CLIA Program; Fee Schedule Revision

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Disease Control and Prevention

Health Care Financing Administration

[HSQ-219-GNC]

RIN 0938-AG87

CLIA Program; Fee Schedule Revision

AGENCY: Health Care Financing Administration (HCFA), Centers for

Disease Control and Prevention (CDC), HHS.

ACTION: General Notice with comment period.

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SUMMARY: This notice updates the certificate fees for laboratories

established under the Clinical Laboratory Improvement Amendments of

1988 (CLIA) consistent with the methodology set forth in 42 CFR part

493. Section 353(m) of the Public Health Service Act requires that fees

be collected to recoup costs of general administration of the CLIA

Program. By economizing at every opportunity, the CLIA program has

managed to maintain the fees established in 1992 and has absorbed all

increases in costs. Revisions to the fees are necessary because the

current fees are no longer sufficient to support the administration of

the CLIA program. This restructuring of fees will more equitably

distribute fees across all sizes and complexity of laboratories. For

purposes of simplification, this notice announces a flat fee of $100

for a certificate of registration.

DATES: Effective Date: The updated fee schedule is effective for

certificate fees assessed as of January 1, 1998, unless we announce

changes in response to public comments in a subsequent notice.

Comments: Comments will be considered if we receive them at the

appropriate address, as provided below, no later than 5 p.m. on October

28, 1997. We will not consider comments concerning any other issue.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: HSQ-219-GNC, P.O. Box 26676,

Baltimore, MD 21207.

If you prefer, you may deliver your written comments (1 original

and 3 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 HSQ-219-GNC. 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 Avenue, SW., Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

Copies: To order copies of the Federal Register containing this

document, send your request to: New Orders, Superintendent of

Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date

of the issue requested and enclose a check or money order payable to

the Superintendent of Documents, or enclose your Visa or Master Card

number and expiration date. Credit card orders can also be placed by

calling the order desk at (202) 512-1800 or by faxing to (202) 512-

2250. The cost for each copy is $8. As an alternative, you can view and

photocopy the Federal Register document at most libraries designated as

Federal Depository Libraries and at many other public and academic

libraries throughout the country that receive the Federal Register.

This Federal Register document is also available from the Federal

Register online database through GPO Access, a service of the U.S.

Government Printing Office. Free public access is available on a Wide

Area Information Server (WAIS) through the Internet and via

asynchronous dial-in. Internet users can access the database by using

the World Wide Web; the Superintendent of Documents home page address

is http://www.access.gpo.gov/su__docs/, by using local WAIS client

software, or by telnet to swais.access.gpo.gov, then login as guest (no

password required). Dial-in users should use communications software

and modem to call (202) 512-1661; type swais, then login as guest (no

password required).

FOR FURTHER INFORMATION CONTACT: Judith Yost (410) 786-3531.

SUPPLEMENTARY INFORMATION:

I. Background

On October 31, 1988, the Congress enacted the Clinical Laboratory

Improvement Amendments of 1988 (CLIA), Pub. L. 100-578. CLIA replaced

in its entirety section 353 of the Public Health Service (PHS) Act and

applies to every laboratory in the United States and its territories

that examines human specimens for the diagnosis, prevention, or

treatment of any disease or impairment of, or the assessment of the

health of, human beings subject to the requirements established by the

Department of Health and Human Services (HHS). These requirements apply

whether or not a laboratory receives reimbursement for services,

participates in the Medicare or Medicaid program, and whether or not it

tests specimens in interstate commerce. Section 353 of the PHS Act

requires HHS to establish certification requirements for any laboratory

that performs tests on human specimens. An amendment to the Social

Security Act also requires laboratories to meet the CLIA requirements

if they choose to participate in the Medicare or Medicaid programs.

On February 28, 1992, we published regulations (57 FR 7002) that

contain the CLIA standards that all laboratories must meet. Also on

that date, we issued regulations (57 FR 7188) concerning CLIA fees and

their collection. Section 353(m) of the PHS Act requires HHS to impose

fees sufficient to cover the general costs of administration incurred

by HHS in implementing the CLIA program.

The preamble to the final regulations published on February 28,

1992, stated that, as experience was gained from administering the CLIA

program, the fee schedules would be revised as necessary. The

regulations themselves provide for periodic updating (Sec. 493.638(b)).

The statute requires that CLIA be a self-funded program with two

separate types of fees: (1) Certificate fees and (2) additional fees

for laboratory specific monitoring activities. Of these two types of

fees, this notice revises only certificate fees, which is the only type

of fee authorized by the statute to cover general administrative

program costs.

