Medicare Program; Provider Reimbursement Determinations and Appeals

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 413, and 417

[CMS-1727-F]

RIN 0938-AL54

Medicare Program; Provider Reimbursement Determinations and Appeals

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

Subpart R of 42 CFR part 405 consists of regulations governing Medicare reimbursement determinations, and appeals of those determinations, by health care providers. (For the sake of simplicity, throughout this final rule, we use “reimbursement” to refer to Medicare payment under both the reasonable cost and prospective payment systems.) Under section 1878 of the Social Security Act (the Act) and the subpart R regulations, the Provider Reimbursement Review Board (the Board) has the authority to adjudicate certain substantial reimbursement disputes between providers and fiscal intermediaries (intermediaries). Board decisions are subject to review by the CMS Administrator, and the final agency decision of the Board or the Administrator, as applicable, is reviewable in Federal district court. In addition, under the subpart R regulations, intermediaries have the authority to hold hearings and adjudicate certain other payment and reimbursement disputes with providers. This final rule updates, clarifies, and revises various provisions of the regulations governing provider reimbursement determinations, appeals before the Board, appeals before the intermediaries (for lesser disputes), and Administrator review of decisions made by the Board.

DATES:

Effective Date:

These regulations are effective August 21, 2008.

Applicability Date:

These regulations are applicable to all appeals pending as of, or filed on or after August 21, 2008, except as noted in sections II.Y. and III.Y. of this final rule.

FOR FURTHER INFORMATION CONTACT:

Morton Marcus, (410) 786-4477; Donald Romano, (410) 786-1401.

SUPPLEMENTARY INFORMATION:

To help readers locate information in this final rule, we are providing the following Table of Contents.

I. Background

A. Legislative and Regulatory History and Development

B. Medicare Modernization Act Requirements for Issuance of Regulations

II. Provisions of the Proposed Rule and Public Comments and Responses

A. Definitions of Entities That Review Intermediary Determinations or Decisions by Such Entities; Definition of Reimbursement (§ 405.1801(a))

B. Calculating Time Periods and Deadlines (§ 405.1801(a) and § 405.1801(d))

C. Providers Under Subpart R; Limited Applicability to Non-Provider Entities (§ 405.1801(b))

D. Provider Hearing Rights (§ 405.1803(d), § 405.1811, and § 405.1835)

1. Provider Dissatisfaction With Medicare Reimbursement; Revised Self-Disallowance Policy

2. Audits of Self-Disallowed Items

3. Determining Timeliness of Hearing Requests (§ 405.1811 and § 405.1835)

4. Contents of Hearing Request

E. Provider Requests for Good Cause Extension of Time Period for Requesting Hearing (§ 405.1813 and § 405.1836)

F. Intermediary Hearing Officer Jurisdiction (§ 405.1814)

G. CMS Reviewing Official Procedure (§ 405.1834)

H. Group Appeals (§ 405.1837)

I. Amount in Controversy (§ 405.1839)

J. Board Jurisdiction (§ 405.1840)

K. Expedited Judicial Review (§ 405.1842)

L. Parties to Proceedings in a Board Hearing or Intermediary Hearing (§ 405.1843 and § 405.1815)

M. Quorum Requirements (§ 405.1845)

N. Board Proceedings Prior to Hearing; Discovery in Board and Intermediary Hearing Officer Proceedings (§ 405.1853 and § 405.1821)

