggested

that, after an initial request, suppliers should not have to request an

advance payment in writing each time an advance payment is warranted.

Response: We agree that the carrier should notify a supplier when

there is a need to make advance payment. If the reason for not making

prompt payment is associated with the carriers' inability to process

Medicare claims in a timely manner, the carrier will notify the

supplier. The supplier will have the option of receiving an advance

payment, as long as the conditions as outlined in this final rule are

met. Additionally, it is not our intention to require suppliers to

request an advance payment each time a claim is submitted during a

period that advance payments are deemed to be necessary. Advance

payments will be automatic until the condition that caused the need for

advance payments is corrected.

Comment: One commenter disagreed with our position that the

decision to advance payments and the determination of the amount of any

advance payment are committed to agency discretion and are not subject

to review or appeal (Sec. 421.214(i)). The commenter believed that this

position does not ensure more efficient and effective administration of

this aspect of the Medicare program.

Response: Advance payments are discretionary because the Medicare

statute imposes no obligation to advance these monies before a final

payment determination is made. The final payment determination is not

affected by the advance payment process; suppliers can only be

advantaged by receiving these advances. Agency discretion for the

amount to be advanced is based on a valid and fair formula, as outlined

in Sec. 421.214(f)(1) and (f)(2). This is an efficient and effective

administration of the program that minimizes the risks to the Medicare

trust fund, without prejudice to the supplier.

Comment: One commenter objected to the provision in the proposed

rule instructing a carrier that the amount of an advance payment should

be no more than 80 percent of the historical assigned claims payment

data (Sec. 421.214(f)(1)). The commenter believed the supplier should

get an advance payment of 100 percent of its submitted charges, minus

the supplier's historical percentage differential between submitted and

approved charges.

Response: We have determined that the fairest method of calculating

advance payments to suppliers without risking an overpayment is to

calculate an advance payment for a particular claim at no more than 80

percent of the anticipated payment for that claim based upon the

historical assigned claims payment data for claims paid to the

supplier. This payment methodology balances the financial needs of the

supplier with our responsibility to protect the Medicare trust fund.

Comment: One commenter was concerned that a provision in the

proposed rule (Sec. 421.214(f)(3)) would allow the carrier to recover

payment from the supplier without requiring the carrier to resolve the

problem that actually caused the claims processing problem.

Response: The commenter's concern is unfounded. It is not our

intent to recover any part of the advance payment before the carrier

resolves the problem that made the advance payment necessary.

Comment: One commenter recommended that the supplier be given the

opportunity to repay the advance payment by check or wire transfer to

avoid the offsetting against claims because offsetting claims often

results in accounting problems.

Response: Permitting suppliers to refund advance payments (as

opposed to having the advanced payment offset against the actual

payment amount) would undoubtedly produce systemic overpayments and

duplicate payments to suppliers. This would be directly contrary to the

intent and purpose of this final rule. It is not our intent to permit

repayment of an advance payment by an option that could delay the

recovery process or that will create a duplicate payment or an

overpayment. A supplier of Part B services could not elect to receive

full payment for a claim and repay the advance payment separately at

some other time. Permitting suppliers to refund the advance payment by

check or wire transfer also conflicts with the definition of ``advance

payment'' in Sec. 421.214(b) and the concept of advancing a portion of

what is owed. The recommendation by the commenter would, in all

probability, increase the frequency of overpayments and duplicate

payments to providers, could be prone to abuse, and is inconsistent

with the intent of this rule.

Comment: One commenter had concerns about the provision prohibiting

an advance payment to a supplier if the supplier is under active

medical review or undergoing a program integrity investigation

(Sec. 421.214(d)(2)). The same commenter also believed that suppliers

that do not take assignment should not be excluded from receiving a

cash advance (Sec. 421.214(d)(4)).

Response: A supplier that is under an active medical review or

undergoing a program integrity investigation is in a status that we do

not treat lightly. These reviews and investigations could culminate in

actions that result in civil, criminal, and administrative remedies. To

authorize an advance payment without final resolution of the medical

review or program integrity investigation is not in the best interest

of the Medicare trust fund. A supplier that does not accept assignment

receives no monies from Medicare. Therefore, there is no basis for an

advance payment.

Comment: One commenter suggested that within 3 business days of a

carrier's receipt of an advance payment request, the carrier should

inform the supplier in writing of the amount of the advance payment

and, within the following 5 business days, the carrier should forward a

check for the advance payment to the supplier.

Response: The commenter proposes an administratively burdensome

time frame for carrier action that is far shorter than (and

inconsistent with) the ``prompt payment'' standard for ``clean'' claims

provided by Congress in section 1842(c)(2) of the Act. In accordance

with this provision, we pay interest when the carrier does not pay a

claim within 30 calendar days of receipt. Under 421.214(b), we will

issue advance payments only if the carrier is unable to process claims

timely, that is, within this 30 day period. Once we decide that the

carrier should issue advance payments, continuing advance payments will

be timed to be consistent with these prompt payment rules and the

carrier's usual operating procedures. This should minimize the

obligation to pay interest, as well as reduce the administrative burden

on the carrier during difficult circumstances. In addition, to adopt

the commenter's suggestion would likely aggravate the situation because

it would appear to create an incentive to seek advance payments.