Certificate fee means a fixed charge for the issuance and

renewal of certificates. Section 353(b) of the PHS Act requires that

every laboratory have in effect a certificate issued by the Secretary

applicable to the nature and scope of tests performed. The categories

or types of certificates are described in the regulations at Part 493.

Section 353(m) of the PHS Act requires that certificate fees must be

sufficient to cover the Federal administrative costs of the program.

These Federal administration costs to be recouped include costs

incurred by HCFA, the Centers for Disease Control and Prevention (CDC)

and contractors for both agencies. Administrative activities

[[Page 45816]]

include locating and registering laboratories, issuing and reissuing

certificates, developing regulatory standards, evaluating States'

requests for exemption and accrediting organizations' petitions for

deemed status, reviewing, approving and monitoring proficiency testing

programs, evaluating which procedures, tests, or examinations meet the

criteria for inclusion in the appropriate complexity category, carrying

out special public health research studies required by law, providing

public information, training surveyors, developing and maintaining a

comprehensive CLIA data system, and developing and overseeing the

fiscal management of the program.

This notice updates the fees associated with issuance of

certificates, consistent with the applicable statutory requirements and

regulations. Certificate fees, as required in part 493 subpart F,

support the Federal CLIA administration activities.

Additional fees are the fees associated with the

inspection of laboratories found in Sec. 493.643 of the CLIA

regulation. These fees are to be used for the costs associated with the

inspection of laboratories and to assess compliance with CLIA

requirements. This notice does not increase these fees.

II. Current Types of Certificates and Fees

Laboratories must pay the following applicable fees biennially

depending on the type of certificate they receive. (These fees and

certificates do not apply to laboratories licensed in States which are

CLIA-exempt under subpart E of this part. In this case the State pays a

fee for CLIA administrative costs.)

Certificate of Waiver (Sec. 493.638). A laboratory that

performs only tests categorized as waived must obtain a certificate of

waiver. The certificate of waiver fee, established in 1992, is $100.

Certificate for Provider-Performed Microscopy (PPM)

Procedures (Sec. 493.638). A certificate for PPM procedures is required

for a laboratory that performs:

1. Only tests specified as PPM procedures, or

2. Only tests specified as PPM procedures and tests categorized as

waived.

The certificate fee for PPM procedures, set in 1993, is $150, which

is $50 more than the fee for certificates of waiver and Schedules LVA,

A, B, and C laboratories. (See Section IV Volume and Scope of

Laboratory Services.) This fee reflects the additional expenses

involved in reviewing moderate complexity tests to determine if they

meet the criteria for classification as PPM procedures. (NOTE: This

subcategory was first established in a rule published January 19, 1993,

(58 FR 5212) and subsequently revised in a rule published April 24,

1995 (60 FR 20035).)

Certificate of Registration (part 493, subparts B and C)

The CLIA regulations, issued on February 28, 1992, and revised

April 24, 1995, describe the fees charged for a certificate of

registration. Every laboratory is required to obtain a certificate of

registration (subparts B and C) except for the following: laboratories

performing only those tests categorized as waived; laboratories

performing only tests specified as PPM procedures or performing PPM

procedures and waived tests; and laboratories located in and licensed

by a State which has a CLIA exemption, as specified in subpart E. In

the 1992 regulations the cost to the laboratory for the certificate of

registration varied with the volume and specialties of services of the

laboratory. The fees for the certificate of registration, established

by the February 28, 1992 regulations, are: $100 (Small volume

laboratories), $350 (Medium volume laboratories), and $600 (Large

volume laboratories). (See Table I)

Certificate of Accreditation (Sec. 493.638). Any

laboratory performing testing beyond waived and PPM procedures may

request a certificate of accreditation based on its accreditation by a

HCFA approved accrediting body. The laboratory must initially pay a fee

for a certificate of registration. The certificate of registration fee

is based on the laboratory's volume and number of specialties. The

certificate of registration is valid for a period of no more than 2

years or until such time as the laboratory shows proof of compliance

with the requirements of the accreditation organization. Once

compliance is established through the accreditation program, the

laboratory must pay the appropriate certificate fee based on volume and

number of specialties, prior to the issuance of the certificate of

accreditation. The fees, set in 1992, for these certificates are: $100

(Small volume laboratories), $350 (Medium volume laboratories), and

$600 (Large volume laboratories).