O. Subpoenas (§ 405.1857)

P. Record of Administrative Proceedings (§ 405.1865 and § 405.1827)

Q. Board Actions in Response to Failure to Follow Board Rules (§ 405.1868)

R. Scope of Board's Authority in a Hearing Decision (§ 405.1869 and § 405.1829)

S. Board Hearing Decision and Intermediary Hearing Decision (§ 405.1871, § 405.1831 and § 405.1833)

T. Administrator Review (§ 405.1875)

U. Judicial Review (§ 405.1877)

V. Reopening Procedures (§ 405.1885 through § 405.1889)

W. Three Additional Proposals Under Consideration

X. Technical Revisions

Y. Effective Date

Z. Children's Health Graduate Medical Education Program (CHGME)

III. Provisions of the Final Rule

IV. Collection of Information Requirements

A. Information Collection Requirements (ICRs) Introduction (§ 405.1801)

B. ICRs Regarding the Right to Intermediary Hearing; Contents of, and Adding Issues to, Hearing Request (§ 405.1811)

C. ICRs Regarding Good Cause Extension of the Time Limit for Requesting an Intermediary Hearing (§ 405.1813)

D. ICRs Regarding CMS Reviewing Official Procedure (§ 405.1834)

E. ICRs Right to Board Hearing; Contents of, and Adding Issues to, Hearing Request (§ 405.1835)

F. ICRs Regarding Good Cause Extension of Time Limit for Requesting a Board Hearing (§ 405.1836)

G. ICRs Regarding Group Appeals (§ 405.1837)

H. ICRs Regarding Amount in Controversy (§ 405.1839)

I. ICRs Regarding Expedited Judicial Review (§ 405.1842)

V. Regulatory Impact Statement

VI. Regulation Text

I. Background

A. Legislative and Regulatory History and Development

Section 1878(a) of the Social Security Act (the Act) allows providers to appeal to the Board final determinations made by a fiscal intermediary under section 1861(v)(1)(A) of the Act (reasonable cost reimbursement), as well as certain determinations by the Secretary involving payment under section 1886(d) (inpatient hospital prospective payment) and section 1886(b) (commonly known as the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) payment system) of the Act. In addition, by regulation, providers are given the right to appeal to the Board or fiscal intermediary certain other determinations. A brief discussion of the original cost reimbursement, TEFRA, and prospective payment systems (PPS), and some of the types of determinations that are appealable, follows.

For cost reporting years beginning before October 1, 1983, all providers were reimbursed for Part A (hospital insurance) covered items and services they furnished to Medicare beneficiaries on the basis of reasonable cost. (Reasonable cost is defined at section 1861(v)(1)(A) of the Act and implementing regulations at 42 CFR, part 413.) In 1982, the Congress determined that the reasonable cost reimbursement system should be modified to provide hospitals with better incentives to render services more efficiently. Accordingly, in TEFRA, Public Law 97-248, the Congress amended the Act by imposing a ceiling on the rate of increase of inpatient operating costs recoverable by a hospital under Medicare.

The Social Security Amendments of 1983, Public Law 98-21, added section 1886(d) to the Act, which, effective with cost reporting periods beginning on or after October 1, 1983, changed the method of payment for inpatient hospital services under Medicare Part A for short-term acute care hospitals. The method of payment for these hospitals was changed from a cost-based

retrospective reimbursement system to a system based on prospectively set rates; that is, a PPS. Under Medicare's inpatient hospital PPS, payment is made at a predetermined specific rate for each hospital discharge (classified according to a list of diagnosis-related groups (DRGs)), excluding certain costs that continue to be reimbursed under the reasonable cost-based system.

Other statutory changes expanded the types of providers that are subject to a PPS. The Balanced Budget Act of 1997 (BBA), Public Law 105-33, established a PPS for home health agencies (HHAs), for rehabilitation hospitals, and for all skilled nursing facilities (SNFs). The Balanced Budget Refinement Act of 1999, Public Law 106-113, provided for the establishment of a PPS for long term care hospitals (LTCHs). Although many types of providers are now paid on a prospectively-determined basis, some types of providers (for example, hospices, psychiatric hospitals, and children's hospitals) continue to be paid on a reasonable cost basis.

Payments to providers are ordinarily made through private organizations, known as fiscal intermediaries, under contracts with the Secretary. (The term “intermediary” includes both fiscal intermediaries and Medicare Administrative Contractors for the purpose of this final rule.) For covered items and services reimbursed on a reasonable cost basis, the intermediary pays a provider during a cost reporting year interim payments that approximate the provider's actual costs. Under a PPS, providers are generally paid for each discharge after each bill is submitted.

Regardless of whether the provider is paid under reasonable cost or under a PPS, the provider files an annual cost report after the cost year is completed. The intermediary then reviews or audits the cost report, determines the aggregate amount of payment due the provider, and makes any necessary adjustments to the provider's total Medicare reimbursement for the cost year. This year-end reconciliation of Medicare payment for the provider's cost reporting period constitutes an intermediary determination, as defined in § 405.1801(a). Under § 405.1801(a)(1), § 405.1801(a)(2), and § 405.1803, the intermediary must render the provider with written notice of the intermediary determination for the cost period in a notice of amount of program reimbursement (NPR). The NPR is an appealable determination.

