Medicare Program; Changes Concerning Suspension of Medicare Payments, and Determinations of Allowable Interest Expenses

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 401, 403, 405, 411, 413, 447, and 493

[BPO-118-FC]

RIN 0938-AC99

Medicare Program; Changes Concerning Suspension of Medicare

Payments, and Determinations of Allowable Interest Expenses

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

ACTION: Final rule with comment period.

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SUMMARY: We are revising the Medicare regulations concerning suspension

of Medicare payments and determination of allowable interest expenses.

These changes are being made to conform the regulations with law and

established policy, to provide necessary clarification, and to protect

the Government's interests.

DATES: Effective date: These regulations are effective January 2, 1997.

Comment Date: We are providing a comment period on the issues

described in section V of this preamble. Written comments will be

considered if we receive them at the appropriate address, as provided

below, no later than 5 p.m. on January 31, 1997.

ADDRESSES: Mail written comments (an original and three copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: BPO-118-FC, P.O. Box 26688,

Baltimore, MD 21207.

If you prefer, you may deliver your written comments (an original

and three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue SW.,

Washington, DC 20201, or

Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept comments

by facsimile (Fax) transmission. In commenting, please refer to file

code BPO-118-FC. Comments received timely will be available for public

inspection as they are received, generally beginning approximately 3

weeks after publication of a document, in Room 309-G of the

Department's offices at 200 Independence Ave., SW., Washington, DC, on

Monday through Friday of each week from 8:30 a.m. to 5 p.m. (phone:

(202) 690-7890).

[[Page 63741]]

FOR FURTHER INFORMATION CONTACT: James Conrad (suspension of payments,

fraud and abuse), (410) 786-6976; Ward Pleines (all other provisions),

(410) 786-4528.

SUPPLEMENTARY INFORMATION:

I. Suspension of Medicare Payments

A. Background

Sections 1815 (a) and (d) and 1833(j) of the Social Security Act

(the Act) and the Federal Claims Collection Act of 1966, as amended,

(31 U.S.C. 3711) allow a Medicare contractor (that is, an intermediary

or carrier) that has the opportunity to offset an overpayment to do so.

This provision is set forth in existing regulations at 42 CFR 401.607

(a) and (d) and 405.1803(c). In addition, existing Sec. 405.370

provides that payments authorized to be made to providers and suppliers

under the Medicare program may be suspended, in whole or in part, by a

Medicare contractor when the contractor has determined that the

provider or supplier has been overpaid or when the contractor has

reliable evidence that either an overpayment exists or that the

payments to be made may not be correct. Existing Sec. 405.370(b),

however, requires that, in order to proceed with a suspension of

payment, the contractor must have determined that ``the suspension of

payments, in whole or in part, is needed to protect the program against

financial loss.'' Section 405.370 does not specify the disposition of

suspended payments, nor do the regulations address how long payment may

be suspended. Also, the existing regulations do not differentiate

between the terms ``suspension of payments,'' ``offset,'' and

``recoupment.''

In addition, the existing regulations do not clearly specify the

procedures applicable when fraud is suspected; they merely provide that

payment may be suspended without advance notice and that the provider

or supplier will be notified of the suspension and the reasons for it.

(When the existing regulations were published (May 27, 1972, 37 FR

10723), the HHS Office of Inspector General (OIG), which is responsible

for conducting investigations involving fraud and willful

misrepresentation, had not been created, and the Social Security

Administration (SSA) administered the Medicare program. Suspension of

Medicare payment based on fraud or abuse was accomplished by Medicare

contractors in consultation with SSA, at the direction of the Bureau of

Health Insurance, the SSA component then responsible for Medicare.

Therefore, the regulations reflect only the role of intermediaries and

carriers.)

Under current law and delegations of authority, HCFA is responsible

for operating the Medicare program. The OIG is responsible for

conducting investigations and identifying wrongdoers and abusers of HHS

programs so appropriate remedies can be applied, as well as identifying

weaknesses or problems in the management of HHS programs. (See the

Statements of Organization, Function, and Delegations of Authority, for

HCFA and for OIG (49 FR 35247, published September 6, 1984, and 54 FR

46775, published November 7, 1989, respectively).)

B. Provisions of Proposed Rule

On August 22, 1988, we published a proposed rule, at 53 FR 31888,

in which we proposed to eliminate the requirement that, before

suspension of payment, the contractor make a determination that

suspension of payments to a provider or supplier is needed to protect

the program against financial loss. We also proposed clarifying our

policy regarding the disposition of suspended payments. As proposed,

suspended funds would first be applied to liquidate, in whole or in

part, overpayments that are the basis for the suspension. Any remaining

suspended funds would be applied to any other determined Medicare

overpayments. In the absence of a further obligation to HHS (such as

Medicaid overpayments) or other legal requirement (such as civil money

penalties or an Internal Revenue Service levy), the excess would be

released to the provider or supplier. Readers who are interested in the

details of our proposals are referred to the proposed rule.

(Note that, in order to expedite certain changes that were contained in

the August 1988 proposed rule, that is, proposed changes pertaining to

the assessment of interest charges on overpayments and underpayments,

we proceeded with them in a separate final rule, published in the

Federal Register on July 10, 1991, at 56 FR 31332. The provisions of

the July 1991 rule appear at Sec. 405.376. The remaining proposed

changes are contained in this final rule.)

C. Summary of and Responses to Public Comments

In response to the proposed rule, we received 12 items of

correspondence, each containing comments on the issue of suspension of

Medicare payments. The commenters included health care facilities,

health care associations, a Medicare contractor, and an accounting

firm. Three commenters believed that the changes would make suspension

more effective, would reduce administrative costs, and would have

little effect on current practice. The other commenters were primarily

concerned with the cash flow problems that could result from the

suspension of payment without a 30-day notice. Their specific concerns

are presented below. Note that, unless otherwise indicated, references

in our responses to sections of the regulations are to the sections in

this final rule.

Comment: Several commenters expressed concern that the proposed

changes concerning suspension of Medicare payments in cases of

overpayments would allow an intermediary or carrier to withhold all

payment to a provider or supplier without notification until an

overpayment was recouped and that this could have a devastating effect

on the cash flow of providers and suppliers, possibly even causing

bankruptcies.