Certificate of Compliance (Sec. 493.638). All laboratories

performing testing beyond waived and PPM procedures and requesting a

certificate of compliance must initially pay a fee for a certificate of

registration. The certificate of registration fee is based on the

laboratory's volume and number of specialties. The certificate of

registration is valid for no more than 2 years or until such time as an

inspection by HCFA or a HCFA agent establishes compliance with the CLIA

requirements. Once compliance is established, the laboratory must pay

the appropriate certificate fee based on volume and number of

specialties, prior to the issuance of the certificate of compliance.

The fees for these certificates, set in 1992, are: $100 (Small volume

laboratories), $350 (Medium volume laboratories), and $600 (Large

volume laboratories).

III. Revisions to Certificates

If a laboratory issued a certificate, changes its name, location,

or meets any conditions specified in Sec. 493.639 of our regulations

before the certificate expiration date, the administrative fee to issue

the revised certificate is $50. (The categorization of laboratories by

scope and volume (see below) was discussed in detail in the preamble to

the February 28, 1992 rule (at page 7194) and is specified in our

regulations at Sec. 493.643(c).)

IV. CLIA Schedules Defined by Number of Specialties and Volume

(See Table II)

Section 493.643(c), lists the schedules based on the laboratory's

number of specialties and volume of testing (including PPM procedures

but excluding tests performed for quality control, quality assurance,

and proficiency testing purposes). These schedules, as set forth below,

are used to establish the certificate fees, as well as fees associated

with monitoring activities.

Schedule A Low Volume (LVA). The laboratory performs not

more than 2,000 laboratory tests annually.

Schedule A. The laboratory performs tests in no more than

three specialties of service with a total annual volume of more than

2,000, but not more than 10,000 laboratory tests.

Schedule B. The laboratory performs tests in at least four

specialties of service with a total annual volume of more than 2,000,

but not more than 10,000 laboratory tests.

Schedule C. The laboratory performs tests in no more than

three specialties of service with a total annual volume of more than

10,000, but not more than 25,000 laboratory tests.

Schedule D. The laboratory performs tests in at least four

specialties with a total annual volume of more than 10,000, but not

more than 25,000 laboratory tests.

Schedule E. The laboratory performs more than 25,000, but

not more than 50,000 laboratory tests annually.

Schedule F. The laboratory performs more than 50,000, but

not

[[Page 45817]]

more than 75,000 laboratory tests annually.

Schedule G. The laboratory performs more than 75,000, but

not more than 100,000 laboratory tests annually.

Schedule H. The laboratory performs more than 100,000, but

not more than 500,000 laboratory tests annually.

Schedule I. The laboratory performs more than 500,000, but

not more than 1,000,000 laboratory tests annually.

Schedule J. The laboratory performs more than 1,000,000

laboratory tests annually.

For purposes of assessing certificate fees in 1992, we considered

laboratories in Schedules LVA through C as small volume ($100 fee), in

Schedules D through G as medium volume ($350 fee), and Schedules H

through J as large volume ($600 fee).

V. Need for Increased Fees

After careful review of CLIA administration costs and revenues

generated from the current certificate fees, we have concluded that

current certificate fees are not sufficient to satisfy the requirements

of section 353 of the PHS Act. According to our regulations at

Sec. 493.638, the total of fees collected must be sufficient to cover

the general costs of administering the CLIA program. The total cost of

the CLIA program is estimated to be approximately $37.5 million

annually. CLIA generates about $25 million in total revenue annually,

through a combination of certificate fees and additional fees, leaving

a projected shortfall of approximately $12.5 million annually.

The shortfall in revenue is the result of two factors. First, more

than half of all registered laboratories now pay fees based on their

performing only waived tests or performing only PPM procedures, or

both. When the initial fees were established in February 1992, there

were no national data available on the number or types of testing

performed. We projected that only 15 percent of all laboratories would

have a certificate of waiver, and the PPM procedures category had not

yet been established. Second, our revenue projections were based on an

initial estimate of 180,000 to 250,000 registered laboratories. In

fact, less than 150,000 laboratories are currently registered. This

number does not include laboratories in CLIA exempt States.

This shortfall has been exacerbated by the lack of appropriations

for start up costs at the inception of the program in 1988. As a

result, we have taken a number of steps to curtail CLIA costs and

administrative activities in order to meet the statutory mandate which

requires CLIA revenues to cover the costs of administering the program.

These steps have included: implementing survey efficiencies, improving

the fee collection process, limiting or postponing CLIA research

projects, restricting hiring of additional staff and delaying some

other Federal administrative activities. Overall Federal administrative

costs have been reduced significantly by decreasing staff positions and

reducing costs for travel, printing, subscriptions, and training.