Comment: One commenter stated that it opposed our proposed method

of calculating the amount of the advance payment (Sec. 421.214(f)) if

the payment is based on 80 percent of assigned claims submitted in the

past 90 days. The commenter further stated that if a carrier is unable

to process claims, the advance payment provision should allow that

carrier to pay at 100 percent of the supplier's submitted charges,

minus the supplier's historical percentage differential between

submitted and approved charges.

[[Page 49275]]

Response: We chose to base the advance payment on 80 percent of

assigned claims submitted in the past 90 days to meet the needs of a

supplier to continue to be a viable business and our responsibility to

protect the Medicare trust fund. If we chose to base the advance

payment on 100 percent of its submitted charges, minus the supplier's

historical percentage differential between submitted and approved

charges, we would likely create a situation in which a carrier overpays

a supplier and subsequently must recover the overpayment. This

situation creates an administrative burden on the carrier to develop

procedures to recover the overpayment successfully and results in

increased costs to the Medicare program.

V. Provisions of the Final Rule

We are making the following changes in this final rule as a result

of written comments received on the proposed rule. We are adding the

following paragraph (1) at the beginning of Sec. 421.214(f), which

concerns requirements for carriers:

``(1) A carrier must notify a supplier as soon as it is determined

that payment will not be made in a timely manner, and an advance

payment option is to be offered to the supplier.''

We are also clarifying Sec. 421.214(f)(1)(i) to eliminate possible

uncertainty regarding how advance payments will be calculated.

VI. Collection of Information

Under the Paperwork Reduction Act of 1995, we are required to

provide 60-day notice in the Federal Register and solicit public

comment before a collection of information requirement is submitted to

the Office of Management and Budget (OMB) for review and approval. In

order to fairly evaluate whether an information collection should be

approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act

requires that we solicit comment on the following issues:

Whether the information collection is necessary and useful

to carry out the proper functions of our agency;

The accuracy of our estimate of the information collection

burden;

The quality, utility, and clarity of the information to be

collected.

Recommendations to minimize the information collection

burden on the affected public, including automated collection

techniques.

We are soliciting public comment on each of these issues for

Sec. 421.214(f)(4) of this document that contains information

collection requirements. The information collection in that section

requires carriers to maintain a system of financial data in accordance

with the Statement of Federal Financial Accounting Standards for

tracking each advance payment and its recoupment. We estimate that it

will take a carrier 4 minutes for entry of an advance payment into the

tracking system and 2 minutes for any update (including recoupment).

For comments that relate to information collection requirements,

mail a copy of comments to: Health Care Financing Administration,

Office of Financial and Human Resources, Management Planning and

Analysis Staff, Room C2-26-17, 7500 Security Boulevard, Baltimore,

Maryland 21244-1850.

VII. 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 suppliers that provide services under Medicare

Part B to be small entities. We do not consider carriers to be small

entities.

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

a regulatory impact analysis for any rule that 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 amends Medicare regulations to ensure that if

carriers make advance payments to suppliers and those payments are

greater than the amounts actually due after the claim is processed, the

excess payments are recovered promptly. We expect this rule will result

in marginal administrative savings to carriers and suppliers. In

addition, we do not believe this regulation will have a negative effect

on the economy. Therefore, the overall benefits are positive and indeed

provide stability for suppliers during potentially disruptive claims

processing delays.

We have determined, and we certify, 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. Therefore, we have not prepared

analyses for either the RFA or section 1102(b) of the Act.

In accordance with the provisions of Executive Order 12866, this

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

This rule is not a major rule as defined at 5 U.S.C. 804(2).

List of Subjects in 42 CFR Part 421

Administrative practice and procedure, Health facilities, Health

professions, Medicare, Reporting and recordkeeping requirements.

42 CFR part 421 is amended as follows:

PART 421--INTERMEDIARIES AND CARRIERS

1. The authority citation for part 421 continues to read as

follows:

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

U.S.C. 1302 and 1395hh).

Subpart C--Carriers

2. A new Sec. 421.214 is added to subpart C to read as follows:

Sec. 421.214 Advance payments to suppliers furnishing items or

services under Part B.

(a) Scope and applicability. This section provides for the

following:

(1) Sets forth requirements and procedures for the issuance and

recovery of advance payments to suppliers of Part B services and the

rights and responsibilities of suppliers under the payment and recovery

process.

(2) Does not limit HCFA's right to recover unadjusted advance

payment balances.