Response: There appears to be some confusion and misunderstanding

of the scope of the changes we proposed to make in this area. We

generally do not intend to suspend payments without at least a 15-day

notice of this action to the provider or supplier. (There are three

exceptions to giving prior notice: (1) When a suspension is imposed in

accordance with section 1815(a) or section 1833(e) of the Act because

the provider or supplier, respectively, has failed to submit

information requested by the Medicare contractor that is needed to

determine the amounts due the provider or supplier; (2) when we or the

Medicare contractor determines that the Medicare Trust funds would be

harmed by giving prior notice; and (3) at our discretion in cases

involving fraud or misrepresentation.) Our proposal merely intended to

eliminate the requirement for a separate determination that a

suspension of payments is necessary to protect Medicare against

financial loss before contractors can proceed with the suspension. In

addition, in this final rule, we clarify that at least a 15-day notice

to the provider or supplier is given in cases of recoupment or offset,

terms that are defined in this rule.

Payment is recouped or offset in those cases in which the amount of

an overpayment has been determined, and any future payment to a

provider or supplier will be offset (that is, applied) against the

identified overpayment generally until the amount of the overpayment is

recovered. Offset or recoupment constitutes constructive payment to the

provider or supplier. Payment is suspended if we or the

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Medicare contractor has determined that the provider or supplier has

been overpaid but the actual amount of the overpayment has not yet been

determined. Therefore, additional effort is required before the amount

of the overpayment can be determined. We believe that the notice

requirement provides ample time for providers and suppliers to submit

evidence to the intermediary or carrier to prevent suspension,

recoupment, or offset and to avoid cash flow problems. However, in

response to the commenters' concerns and in an effort to eliminate

confusion, in this final rule we have--

Added, at Sec. 405.370, the following definitions of

``suspension of payment,'' ``offset,'' and ``recoupment.''

Offset. The recovery by Medicare of a non-Medicare debt by reducing

present or future Medicare payments and applying the amount withheld to

the indebtedness. (Examples are Public Health Service debts or Medicaid

debts recovered by HCFA).

Recoupment. The recovery by Medicare of any outstanding Medicare

debt by reducing present or future Medicare payments and applying the

amount withheld to the indebtedness.

Suspension of payment. The withholding of payment by an

intermediary or carrier from a provider or supplier of an approved

Medicare payment amount before a determination of the amount of the

overpayment exists.

Reorganized and revised the provisions related to

suspension of payment in order to set forth our policy more clearly

(see Sec. 405.372, ``Proceeding for suspension of payment''). These

changes from the proposed rule have been made to improve the

readability of the regulations and to clearly set forth the existing

process and policy; we have not made any substantive changes that were

not included in our proposed rule or that are not being made in

response to public comment. (Note that, because of the restructuring of

the provisions related to suspension, it was necessary to also

reorganize and revise other provisions set forth in existing

Secs. 405.370 through 405.373. Again, in accomplishing this

reorganization, we have not made any substantive changes that were not

included in our proposed rule or that are not being made in response to

public comment.) We will, however, consider timely comments from anyone

who believes that, in making these changes, we have unintentionally

altered the meaning.

Revised existing Sec. 405.374, ``Collection and compromise

of claims for overpayment'' by changing the section heading to

``Suspension and termination of collection action and compromise of

claims for overpayment'' to better describe the section's contents (and

redesignated it as Sec. 405.376). For the same reason, we have revised

the headings of paragraph (e) (from ``Basis for terminations'' to

``Basis for termination of collection action'') and paragraph (f) (from

``Basis for suspension'' to ``Basis for suspension of collection

action'').

Revised existing Sec. 405.375, ``Withholding Medicare

payments to recover Medicaid overpayments'' (and redesignated it as

Sec. 405.377), to clarify our policy with regard to withholding

Medicare payments to offset Medicaid overpayments.

We are also taking this opportunity to create two separate

provisions to address two separate situations concerning failure to

furnish information. Current regulations at Sec. 405.371(d) (``Failure

to furnish information requested'') provide for suspending payments in

all situations in which information is not supplied, including when a

provider fails to file a cost report. It has been our long-standing

policy that, if a provider has failed to timely file an acceptable cost

report, payment is immediately suspended until an acceptable cost

report is filed. This regulation and policy are based on sections

1815(a) and 1833(e) of the Act. Section 1815(a) provides, in part, that

``no * * * payments shall be made to any provider unless it has

furnished such information as the Secretary may request in order to

determine the amounts due such provider under this part [Medicare Part

A] for the period with respect to which the amounts are being paid or

any prior period.'' Section 1833(e) of the Act contains similar

language with respect to payments made under Part B of Medicare.

In this final rule we set forth a separate provision, new

Sec. 405.371(c), specifically addressing the suspension of payments in

the case of unfiled cost reports. Section 405.371(c) specifies that, if

a provider has failed to timely file an acceptable cost report, payment

to the provider is immediately suspended until a cost report is filed

and determined by the intermediary to be acceptable. This section

further specifies that, in the case of an unfiled cost report, the

provisions of Sec. 405.372 (``Proceeding for suspension of payment'')

do not apply. We believe that this is consistent with the above-cited

mandate that ``no payment shall be made * * * unless it has furnished

such information * * *.''

In addition, we are retaining, with editorial modifications, the

provision in current regulations at Sec. 405.371(d) to apply to all

instances of failure to supply information except those in which a cost

report is not filed. This provision is set forth at Sec. 405.372(a)(2)

in this final rule. As in the current regulations, it specifies that

the prior notice and rebuttal provisions do not apply if the provider

failed to submit evidence requested by the intermediary that is needed

to determine the amounts due the provider under the Medicare program.

However, unlike new Sec. 405.371(c) (``Suspension in the case of

unfiled cost reports''), the time limitation on suspension established

by this final rule, and discussed in the response to the following

comment, applies.

Comment: Since immediate suspension of payments could cause great

hardship to many Medicare providers and suppliers, one commenter

believed it only fair to continue the requirement of a separate

determination that suspension is needed to protect the program from

financial loss.

Response: As discussed above, all providers and suppliers will

generally receive prior notification of the suspension, recoupment, or

offset action and have at least 15 days to reply. The notification of

overpayment will state that, if there is no reply within the timeframe

specified in the notification, the Medicare contractor will then begin

action. If no reply is received from the provider or supplier, we

believe that suspension is required to protect a program such as

Medicare or Medicaid from financial loss and that it is not necessary

to make a separate determination on that fact. Even if a reply is

received, suspension may be required, and a separate determination is

unnecessary.