Even though we have reduced administrative costs, a portion of

CLIA's administrative expenditures remains fixed and cannot be reduced

without seriously undermining the effectiveness of the program. These

costs are associated with activities such as: evaluating test systems

for appropriate complexity categorization under CLIA; revising survey

procedures, such as instituting the Alternate Quality Assessment Survey

(AQAS); providing training and consultation to States, other Federal

agencies, professional organizations, and laboratories; mailing

information and application materials to laboratories; and operating

and maintaining the accounting and data systems needed to provide

accurate and timely information about laboratory registration and about

CLIA receipts and expenses. Other costs are those associated with

collecting unpaid fees and administration of the enforcement process.

In order to comply with statutory requirements requiring that CLIA

be self-funded, we have already made substantial efforts to decrease

Federal administrative costs. Now, we must also seek additional

revenues within the authority of the statute and existing regulations

to eliminate an anticipated CLIA shortfall.

While this increase in fees will have a varying impact on

laboratories, depending on the size and volume of testing performed and

other market place factors, it will ultimately provide for a more

effective and efficient management of the CLIA program and be a cost

effective investment. For example, research projects will enable us to

identify, expand and develop innovative, less burdensome survey

processes, appropriate personnel qualifications, effective quality

control requirements, and could ultimately reduce costs to individual

laboratories.

VI. Revised Fees

The CLIA regulations require laboratories to pay a fee for the

issuance of a CLIA certificate. In updating the certificate fee levels

to meet statutory revenue requirements, the methodology set forth in

Sec. 493.638(b) has been retained. This is consistent with the intent

to allocate fees to avoid any undue burden and to maintain site

neutrality among all laboratories. This means that laboratories

performing similar types and volumes of testing despite the location of

testing have the same fees imposed upon them. Currently, there are

three certificate fees for small, medium and large volume laboratories.

This notice sets forth a $150 certificate fee for Schedules LVA, A and

B laboratories. It also establishes eight other certificate fees based

on volume differences in laboratories.

Registration Fee--Currently, a laboratory pays the same amount for

a certificate of registration and its certificate of compliance or

certificate of accreditation. Schedules LVA, A, B, and C laboratories

pay $100. Schedules D, E, F, and G laboratories pay $350; and Schedules

H, I, and J laboratories pay $600. To be consistent, a set registration

fee of $100 will be charged to every laboratory applying for a

certificate of accreditation or certificate of compliance. Therefore,

this notice provides for a reduction in certificate of registration

fees for Schedules D through J laboratories. The fee for Schedules LVA,

A, B, and C laboratories will remain $100. (See Table I). We invite

comments if there are other alternatives which might be adopted in

place of this flat registration fee.

Fee for Revised Certificates--The regulations require laboratories

to provide notification of certain changes such as name, location,

director, and deleting or adding services as outlined in Sec. 493.639.

Prior to the expiration of the certificate, these changes require

payment of a fee for the issuance of a revised certificate. Based on

the costs involved to issue a revised certificate, this fee will

increase from $50 to $75. It should be noted that, to date, no fees

have been charged for issuing revised certificates, due to changes in

the CLIA program such as the addition of PPM procedures; categorization

of additional waived tests and revisions to other federal regulations

pertaining to laboratory ownership.

Biennial Certificate Fees--The statute requires fees be imposed to

cover the costs of administering the CLIA program. Even though

significant cost reductions in the program have already occurred, the

certificate fees must be increased to maintain program integrity. In

order to equitably distribute the biennial certificate fees, the

average annual testing volume for laboratories in

[[Page 45818]]

Schedules LVA through J were considered. Table III in this section

lists average annual testing volumes for the various schedules of

laboratories.

The regulations at Sec. 493.643(c) require that certificate fees be

based on the ``number of specialties and volume of testing.'' It was

determined that an equitable manner to spread costs while conforming to

regulatory requirements would be to set certificate fees for Schedules

C through J laboratories on an average per-test basis. Fees for

Schedules LVA, A, and B laboratories would be set at a minimum amount--

$150. Use of this basis to determine fees is expected to result in a

more appropriate allocation of cost across all fee schedules. (See

Table III).

Economies of scale among laboratories are accounted for by applying

reductions in the per-test rates as the number of specialties and

volume of a laboratory increases. New fees for laboratory Schedules C

through J are calculated by multiplying the average testing volume by

the corresponding per-test rate. This will result in a fairer

allocation of costs than the current flat fees for small, medium and

large laboratories. The revised fees are summarized below.

Certificate of Waiver (Sec. 493.638). The biennial fee for

this certificate is being increased from $100 to $150. This increase is

necessary to cover added administrative costs to the CLIA program as

more tests are waived. Laboratories may perform these tests at any

volume and pay only $150 biennially.