(3) Does not affect suppliers' appeal rights under part 405,

subpart H of this chapter relating to substantive determinations on

suppliers' claims.

(4) Does not apply to claims for Part B services furnished by

suppliers that have in effect provider agreements under section 1866 of

the Act and part 489 of this chapter, and are paid by intermediaries.

(b) Definition. As used in this section, advance payment means a

conditional partial payment made by the carrier in response to a claim

that it is unable to process within established time limits.

(c) When advance payments may be made. An advance payment may be

made if all of the following conditions are met:

(1) The carrier is unable to process the claim timely.

(2) HCFA determines that the prompt payment interest provision

specified in section 1842(c) of the Act is insufficient to make a

claimant whole.

[[Page 49276]]

(3) HCFA approves, in writing to the carrier, the making of an

advance payment by the carrier.

(d) When advance payments are not made. Advance payments are not

made to any supplier that meets any of the following conditions:

(1) Is delinquent in repaying a Medicare overpayment.

(2) Has been advised of being under active medical review or

program integrity investigation.

(3) Has not submitted any claims.

(4) Has not accepted claims' assignments within the most recent

180-day period preceding the system malfunction.

(e) Requirements for suppliers. (1) Except as provided for in

paragraph (g)(1) of this section, a supplier must request, in writing

to the carrier, an advance payment for Part B services it furnished.

(2) A supplier must accept an advance payment as a conditional

payment subject to adjustment, recoupment, or both, based on an

eventual determination of the actual amount due on the claim and

subject to the provisions of this section.

(f) Requirements for carriers. (1) A carrier must notify a supplier

as soon as it is determined that payment will not be made in a timely

manner, and an advance payment option is to be offered to the supplier.

(i) A carrier must calculate an advance payment for a particular

claim at no more than 80 percent of the anticipated payment for that

claim based upon the historical assigned claims payment data for claims

paid the supplier.

(ii) ``Historical data'' are defined as a representative 90-day

assigned claims payment trend within the most recent 180-day experience

before the system malfunction.

(iii) Based on this amount and the number of claims pending for the

supplier, the carrier must determine and issue advance payments.

(iv) If historical data are not available or if backlogged claims

cannot be identified, the carrier must determine and issue advance

payments based on some other methodology approved by HCFA.

(v) Advance payments can be made no more frequently than once every

2 weeks to a supplier.

(2) Generally, a supplier will not receive advance payments for

more assigned claims than were paid, on a daily average, for the 90-day

period before the system malfunction.

(3) A carrier must recover an advance payment by applying it

against the amount due on the claim on which the advance was made. If

the advance payment exceeds the Medicare payment amount, the carrier

must apply the unadjusted balance of the advance payment against future

Medicare payments due the supplier.

(4) In accordance with HCFA instructions, a carrier must maintain a

financial system of data in accordance with the Statement of Federal

Financial Accounting Standards for tracking each advance payment and

its recoupment.

(g) Requirements for HCFA. (1) In accordance with the provisions of

this section, HCFA may determine that circumstances warrant the

issuance of advance payments to all affected suppliers furnishing Part

B services. HCFA may waive the requirement in paragraph (e)(1) of this

section as part of that determination.

(2) If adjusting Medicare payments fails to recover an advance

payment, HCFA may authorize the use of any other recoupment method

available (for example, lump sum repayment or an extended repayment

schedule) including, upon written notice from the carrier to the

supplier, converting any unpaid balances of advance payments to

overpayments. Overpayments are recovered in accordance with part 401,

subpart F of this chapter concerning claims collection and compromise

and part 405, subpart C of this chapter concerning recovery of

overpayments.

(h) Prompt payment interest. An advance payment is a ``payment''

under section 1842(c)(2)(C) of the Act for purposes of meeting the time

limit for the payment of clean claims, to the extent of the advance

payment.

(i) Notice, review, and appeal rights. (1) The decision to advance

payments and the determination of the amount of any advance payment are

committed to HCFA's discretion and are not subject to review or appeal.

(2) The carrier must notify the supplier receiving an advance

payment about the amounts advanced and recouped and how any Medicare

payment amounts have been adjusted.

(3) The supplier may request an administrative review from the

carrier if it believes the carrier's reconciliation of the amounts

advanced and recouped is incorrectly computed. If a review is

requested, the carrier must provide a written explanation of the

adjustments.

(4) The review and explanation described in paragraph (i)(3) of

this section is separate from a supplier's right to appeal the amount

and computation of benefits paid on the claim, as provided at part 405,

subpart H of this chapter. The carrier's reconciliation of amounts

advanced and recouped is not an initial determination as defined at

Sec. 405.803 of this chapter, and any written explanation of a

reconciliation is not subject to further administrative review.

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance and No. 93.774 Supplementary Medical

Insurance Program)

Dated: August 30, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

[FR Doc. 96-23958 Filed 9-18-96; 8:45 am]

BILLING CODE 4120-01-P