If the provider or supplier submits a statement as to why a

suspension of payment, recoupment, or offset should not be put into

effect, the intermediary or carrier will have 15 days from the date the

statement is received to consider the statement and make a

determination whether the facts justify a suspension, or removal of a

suspension already initiated. Suspension, however, will not be delayed

in order to review any statement submitted.

In further response to the concerns expressed by the commenters, we

have decided to impose a limitation upon how long we will suspend

payment pending a determination whether or not an overpayment exists

and in matters involving fraud or willful misrepresentation. The

purpose of suspending payment is to verify whether, and how much,

payment was

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actually due the provider for past claims and to ensure that, if a

provider or supplier was overpaid, sufficient funds are available to

recover the overpayment. These actions are clearly necessary to protect

the Trust Funds from loss. It is implicit that, when payment is

suspended, determinations of overpayment, or of fraud or willful

misrepresentation, should be made promptly. Accordingly, because it is

appropriate that a provider or supplier receive a prompt determination

so that it may receive any balances actually due after application of

recoupment or offset, we have decided to limit suspension of Medicare

payment to 180 days, with a possible extension of up to 180 additional

days being granted to the intermediary, carrier, or OIG by HCFA. This

period will enable us or the carrier or intermediary, as the case may

be, to investigate and to determine the amounts of any Medicare

overpayments or, in cases involving the OIG, for the OIG to complete

its investigation, while protecting the Medicare Trust Funds. At the

same time, providers and suppliers have the security of knowing that

the suspension may culminate in an appealable determination within a

specific period of time if the claims are subsequently denied. (A

decision to suspend payment is not an initial determination subject to

appeal under Secs. 405.704, 405.803, or 405.1803.)

In addition, we recognize that there may be special circumstances

in which the specified time limit (that is, 180 days plus up to 180

additional days) may not be sufficient. Therefore, we may grant an

exception to the time limits in the following situations:

The case has been referred to, and is being considered by,

the OIG for administrative action, that is, civil money penalties.

The Department of Justice, generally through the United

States Attorney with jurisdictional responsibility, submits a written

request to HCFA that the suspension be continued based on the ongoing

investigation and anticipated filing of criminal and/or civil actions.

At a minimum, the request must include the following:

*Identification of the entity under suspension.

*The amount of time needed for continued suspension in order to

implement the criminal and/or civil proceedings.

*A statement of why and/or how criminal and/or civil actions may be

affected if the requested extension is not granted.

Once a determination is made, any overpayments will be recouped or

offset, first from suspended funds, then from any other monies owed the

debtor in accordance with usual Medicare program rules. (See, for

example, Sec. 401.607(a)). Note that, in contrast to the decision to

suspend payment, an overpayment determination is an initial

determination, subject to appeal, but that appeals do not delay

recoupment. Also note that, as defined in this final rule at

Sec. 405.370, recoupment may constitute 100 percent of any monies due

if the debt to Medicare is equal to or greater than the amounts

payable. Nonetheless, for the very reasons raised by the commenters,

Medicare usually does not impose 100 percent recoupment in the absence

of a basis for doing so, such as the debtor's failure to respond to a

demand letter.

Under current law and delegations of authority, HCFA is responsible

for operating the Medicare program. This includes making determinations

whether to suspend payment. In cases of suspected fraud or willful

misrepresentation, the determination whether to suspend is generally

made after consultation with the OIG, the Medicare contractor, U.S.

Attorney, and other law enforcement agencies as appropriate to the

case. Where the OIG or other law enforcement agency requests

suspension, the requesting agency must advise us of the basis for the

request. Thus, although the OIG is responsible for identifying,

investigating, and pursuing matters of fraud and abuse, HCFA is

responsible for determining whether there is reliable evidence of an

overpayment, whether to suspend payment, and, if the decision is to

suspend payment, whether advance notice of the suspension should be

given. (If advance notice is to be given, we usually direct the

Medicare contractor to give the notice.) The Medicare contractor is

responsible for promptly determining the overpayment. Once the amount

of an overpayment is determined, the suspended payments are applied to

recoup the overpayment. Although the Medicare contractor may implement

a suspension, offset, or recoupment, HCFA is the real party in interest

and is responsible for the actions.

This final rule clarifies that our decision regarding whether to

suspend payment may be based on information provided by the

intermediary, carrier, a law enforcement agency, or other source. We

will normally provide at least a 15-day delay before suspension is

imposed. However, when it appears that the Medicare Trust Funds would

be harmed by providing this notice or in matters involving fraud or

misrepresentation, suspension may be imposed without prior notice. (We

believe, however, that suspension without prior notice would be the

exception.)

II. Determination of Allowable Interest Expense

A. Background

Under the Medicare program, health care providers not subject to

the prospective payment system generally are paid for the reasonable

costs of the covered items and services they furnish to Medicare

beneficiaries. Section 1861(v)(1)(A) of the Act defines reasonable

costs as the cost actually incurred, excluding any cost unnecessary in

the efficient delivery of needed health services. Section 1861(v)(1)(A)

also provides that reasonable costs be determined in accordance with

regulations that establish the methods to be used and the items to be

included for purposes of determining which costs are allowable for

various types or classes of institutions, agencies, and services.

Providers may generally include interest expense (the cost incurred

for the use of funds borrowed for patient care-related purposes) in

allowable costs, but, under existing Sec. 413.153(b)(2)(iii), allowable

interest expense must be reduced by investment income. Additionally,

this section of the regulations provides that investment income from

gifts and grants (whether restricted or unrestricted) is not used to

reduce interest expense if the gift and grant funds are held separate

and not commingled with other funds. The latter provision was intended

to ensure that providers maintain the discrete nature of the grant

funds and to facilitate the intermediaries' application of proper

payment principles to the resulting investment income.

Section 1134 of the Act, which was added by section 901 of the

Omnibus Reconciliation Act of 1980 (ORA '80), Public Law 96-499,

provides that, in the case of nonprofit hospitals, interest income from

grants, gifts, or endowments, that have not been designated by the

donor to be used to defray specific operating costs, is not to be

offset against interest income.