Certificate for Provider-Performed Microscopy (PPM)

Procedures (Sec. 493.638). The biennial fee for the certificate is

being increased from $150 to $200. This increase in fees is required to

cover administrative costs associated with this subcategory of testing.

This certificate allows a laboratory to conduct both PPM procedures and

waived tests, at any volume and pay no other fee.

Certificate of Compliance and Certificate of Accreditation

(Sec. 493.638).

Schedule A Low Volume. If the laboratory performs not more

than 2,000 laboratory tests annually, the biennial certificate fee will

be $150.

Schedule A. If the laboratory performs tests in no more

than three specialties of service with a total annual volume of more

than 2,000, but not more than 10,000 laboratory tests, the biennial

certificate fee will be $150.

Schedule B. If the laboratory performs tests in at least

four or more specialties of service with a total annual volume of not

more than 10,000 laboratory tests, the biennial certificate fee will be

$150.

Schedule C. If the laboratory performs tests in no more

than three specialties of service with a total annual volume of more

than 10,000, but not more than 25,000 laboratory tests, the biennial

certificate fee will be $430.

Schedule D. If the laboratory performs tests in at least

four or more specialties with a total annual volume of more than

10,000, but not more than 25,000 laboratory tests, the biennial

certificate fee will be $440.

Schedule E. If the laboratory performs more than 25,000,

but not more than 50,000 laboratory tests annually, the biennial

certificate fee will be $650.

Schedule F. If the laboratory performs more than 50,000,

but not more than 75,000 laboratory tests annually, the biennial

certificate fee will be $1,100.

Schedule G. If the laboratory performs more than 75,000,

but not more than 100,000 laboratory tests annually, the biennial

certificate fee will be $1,550.

Schedule H. If the laboratory performs more than 100,000,

but not more than 500,000 laboratory tests annually, the biennial

certificate fee will be $2,040.

Schedule I. If the laboratory performs more than 500,000,

but not more than 1,000,000 laboratory tests annually, the biennial

certificate fee will be $6,220.

Schedule J. If the laboratory performs more than 1,000,000

laboratory tests annually, the biennial certificate fee will be $7,940.

The revised certificate fees in schedule C through J are based on the

average annual number of tests performed.

The following examples illustrate how these fees are determined:

The average annual test volume for laboratories in

Schedule D is 16,445 tests each year. The certificate fee, rounded to

the nearest $10, for those laboratories is $0.0269 times 16,445 annual

tests, or $440.

Similarly, the average annual test volume for Schedule J

laboratories is 2,886,393. At a per-test rate of $0.00275, Schedule J

laboratories will pay a biennial certificate fee, rounded to the

nearest $10, of $7,940.

Table I.--Reductions in Most Registration Fees

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Current Reduction in New registration

Type of lab registration fee registration fee fee

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Waived................................................. N/A N/A N/A

PPM.................................................... N/A N/A N/A

Low Vol A.............................................. $100 $0 $100

Schedule A............................................. 100 0 100

Schedule B............................................. 100 0 100

Schedule C............................................. 100 0 100

Schedule D............................................. 350 250 100

Schedule E............................................. 350 250 100

Schedule F............................................. 350 250 100

Schedule G............................................. 350 250 100

Schedule H............................................. 600 500 100

Schedule I............................................. 600 500 100

Schedule J............................................. 600 500 100

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Table II.--CLIA Laboratory Schedule

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Number of Current biennial New biennial

Type of lab specialties Annual test volume certificate fee certificate fee

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Waived.......................... N/A................ N/A................ $100 $150

PPM............................. N/A................ N/A................ 150 200

[[Page 45819]]

Low Vol A....................... N/A................ Less than 2,000.... 100 150

Sch. A.......................... 3 or Fewer......... 2,000-10,000....... 100 150

Sch. B.......................... 4 or More.......... 2,000-10,000....... 100 150

Sch. C.......................... 3 or Fewer......... 10,001-25,000...... 100 430

Sch. D.......................... 4 or More.......... 10,001-25,000...... 350 440

Sch. E.......................... N/A................ 25,001-50,000...... 350 650

Sch. F.......................... N/A................ 50,001-75,000...... 350 1,100

Sch. G.......................... N/A................ 75,001-100,000..... 350 1,550

Sch. H.......................... N/A................ 100,001-500,000.... 600 2,040

Sch. I.......................... N/A................ 500,001-1,000,000.. 600 6,220

Sch. J.......................... N/A................ Greater than 600 7,940

1,000,000.