The provisions of section 901 of ORA '80, as well as our

established position on commingling of funds, were incorporated in

Transmittal No. 279 issued in January 1983. This transmittal, which

revised section 202.6 of the Provider Reimbursement Manual (HCFA Pub.

15-1), permits the pooling of funds for investment purposes, provided

adequate records are maintained to enable the proper identification of

funds

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and investment income applicable to each.

Existing Sec. 413.153(b)(2)(iii) excludes the following types of

income from the interest expense offset requirements:

Investment income from separately held and noncommingled

gifts and grants.

Income from a provider's funded depreciation.

Income from qualified employee pension funds.

Interest received as a result of judicial review by a

Federal court.

Under our current operating policy, investment income from a

provider's deferred compensation funds and self-insurance funds that

meet the program's qualifying compensation plans provided in section

2140 of the Provider Reimbursement Manual and the qualifying criteria

for self-insurance funds described in subsection 2162.7 of the Manual

must become part of those funds and, as such, is unavailable for offset

against interest expense.

B. Provisions of the Proposed Regulations

We proposed to revise Sec. 413.153(b)(2)(iii) to modify the

restriction against commingling to permit the pooling of grant, gift,

or endowment funds for investment purposes for all providers, rather

than only the nonprofit hospitals referenced in section 1134 of the

Act. This change was proposed to conform the regulations to our current

operating policy as set forth in section 202.6 of the Provider

Reimbursement Manual (HCFA Pub. 15-1).

As a conforming change, we also proposed to remove the regulations

text located at Sec. 413.5(c)(3). This section contains outdated

statements concerning offsetting of restricted grants, gifts, and

income from endowments and ceased being effective with cost reporting

periods beginning on or after October 1, 1983.

We also proposed to make a technical change to the regulations at

Sec. 413.90(b)(2) to remove the provision that required the offset of

research grant funds (used for usual patient care purposes in

conjunction with basic medical and hospital research) against usual

patient care costs. This provision became obsolete with cost reporting

periods beginning on or after October 1, 1983.

We further proposed to clarify Sec. 413.153(b)(2)(iii) by adding to

the exclusions from interest expense offset investment income on--

A provider's deferred compensation plans; and

Self-insurance trust funds.

Because established program policy has always required that

investment income earned on a provider's deferred compensation fund

(Provider Reimbursement Manual, section 2140 ff.) or self-insurance

fund (section 2162.7) become part of those funds, it is unavailable for

offset against interest expense. We simply proposed to add these

exclusions from interest expense offset to the regulations text to

conform it to the established policy.

C. Analyses of and Responses to Public Comments

We received a comment on these proposals with the following

concern:

Comment: The commenter requested that the proposed clarification of

Sec. 413.153(b)(2)(iii) to permit the pooling of funds from grants and

gifts be further modified to explicitly include monies from funded

depreciation for nonprofit hospitals.

Response: Section 413.153(b)(2)(iii) never prohibited the

commingling of funded depreciation monies for investment purposes by

either proprietary or nonprofit providers. Therefore, we believe that

the change suggested by the commenter is unnecessary.

III. Provisions of the Final Rule

This final rule with comment period incorporates those provisions

of the August 1988 proposed rule that were not incorporated into the

regulations by the July 10, 1991 final rule, with the changes listed

below. The rationale for these changes has been discussed above in our

responses to comments.

We include definitions of the terms ``offset,''

``recoupment,'' and ``suspension of payment.'' (See Sec. 405.370.)

We clarify that at least a 15-day notice to the provider

or supplier is given in cases of recoupment or offset, as well as in

cases of suspension of payment. (See Sec. 405.374(a).)

We limit the duration of a suspension of payment. (See

Sec. 405.372(d).)

We clarify the procedures applicable to suspension of

payment when fraud or willful misrepresentation is suspected. (See

Sec. 405.372 (a) and (e).)

In addition to the above changes, which were discussed in the

responses to comments, we make the following clarifying, conforming,

and technical changes:

We revise Sec. 401.601, which sets forth the basis and

scope of subpart F (Claims Collection and Compromise) of part 401

(General Administrative Requirements). Paragraph (d) of this section

identifies, as related regulations, HHS regulations applicable to HCFA

that generally implement the Federal Claims Collection Act (FCCA) for

the Department and are located at 45 CFR part 30. We add a statement to

paragraph (d) to clarify that those regulations apply only to the

extent HCFA regulations do not address a situation.

We revise Sec. 401.607 (Claims collection). Paragraph

(d)(1) of this section states that ``[i]n conformity with 4 CFR 102.3,

HCFA may offset, where possible, the amount of a claim against the

amount of * * * monies that a debtor is receiving or is due from the

Federal government.'' The ``conformity'' phrase was included to reflect

that offset of Medicare debts is consistent with general FCCA

regulations. It was not intended to impose additional requirements not

included in HCFA's FCCA regulations. It has come to our attention,

however, that this phrase has caused confusion. Therefore, in order to

eliminate this confusion, we remove the phrase.

In Sec. 405.1803, ``Intermediary determination and notice

of amount of program reimbursement,'' we revise paragraph (c),

currently titled ``Use of notice as basis for recovery of

overpayments,'' to conform it to the terminology and process this rule

establishes in Secs. 405.370 through 405.377. First, we change the word

``recovery'' wherever it appears in paragraph (c) to ``recoupment''.

Second, we replace the phrase ``including the suspending of further

payments to the provider in order to recover, or to aid in the recovery

of,'' with ``including recoupment under Sec. 405.373 from ongoing

payment to the provider of''. Third, we make a minor editorial change

to break the existing first sentence into two sentences. Finally,

because the cross reference made by the last sentence is no longer

correct and we believe a cross reference is not necessary, we remove

the last sentence.

We make a number of technical changes (such as revising

cross-reference citations because of the redesignations made by this

final rule) that do not affect the substance of the provisions.

IV. 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 final rule with comment period will not have

a significant economic impact on a substantial number of small

entities. For purposes of the RFA, all providers and suppliers are

considered to be small entities.

[[Page 63745]]

In addition, 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.

Elimination of the requirement at existing Sec. 405.370(b) that an

intermediary or carrier make a prior determination that a suspension of

payment is needed to protect the Medicare program against financial

loss may have an adverse economic effect on some providers and

suppliers. However, we do not believe that this policy will affect a

significant number of providers and suppliers. Additionally, the time

limits on suspension established by this final rule may mitigate the

adverse effect of our modifications to Sec. 405.370(b).

In addition to the changes previously discussed in the notice of

proposed rulemaking, we have made certain clarifying changes. We do not

anticipate any economic effects resulting from our clarifications of

already existing policy.

For these reasons, we are not preparing analyses for either the RFA

or section 1102 of the Act since we have determined, and the Secretary

certifies, that this rule will not result in a significant economic

impact on a substantial number of small entities and will not have 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 reviewed by the Office of Management and Budget.

V. Public Comment Period

We have made certain changes from the proposed rule to improve the

readability of the regulations and to clearly set forth the existing

process and policy. In doing so, we have not made any substantive

changes to existing regulations that were not included in our proposed

rule or that are not being made in response to public comment on the

proposed rule. While a prior public comment period is not required in

this case, we are granting the public an opportunity to comment on

these changes. As stated earlier, we are providing 60-day comment

period on the following:

(1) The differences between suspension, recoupment, and offset.

(2) The fact that suspension or offset or recoupment will not be

delayed beyond the date stated in the notice from the intermediary or

carrier in order to review any statement submitted.

(3) The inclusion of time limits on the period during which payment

may be suspended.

(4) The clarification of applicable procedures in the case of

suspension of payment if fraud or willful misrepresentation is

suspected.

(5) The creation of two separate provisions concerning suspension

of payment for failure to furnish information.

(6) The reorganization of the provisions.

Because of the large number of items of correspondence we normally

receive on regulations, we cannot acknowledge or respond to them

individually. We will, however, consider all comments concerning the

issues noted directly above that are received by the date and time

specified in the ``DATES'' section of this preamble. If we proceed with

a subsequent document, we will respond to the comments in the preamble

to that document.

List of Subjects

42 CFR Part 401

Claims, Freedom of information, Health facilities, Medicare,

Privacy.

42 CFR Part 403

Health insurance, Hospitals, Intergovernmental relations, Medicare,

Reporting and recordkeeping requirements.

42 CFR Part 405

Administrative practice and procedure, Health facilities, Health

professions, Kidney diseases, Medicare, Reporting and recordkeeping

requirements, Rural areas, X-rays.

42 CFR Part 411

Kidney diseases, Medicare, Physician referral, Reporting and

recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,

Reporting and recordkeeping requirements.

42 CFR Part 447

Accounting, Administrative practice and procedure, Drugs, Grant

programs--health, Health facilities, Health professions, Medicaid,

Reporting and recordkeeping requirements, Rural areas.

42 CFR Part 493

Grant programs--health, Health facilities, Laboratories, Medicaid,

Medicare, Reporting and recordkeeping requirements.

42 CFR chapter IV is amended as follows:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

A. Part 405 is amended as set forth below:

Subpart C--Suspension of Payment, Recovery of Overpayments, and

Repayment of Scholarships and Loans

1. The authority citation for subpart C continues to read as

follows:

Authority: Secs. 1102, 1815, 1833, 1842, 1866, 1870, 1871, 1879

and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g, 1395l,

1395u, 1395cc, 1395gg, 1395hh, 1395pp and 1395ccc) and 31 U.S.C.

3711.

2. The undesignated center heading preceding Sec. 405.370 is

revised to read as follows:

SUSPENSION AND RECOUPMENT OF PAYMENT TO PROVIDERS AND SUPPLIERS AND

COLLECTION AND COMPROMISE OF OVERPAYMENTS

3. Sections 405.370 through 405.373 are redesignated as

Secs. 405.371 through 405.374, respectively, and current Secs. 405.374

through 405.376 are redesignated as Sec. 405.376 through 405.378,

respectively.

4. New Secs. 405.370 and 405.375 are added, and redesignated

Secs. 405.371 through 405.374 are revised, to read as follows:

Sec. 405.370 Definitions.

For purposes of this subpart, the following definitions apply:

Offset. The recovery by Medicare of a non-Medicare debt by reducing

present or future Medicare payments and applying the amount withheld to

the indebtedness. (Examples are Public Health Service debts or Medicaid

debts recovered by HCFA).

Recoupment. The recovery by Medicare of any outstanding Medicare

debt by reducing present or future Medicare payments and applying the

amount withheld to the indebtedness.

Suspension of payment. The withholding of payment by an

intermediary or carrier from a provider or supplier of an approved

Medicare payment amount before a determination of the amount of the

overpayment exists.

[[Page 63746]]

Sec. 405.371 Suspension, offset, and recoupment of Medicare payments

to providers and suppliers of services.

(a) General. Medicare payments to providers and suppliers, as

authorized under this subchapter (excluding payments to beneficiaries),

may be--

(1) Suspended, in whole or in part, by HCFA, an intermediary, or a

carrier if HCFA, the intermediary, or the carrier possesses reliable

information that an overpayment or fraud or willful misrepresentation

exists or that the payments to be made may not be correct, although

additional evidence may be needed for a determination; or

(2) Offset or recouped, in whole or in part, by an intermediary or

a carrier if the intermediary, carrier, or HCFA has determined that the

provider or supplier to whom payments are to be made has been overpaid.

(b) Steps necessary for suspension of payment, offset, and

recoupment. Except as provided in paragraph (c) of this section, HCFA,

the intermediary, or carrier suspends payments only after it has

complied with the procedural requirements set forth at Sec. 405.372.

The intermediary or carrier offsets or recoups payments only after it

has complied with the procedural requirements set forth at

Sec. 405.373.

(c) Suspension of payment in the case of unfiled cost reports. If a

provider has failed to timely file an acceptable cost report, payment

to the provider is immediately suspended until a cost report is filed

and determined by the intermediary to be acceptable. In the case of an

unfiled cost report, the provisions of Sec. 405.372 do not apply. (See

Sec. 405.372(a)(2) concerning failure to furnish other information.)

Sec. 405.372 Proceeding for suspension of payment.

(a) Notice of intention to suspend--(1) General rule. Except as

provided in paragraphs (a)(2) through (a)(4) of this section, if the

intermediary, carrier, or HCFA has determined that a suspension of

payments under Sec. 405.371(a)(1) should be put into effect, the

intermediary or carrier must notify the provider or supplier of the

intention to suspend payments, in whole or in part, and the reasons for

making the suspension.