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TABLE III.--CLIA Laboratories by Testing Volume

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Current biennial Number of labs as Average annual Biennial per test New biennial

Type of lab cert. fee of 3/96 testing volume rate cert. fee

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

Waived................................................. $100 70948 N/A N/A $150

PPM.................................................... 150 26707 N/A N/A 200

Low Vol A.............................................. 100 18307 852 N/A 150

Sch. A................................................. 100 11204 4911 N/A 150

Sch. B................................................. 100 2864 5509 N/A 150

Sch. C................................................. 100 3599 15969 $0.027 430

Sch. D................................................. 350 1840 16445 0.0269 440

Sch. E................................................. 350 2990 35928 0.0181 650

Sch. F................................................. 350 1417 61669 0.0179 1,100

Sch. G................................................. 350 938 87145 0.0178 1,550

Sch. H................................................. 600 3566 226237 0.0090 2,040

Sch. I................................................. 600 988 711213 0.00875 6,220

Sch. J................................................. 600 1058 2886393 0.00275 7,940

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VII. Comment Opportunities and Alternatives Considered

We are publishing this as a general notice with opportunity to

comment because it relates only to the application of Sec. 493.638 by

the agency, and is limited to the issue of the amount of the CLIA

certificate fee. While we will be accepting public comment on this

notice, a fee increase is required by statute because section

353(m)(3)(A) of the PHS Act mandates that certificate fees cover the

cost of general CLIA program administration. Moreover, we believe this

fee increase is consistent with the methodology set forth in our

regulations at Secs. 493.638 and 493.649.

We will consider all comments received within 60 days of the date

of publication of this notice, and if necessary, we may revise the

certificate fees laid out in this notice based on issues raised by

commenters. Other alternatives to the changes in fee schedules may

exist, and we will consider options suggested by commenters. If we

determine that changes in the certificate fees are required in response

to public comments, we will announce the changes in a subsequent

notice. Otherwise, the certificate fees announced in this notice will

become effective on January 1, 1998.

We considered several options before establishing the certificate

fees. The first option we considered was to establish a single

registration and certificate fee for all laboratories, regardless of

their size. This option was first presented in the proposed rule on

CLIA program fees in May 1990 (55 FR 31758). After further discussion

and consideration of public comments, it was rejected because a single

certificate fee would create an unfair burden on small laboratories.

The second option we considered was to retain separate registration

and certificate fees for small, medium, and large laboratories, using

the existing size categories; that is, for purposes of assessing fees,

we considered laboratories in Schedules LVA through C as small volume,

in Schedules D through G as medium volume, and in Schedules H through J

as large volume. We dismissed this option because, in order to generate

adequate revenue, the increase in fees from one category to another

would be too extreme. Laboratories with nearly identical test volumes

could, under this option, pay extremely disparate fees.

We also considered basing certificate fees on each laboratory's

annual revenue, but dismissed this option because accurate information

regarding revenues for each laboratory is not readily available.

Therefore, after careful evaluation of these options, it was determined

that a set fee would be assessed for certificates of waiver, PPM

procedures, registration and Schedules LVA, A and B laboratories.

Certificate of compliance and certificate of accreditation fees, for

Schedules C through J laboratories, are based on the average annual

test volume and number of specialties. This was the most equitable and

practical method for determining fees. This approach has the merit of

assessing larger fees to large volume laboratories, while setting their

cost per test performed at a lower rate than that of smaller

laboratories to acknowledge economies of scale. This approach is based

on the fee methodology already set forth in the CLIA regulations.

We will continue to review these certificate fees and may adjust

the fee amounts in the future as additional experience in program

implementation is gained. We are considering whether to establish a

mechanism to adjust fees periodically for inflation and invite specific

suggestions on mechanisms, including specific indices, which could be

used to accommodate adjustments

[[Page 45820]]

based on inflation and changes to the program. Any future changes in

the fees will be preceded by an announcement in the Federal Register.

VIII. Impact Analysis

A. Regulatory Impact Statement

We generally prepare a regulatory flexibility analysis that is

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

through 612) unless the Secretary certifies that a final rule will not

have a significant economic impact on a substantial number of small

entities. For purposes of the RFA, all laboratories are considered to

be small entities. Individuals and States are not included in the

definition of a small entity. Although this notice would not have a

significant economic impact on a substantial number of small entities,

we are preparing the following voluntary regulatory flexibility

analysis.

This notice revises the fees for all CLIA certificates. The effect

of this notice will vary widely among laboratories. This notice is

projected to generate certificate fees of $50 million on a biennial

basis or $25 million annually.

Section 353(m) of the PHS Act, as amended by CLIA, requires HHS to

impose fees for the issuance and renewal of certificates and for

determining program compliance. The statute requires that all

certificate holders share in the costs that the government incurs in

administering the CLIA program. The statute states that the fees

imposed vary by group or classification of laboratory, based on such

considerations as the Secretary determines are relevant. Hence, the

imposition of fees is not a discretionary action on the part of HHS or

HCFA.

The CLIA fee collection rule, published on February 28, 1992,

established 12 classifications of laboratories based on volume and

scope of services. (A thirteenth schedule, certificate for PPM

procedures, was added January 19, 1993.) These classifications are

unchanged by this notice. Previously, laboratories applying for

certificate of waiver or certificate of PPM procedures paid a set fee.

Laboratories applying for certificates of compliance or accreditation

paid one of three registration and certificate fees determined by

number of specialties and volume of services.

In developing the CLIA regulations and implementation policies, we

were cognizant of the costs and attempted to avoid unnecessary burden

on laboratories due to unreasonable costs of regulation, particularly

on small providers in rural areas. The graduated fee amounts also were

adopted in order to avoid any undue burden on small laboratories and

represented our best attempt, using the limited data available at the

time, to apportion the estimated costs of administering CLIA while

maintaining site neutrality among the projected universe of

laboratories.

In the comprehensive regulatory impact analysis of the February 28,

1992, regulations implementing CLIA, we presented several assumptions

regarding the universe of laboratories and the projected distribution

of laboratories by certificate fee category. Our most conservative

assumption estimated a universe of 180,000 laboratories, with 50

percent of the laboratories paying the lowest fee of $100 by virtue of

being classified as waived or small, and 50 percent paying either $350

or $600, depending on whether they were classified as medium or large.

Our 1992 projections have proven to be incorrect. At that time,

there was no way to accurately predict that the total number of

laboratories registering under CLIA would fall short of our estimate,

and the number of waived and small laboratories would exceed our

projection. Recent data indicate that approximately 90 percent of the

registered laboratories pay minimum fees because they hold certificates

of waiver, PPM procedures, or are categorized as small based on volume

of testing. The remaining 10 percent (Schedules C through J) have

average annual testing volumes greater than 10,000.

Current total CLIA revenues generated are approximately $25 million

annually and are not sufficient to fully support the continued

operation of the CLIA program and retain the intended goals of the

program. Even with the reduction in administrative activities, we

estimate that the cost of the program will be approximately $37.5

million annually or $75 million biennially. After enactment of this

certificate fee schedule, we estimate that annual CLIA revenues,

through a combination of certificate fees and additional fees, will

maintain the viability of the program.

Once this notice is effective, there will be a set fee for

certificates of registration, waiver, PPM procedures and the

certificates for Schedules LVA, A and B laboratories. For Schedules C

through J laboratories, the certificate fee changes in this notice

result in increases in fee amounts from one schedule to another, based

on test volume. These changes also retain the policy of allowing the

laboratories doing the least amount of testing to pay the lowest

certificate fee necessary to cover the costs of implementing the CLIA

requirements. This is a minimal change because laboratories holding a

certificate of waiver, certificate for PPM procedures, or laboratories

falling in Schedules LVA through B will each see an increase of only

$50 over a 2 year period, amounting to less than $.07 per day.

Currently, laboratories pay $100, $350, or $600 for a certificate

of registration, depending on their volume of testing. The new

certificate of registration fee for all laboratories will be $100,

regardless of testing volume. We believe this approach is in keeping

with our policy of attempting to minimize fee increases for

laboratories performing a smaller volume of testing, and at the same

time, simplifies the registration process.

A certificate of registration allows the laboratory to begin

performing testing before compliance is assessed. We will maintain the

policy of not requiring a certificate of registration for laboratories

seeking a certificate of waiver or a certificate for PPM procedures;

therefore, these laboratories' will not have to pay a certificate of

registration fee. We will assess these laboratories fees biennially

only for their respective certificate of waiver or certificate for PPM

procedures.

We are soliciting comments on whether assessing even a new minimal

$100 registration fee for laboratories seeking a certificate of

compliance or certificate of accreditation creates a barrier into the

market place. If so, specifically how do such fees create a barrier

into the market place?

When we examined total fees related to the volume of tests

performed, we concluded that disproportionally small fees were being

collected from large laboratories. Under the current certificate fees,

laboratories holding a certificate of waiver, certificate for PPM

procedures and laboratories falling in Schedules LVA, through B

(approximately 130,000 or 89 percent of the total number of

laboratories) pay 70 percent of the administrative costs of the CLIA

program through the certificate fees. Under the new certificate fees,

the same laboratories pay only 42 percent of the administrative costs.