(2) Failure to furnish information. The notice requirement of

paragraph (a)(1) of this section does not apply if the intermediary or

carrier suspends payments to a provider or supplier in accordance with

section 1815(a) or section 1833(e) of the Act, respectively, because

the provider or supplier has failed to submit information requested by

the intermediary or carrier that is needed to determine the amounts due

the provider or supplier. (See Sec. 405.371(c) concerning failure to

file timely acceptable cost reports.)

(3) Harm to Trust Funds. A suspension of payment may be imposed

without prior notice if HCFA, the intermediary, or carrier determines

that the Medicare Trust Funds would be harmed by giving prior notice.

HCFA may base its determination on an intermediary's or carrier's

belief that giving prior notice would hinder the possibility of

recovering the money.

(4) Fraud or misrepresentation. If the intended suspension of

payment involves suspected fraud or misrepresentation, HCFA determines

whether to impose the suspension and if prior notice is appropriate.

HCFA directs the intermediary or carrier as to the timing and content

of the notification to the provider or supplier. HCFA is the real party

in interest and is responsible for the decision. HCFA may base its

decision on information from the intermediary, carrier, law enforcement

agencies, or other sources. HCFA determines whether the information is

reliable.

(b) Rebuttal--(1) If prior notice is required. If prior notice is

required under paragraph (a) of this section, the intermediary or

carrier must give the provider or supplier an opportunity for rebuttal

in accordance with Sec. 405.374. If a rebuttal statement is received

within the specified time period, the suspension of payment goes into

effect on the date stated in the notice, and the procedures and

provisions set forth in Sec. 405.375 apply. If by the end of the period

specified in the notice no statement has been received, the suspension

goes into effect automatically, and the procedures set forth in

paragraph (c) of this section are followed.

(2) If prior notice is not required. If, under the provisions of

paragraphs (a)(2) through (a)(4) of this section, a suspension of

payment is put into effect without prior notice to the provider or

supplier, the intermediary or carrier must, once the suspension is in

effect, give the provider or supplier an opportunity to submit a

rebuttal statement as to why the suspension should be removed.

(c) Subsequent action. If a suspension of payment is put into

effect, the intermediary, carrier, or HCFA takes timely action after

the suspension to obtain the additional evidence it may need to make a

determination as to whether an overpayment exists or the payments may

be made. The intermediary, carrier, or HCFA makes all reasonable

efforts to expedite the determination. As soon as the determination is

made, the intermediary or carrier informs the provider or supplier and,

if appropriate, the suspension is rescinded or any existing recoupment

or offset is adjusted to take into account the determination.

(d) Duration of suspension of payment--(1) General rule. Except as

provided in paragraphs (d)(2) and (d)(3) of this section, a suspension

of payment is limited to 180 days, starting with the date the

suspension begins.

(2) 180-day extension. (i) An intermediary, a carrier, or, in cases

of fraud and misrepresentation, OIG or a law enforcement agency, may

request a one-time only extension of the suspension period for up to

180 additional days if it is unable to complete its examination of the

information or investigation, as appropriate, within the 180-day time

limit. The request must be submitted in writing to HCFA.

(ii) Upon receipt of a request for an extension, HCFA notifies the

provider or supplier of the requested extension. HCFA then either

extends the suspension of payment for up to an additional 180 days or

determines that the suspended payments are to be released to the

provider or supplier.

(3) Exceptions to the time limits. (i) The time limits specified in

paragraphs (d)(1) and (d)(2) of this section do not apply if the case

has been referred to, and is being considered by, the OIG for

administrative action (for example, civil money penalties).

(ii) HCFA may grant an extension in addition to the extension

provided under paragraph (d)(2) of this section if the Department of

Justice submits a written request to HCFA that the suspension of

payment be continued based on the ongoing investigation and anticipated

filing of criminal and/or civil actions. At a minimum, the request must

include the following:

(A) Identification of the entity under suspension.

(B) The amount of time needed for continued suspension in order to

implement the criminal and/or civil proceedings.

(C) A statement of why and/or how criminal and/or civil actions may

be affected if the requested extension is not granted.

(e) Disposition of suspended payments. Payments suspended under the

authority of Sec. 405.371(b) are first applied to reduce or eliminate

any overpayments determined by the intermediary, carrier, or HCFA,

including any interest assessed under the provisions of Sec. 405.378,

and then applied to reduce any other obligation

[[Page 63747]]

to HCFA or to HHS. In the absence of a legal requirement that the

excess be paid to another entity, the excess is released to the

provider or supplier.

Sec. 405.373 Proceeding for offset or recoupment.

(a) General rule. Except as specified in paragraph (b) of this

section, if the intermediary, carrier, or HCFA has determined that an

offset or recoupment of payments under Sec. 405.371(a)(2) should be put

into effect, the intermediary or carrier must--

(1) Notify the provider or supplier of its intention to offset or

recoup payment, in whole or in part, and the reasons for making the

offset or recoupment; and

(2) Give the provider or supplier an opportunity for rebuttal in

accordance with Sec. 405.374.

(b) Paragraph (a) of this section does not apply if the

intermediary, after furnishing a provider a written notice of the

amount of program reimbursement in accordance with Sec. 405.1803,

recoups payment under paragraph (c) of Sec. 405.1803. (For provider

rights in this circumstance, see Secs. 405.1809, 405.1811, 405.1815,

405.1835, and 405.1843.)

(c) Actions following receipt of rebuttal statement. If a provider

or supplier submits, in accordance with Sec. 405.374, a statement as to

why an offset or recoupment should not be put into effect on the date

specified in the notice, the intermediary or carrier must comply with

the time limits and notification requirements of Sec. 405.375.

(d) No rebuttal statement received. If, by the end of the time

period specified in the notice, no statement has been received, the

recoupment or offset goes into effect automatically.

(e) Duration of recoupment or offset. If a recoupment or offset is

put into effect, it remains in effect until the earliest of the

following:

(1) The overpayment and any assessed interest are liquidated.

(2) The intermediary or carrier obtains a satisfactory agreement

from the provider or supplier for liquidation of the overpayment.

(3) The intermediary or carrier, on the basis of subsequently

acquired evidence or otherwise, determines that there is no

overpayment.

Sec. 405.374 Opportunity for rebuttal.