We were conservative in raising the certificate fees for small

laboratories in order to be sensitive to their need to provide direct

patient care and not impede access to quality laboratory testing.

Larger laboratories, based on the volume of tests, reap a greater

financial benefit than the smaller laboratories due to the conceivable

economies of scale and, therefore, have unlimited potential to provide

service to a larger share of the

[[Page 45821]]

market. In an effort to distribute costs more equitably among the

various types and sizes of laboratories, while generating sufficient

revenue, we now rely more heavily on average annual test volumes to

determine certificate fees. The fees for certificate of waiver or PPM

procedures have been, and will continue to be, a flat fee irrespective

of volume of testing performed. The $50 fee increase for these

laboratories is based on expenditures related to these types of

certificates. These costs include: reviewing test systems for

categorization as waived or PPM procedures; maintaining and updating

the data systems; issuing certificates; issuing test categorization

notices; collecting fees; and analyzing data.

For other certificate types, instead of using the three-tiered fee

schedule based on general ranges of test volume, we are maintaining the

11 laboratory schedules, LVA through J, previously established on

February 28, 1992. The new biennial certificate fees for each schedule

are computed using a decreasing per test rate as the volume of tests

increases. This per-test rate is multiplied by the average annual test

volume performed in each schedule, with the exception of the smallest

laboratories, LVA through B, being charged a certificate fee of $150.

Laboratories in Schedules C through G, which encompass test volumes up

to 100,000, each will pay a certificate fee based on the per-test rate.

(See Table III) Between Schedules G and H laboratories, the per-test

rate is being reduced by almost one half, because of the dramatic

increase in volume for Schedule H laboratories. These test volumes

range from more than 100,000 to 500,000. Another very large increase in

volume occurs for Schedule J laboratories, which perform over 1 million

tests annually. Between Schedules I and J laboratories, the per-test

rate is being reduced by approximately three-fourths, in recognition of

the large increase in the test volume of these laboratories.

The revisions to the CLIA certificate fees will significantly alter

the biennial certificate fees for some laboratories. Table III presents

the approximate number of laboratories in each laboratory type and

their new biennial certificate fees.

The effect of this new fee schedule will vary widely among clinical

laboratories. Nearly 62 percent of the laboratories now hold

certificate of waiver or certificate for PPM procedures and pay a flat

certificate fee. For certificates of waiver, laboratories will pay $150

biennially and for certificates for PPM procedures, the biennial fee

will be $200. These $50 biennial increases amount to less than $0.07

per day per laboratory. The new fees take into account the increased

number of tests that may be performed under these types of

certificates.

Laboratories with a change in name, location or in any of the

conditions specified in Sec. 493.639 of our regulations will find the

fee for a revised certificate increased by $25, from $50 to $75.

As previously stated, we are required by statute to establish fees

to support the CLIA program. Although certificate fees increase

proportionately, we believe that by relating the fee more precisely to

the number of tests a laboratory performs each year, the costs of

administering CLIA will be distributed more equitably across all

laboratories. The laboratories bearing the largest increase in

certificate fees, Schedules C through J, account for more than 90

percent of the annual test volume in this country. Because of their

large test volumes we have applied the lowest possible per-test rates

to those laboratories, consistent with generating sufficient revenues.

We concluded that basing certificate fees on the average annual test

volume for each schedule and a decreasing per-test rate was the most

equitable and practical method for constructing the fee schedule. (See

Table III) This approach has the merit of charging larger laboratories

less per test performed, while still basing the overall fees directly

on the volume of testing. These fees will result in large increases in

certificate fees for the laboratories with the highest test volumes.

These differences are directly proportional to test volumes, resulting

in laboratories with similar volumes paying similar fees.

For the reasons given above, we certify that this proposed fee

schedule would not have a significant effect on a substantial number of

small entities and that a regulatory flexibility analysis is not

needed.

B. Rural Hospital Impact Statement

Section 1102(b) of the Act requires us 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. We are not preparing a

rural impact statement since we have determined, and certify, that this

notice would 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

notice was reviewed by the Office of Management and Budget.

(Catalog of Federal Domestic Assistance Program No. 93-778, Medical

Assistance Program; No. 93.773 Medicare--Hospital Insurance Program;

and No. 93-774, Medicare--Supplementary Medical Insurance Program)

Dated: December 20, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: December 11, 1996.

David A. Satcher,

Director, Centers for Disease Control and Prevention.

Dated: March 26, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-23084 Filed 8-28-97; 8:45 am]

BILLING CODE 4210-01-P