(a) General rule. If prior notice of the suspension of payment,

offset, or recoupment is given under Sec. 405.372 or Sec. 405.373, the

intermediary or carrier must give the provider or supplier an

opportunity, before the suspension, offset, or recoupment takes effect,

to submit any statement (to include any pertinent information) as to

why it should not be put into effect on the date specified in the

notice. Except as provided in paragraph (b) of this section, the

provider or supplier has at least 15 days following the date of

notification to submit the statement.

(b) Exception. The intermediary or carrier may for cause--

(1) Impose a shorter period for rebuttal; or

(2) Extend the time within which the statement must be submitted.

Sec. 405.375 Time limits for, and notification of, administrative

determination after receipt of rebuttal statement.

(a) Submission and disposition of evidence. If the provider or

supplier submits a statement, under Sec. 405.374, as to why a

suspension of payment, offset, or recoupment should not be put into

effect, or, under Sec. 405.372(b)(2), why a suspension should be

terminated, HCFA, the intermediary, or carrier must within 15 days,

from the date the statement is received, consider the statement

(including any pertinent evidence submitted), together with any other

material bearing upon the case, and determine whether the facts justify

the suspension, offset, or recoupment or, if already initiated, justify

the termination of the suspension, offset, or recoupment. Suspension,

offset, or recoupment is not delayed beyond the date stated in the

notice in order to review the statement.

(b) Notification of determination. The intermediary or carrier must

send written notice of the determination made under paragraph (a) of

this section to the provider or supplier. The notice must--

(1) In the case of offset or recoupment, contain rationale for the

determination; and

(2) In the case of suspension of payment, contain specific findings

on the conditions upon which the suspension is initiated, continued, or

removed and an explanatory statement of the determination.

(c) Determination is not appealable. A determination made under

paragraph (a) of this section is not an initial determination and is

not appealable.

5. In redesignated Sec. 405.376, the heading of the section,

paragraph (a), and the headings of paragraphs (e) and (f) are revised

to read as follows:

Sec. 405.376 Suspension and termination of collection action and

compromise of claims for overpayment.

(a) Basis and purpose. This section contains requirements and

procedures for the compromise of, or suspension or termination of

collection action on, claims for overpayments against a provider or a

supplier under the Medicare program. It is adopted under the authority

of the Federal Claims Collection Act (31 U.S.C. 3711). Collection and

compromise of claims against Medicare beneficiaries are explained at 20

CFR 404.515.

* * * * *

(e) Basis for termination of collection action.

* * * * *

(f) Basis for suspension of collection action.

* * * * *

6. Redesignated Sec. 405.377 is revised to read as follows:

Sec. 405.377 Withholding Medicare payments to recover Medicaid

overpayments.

(a) Basis and purpose. This section implements section 1885 of the

Act, which provides for withholding Medicare payments to certain

Medicaid providers that have not arranged to repay Medicaid

overpayments as determined by the Medicaid State agency or have failed

to provide information necessary to determine the amount (if any) of

overpayments.

(b) When withholding may be used. HCFA may withhold Medicare

payment to offset Medicaid overpayments that a Medicaid agency has been

unable to collect if--

(1) The Medicaid agency has followed the procedure specified in

Sec. 447.31 of this chapter; and

(2) The institution or person is one described in paragraph (c) of

this section and either--

(i) Has not made arrangements satisfactory to the Medicaid agency

to repay the overpayment; or

(ii) Has not provided information to the Medicaid agency necessary

to enable the agency to determine the existence or amount of Medicaid

overpayment.

(c) Institutions or persons affected. Withholding under paragraph

(b) of this section may be made with respect to any of the following

entities that has or had in effect an agreement with a Medicaid agency

to furnish services under an approved Medicaid State plan:

(1) An institutional provider that has in effect an agreement under

section 1866 of the Act. (Part 489 (Provider and Supplier Agreements)

implements section 1866 of the Act.)

(2) A physician or supplier that has accepted payment on the basis

of an assignment under section 1842(b)(3)(B)(ii) of the Act. (Section

424.55 sets forth the conditions a supplier agrees to in accepting

assignment.)

[[Page 63748]]

(d) Amount to be withheld. (1) HCFA contacts the appropriate

intermediary or carrier to determine the amount of Medicare payment to

which the institution or person is entitled.

(2) HCFA may require the intermediary or carrier to withhold

Medicare payments to the institution or person by the lesser of the

following amounts:

(i) The amount of the Medicare payments to which the institution or

person would otherwise be entitled.

(ii) The total Medicaid overpayment to the institution or person.

(e) Notice of withholding. If HCFA intends to withhold payments

under this section, it notifies by certified mail, return receipt

requested, the institution or person and the appropriate intermediary

or carrier of the intention to withhold Medicare payments and follows

the procedure in Sec. 405.374. The notice includes--

(1) Identification of the institution or person; and

(2) The amount of Medicaid overpayment to be withheld from payments

to which the institution or person would otherwise be entitled under

Medicare.

(f) Termination of withholding. HCFA terminates the withholding

if--

(1) The Medicaid overpayment is completely recovered;

(2) The institution or person enters into an agreement satisfactory

to the Medicaid agency to repay the overpayment; or

(3) The Medicaid agency determines that there is no overpayment

based on newly acquired evidence or a subsequent audit.

(g) Disposition of funds withheld. HCFA releases amounts withheld

under this section to the Medicaid agency to be applied against the

Medicaid overpayment made by the State agency.

Subpart R--Provider Reimbursement Determinations and Appeals

7. The authority citation for part 405, subpart R continues to read

as follows:

Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v),

1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C.

405, 1302, 1395(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii,

1395oo, and 1395ww).

8. In Sec. 405.1803, paragraph (c) is revised to read as follows:

Sec. 405.1803 Intermediary determination and notice of amount of

program reimbursement.

* * * * *

(c) Use of notice as basis for recoupment of overpayments. The

intermediary's determination contained in its notice is the basis for

making the retroactive adjustment (required by Sec. 413.64(f) of this

chapter) to any program payments made to the provider during the period

to which the determination applies, including recoupment under

Sec. 405.373 from ongoing payments to the provider of any overpayments

to the provider identified in the determination. Recoupment is made

notwithstanding any request for hearing on the determination the

provider may make under Sec. 405.1811 or Sec. 405.1835.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR

END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED

PAYMENT RATES FOR SKILLED NURSING FACILITIES

B. Part 413 is amended as set forth below:

1. The authority citation for part 413 continues to read as

follows:

Authority: Sec. 1102, 1861(v)(1)(A), and 1871 of the Social

Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Sec. 413.5 [Amended]

2. In Sec. 413.5, paragraph (c)(3) is removed and reserved.

3. In Sec. 413.90, paragraph (b)(2) is revised to read as follows:

Sec. 413.90 Research costs.

* * * * *

(b) Application. (1) * * *

(2) If research is conducted in conjunction with, and as a part of,

the care of patients, the costs of usual patient care and studies,

analyses, surveys, and related activities to serve the provider's

administrative and program needs are allowable costs in the

determination of payment under Medicare.

4. In Sec. 413.153, paragraph (a)(1) introductory text is

republished, and paragraphs (a)(1)(ii) and (b)(2) are revised to read

as follows:

Sec. 413.153 Interest expense.

(a)(1) Principle. Necessary and proper interest on both current and

capital indebtedness is an allowable cost. However, interest costs are

not allowable if incurred as a result of--

(i) * * *

(ii) An interest assessment on a determined overpayment (as

described in Sec. 405.377 of this chapter); or

* * * * *

(b) Definitions. (1) * * *

(2) Necessary. Necessary interest is interest that meets the

following requirements:

(i) It is incurred on a loan made to satisfy a financial need of

the provider. Loans that result in excess funds or investments are not

considered necessary.

(ii) It is incurred on a loan made for a purpose reasonably related

to patient care.

(iii) It is reduced by investment income except income from--

(A) Gifts, grants, and endowments, whether held separately or

pooled with other funds;

(B) Funded depreciation that meets the program's qualifying

criteria;

(C) The provider's qualified pension funds;

(D) The provider's deferred compensation funds that meet the

program's qualifying criteria; and

(E) The provider's self-insurance trust funds that meet the

program's qualifying criteria.

(iv) It is not reduced by interest received as a result of judicial

review by a Federal court (as described in Sec. 413.64(j)).

* * * * *

C. Technical Amendments.

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

1. The authority citation for part 401 is revised to read as

follows:

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

U.S.C. 1302 and 1395hh). Subpart F is also issued under the

authority of the Federal Claims Collection Act (31 U.S.C. 3711).

Sec. 401.601 [Amended]

2. In Sec. 401.601, the following changes are made:

a. The following sentence is added at the end of paragraph (d)(1):

``These regulations apply only to the extent HCFA regulations do not

address a situation.''

b. In paragraph (d)(2)(iii), the phrase ``Secs. 405.374 and

405.376'' is removed, and the phrase ``Secs. 405.377 and 405.378'' is

added in its place.

Sec. 401.607 [Amended]

3. In Sec. 401.607, in paragraph (d)(1), the phrase ``In conformity

with 4 CFR 102.3,'' is removed.

PART 403--SPECIAL PROGRAMS AND PROJECTS

4. The authority citation for part 403 continues to read as

follows:

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

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

Sec. 403.310 [Amended]

5. In Sec. 403.310, in the last sentence of paragraph (a), the

citation ``Sec. 405.376'' is

[[Page 63749]]

removed, and the citation ``Sec. 405.378'' is added in its place.

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart G--Reconsiderations and Appeals Under Medicare Part A

6. The authority citation for part 405, subpart G continues to read

as follows:

Authority: Secs. 1102, 1151, 1154, 1156, 1869(b), 1871, 1872,

and 1879 of the Social Security Act (42 U.S.C. 1302, 1320c, 1320c-3,

1320c-4, 1395ff(b), 1395hh, 1395ii, and 1395pp).

Sec. 405.705 [Amended]

7. In Sec. 405.705, in paragraph (d), the following changes are

made:

a. The citation ``(31 U.S.C. 951-953)'' is removed, and the

citation ``(31 U.S.C. 3711)'' is added in its place.

b. The citation ``Sec. 405.374'' is removed, and the citation

``Sec. 405.376'' is added in its place.

Sec. 405.1801 [Amended]

8. In Sec. 405.1801, in paragraph (a)(4), the citation

``Sec. 405.374'' is removed, and the citation ``Sec. 405.376'' is added

in its place.

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE

PAYMENT

9. The authority citation for part 411 continues to read as

follows:

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

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

Sec. 411.28 [Amended]

10. In Sec. 411.28, in paragraph (b), the citation ``Sec. 405.374''

is removed, and the citation ``Sec. 405.376'' is added in its place.

Sec. 413.20 [Amended]

11. In Sec. 413.20, in paragraph (e), the citation

``Sec. 405.371(a)'' is removed wherever it appears (twice), and the

citation ``Sec. 405.372(a)'' is added in place of the first appearance,

and ``Sec. 405.372(b)'' is added in place of the second appearance.

Sec. 413.153 [Amended]

2. In Sec. 413.153, in paragraph (a)(1)(iii), the citation

``Sec. 405.376'' is removed, and the citation ``Sec. 405.378'' is added

in its place.

PART 447--PAYMENTS FOR SERVICES

13. The authority citation for part 447 continues to read as

follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.

1302).

Sec. 447.31 [Amended]

14. In Sec. 447.31, in paragraph (a), the citation ``Sec. 405.375''

is removed, and the citation ``Sec. 405.377'' is added in its place.

PART 493--LABORATORY REQUIREMENTS

15. The authority citation for part 493 continues to read as

follows:

Authority: Sec. 353 of the Public Health Service Act, secs.

1102, 1861(e), the sentence following 1861(s)(11), 1861(s)(12),

1861(s)(13), 1861(s)(14), 1861(s)(15), and 1861(s)(16) of the Social

Security Act (42 U.S.C. 263a, 1302, 1395x(e), the sentence following

1395x(s)(11), 1395(s)(12), 1395(s)(13), 1395(s)(14), 1395(s)(15),

and 1395(s)(16)).

Sec. 493.1834 [Amended]

16. In Sec. 493.1834, in paragraph (i)(1)(ii), the citation

``Sec. 405.376(d)'' is removed, and the citation ``Sec. 405.378(d)'' is

added in its place.

(Catalog of Federal Domestic Assistance Program No. 93.773,

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

Supplementary Medical Insurance Program)

Dated: July 30, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: August 16, 1996.

Donna E. Shalala,

Secretary.

[FR Doc. 96-30057 Filed 11-29-96; 8:45 am]

BILLING CODE 4120-01-P