In addition to the NPR, other determinations made by the intermediary or CMS for hospitals and other providers are appealable to the intermediary or Board (depending on the amount in controversy). These include: A denial of a hospital's request for an adjustment to, or an exemption from, the TEFRA rate of increase ceiling (see § 413.40); a denial of an HHA's or SNF's request for an adjustment to, or an exemption from, the routine cost limits that were in effect prior to a PPS for these providers (see § 413.30); a denial of certain hospice payments (see § 418.311); or a denial of a PPS hospital's request to be classified as a sole community hospital (see § 412.92) or rural referral center. Also, some health care entities (for example, end-stage renal dialysis (ESRD) facilities, rural health clinics (RHCs) and Federally qualified health centers (FQHCs)) are treated as “providers” for purposes of subpart R and have appeal rights before the intermediaries and the Board. Thus, for example, a renal dialysis facility may appeal to the intermediary or the Board a CMS denial of its request for an exception to its composite payment rate (see § 413.194(b)).

If a provider is dissatisfied with some aspect of an appealable intermediary or CMS determination, it may request a hearing before the intermediary or the Board, depending on the amount in controversy. For an amount in controversy that is at least $1,000 but less than $10,000, the provider may request an intermediary hearing before the intermediary hearing officer(s) under § 405.1811. If the amount in controversy is at least $10,000, the provider may request a hearing before the Board under section 1878(a) of the Act and § 405.1835 of the regulations. Alternatively, the provider may request a Board hearing with one or more additional providers under section 1878(b) of the Act and § 405.1837, if the amount in controversy is, in the aggregate, at least $50,000. (This type of appeal is known as a group appeal.) (Note that under section 1878(f)(1) of the Act, any appeal to the Board by providers under common ownership or control must be brought by these providers as a group regarding any matter involving an issue common to these providers. We interpret this provision to apply only where the amount in controversy for the common issue is at least $50,000.) Decisions by the intermediary hearing officer(s) or the Board are subject to further review. Prior to the implementation of this final rule, intermediary hearing officers' decisions have been subject to review by a CMS reviewing official pursuant to section 2917 of the

Provider Reimbursement Manual

(PRM), Part 1. Now, § 405.1834 provides for this review. Also, under this final rule, no provisions remain for judicial review of a final decision of the intermediary hearing officer(s) or CMS reviewing official, as applicable. Board decisions are subject to review by the Administrator or the Deputy Administrator of CMS, under section 1878(f)(1) of the Act and § 405.1875. (The Secretary's review authority under section 1878(f)(1) of the Act has been delegated to the Administrator, and redelegated to the Deputy Administrator, of CMS. For ease of use, throughout this proposed rule, we use the term “Administrator” to refer to either the Administrator or Deputy Administrator, and the term “Administrator review” to review by either official.) A final decision of the Board, or any reversal, affirmance, or modification of a final Board decision by the Administrator, is subject to review by a United States District Court with venue under section 1878(f)(1) of the Act and § 405.1877 of the regulations.

Most of the central provisions of the regulations governing provider reimbursement determinations and appeals are more than 30 years old. On May 27, 1972, we published a final rule (37 FR 10722), which provided for the intermediary determination, NPR, intermediary hearing, and reopening of both intermediary determinations and intermediary hearing decisions. Five months later, the Congress added section 1878 to the Act, which established the Board and provided for review of Board decisions by the Secretary, as well as for judicial review. (See Social Security Amendments of 1972, Pub. L. 92-603, section 243(a), 86 Stat. 1420 (October 30, 1972).) We then, on September 26, 1974, published a final rule (39 FR 34514) that implemented the 1972 amendments to the Act, and revised and redesignated the preexisting rules governing the intermediary determination, NPR, intermediary hearing, and reopening. These regulations were redesignated as Subpart B of Part 405 of Title 42 of the CFR (Subpart R) on September 30, 1977 (42 FR 52826). We have revised these regulations on several occasions, largely in response to various amendments to section 1878 of the Act.

For several reasons, we believe it is necessary and appropriate to revise many of the subpart R regulations governing provider reimbursement determinations and appeals. As noted previously, the principal provisions of the regulations are more than 30 years old. In the intervening period, various issues have arisen regarding provider reimbursement determinations and

appeals. Important parts of the regulations have been the subject of extensive litigation, the results of which indicate a need for reexamination of the rules. Also important is the development of a huge backlog of cases before the Board (which, at the present time, is approximately 6,800 cases). Experience gained through long use of the regulations indicates that revisions to the regulations would lead to a more effective and efficient appeal process. We recognize that the Board's inventory of pending cases is dependent in some ways on factors outside of its control (for example, the number of hearing requests filed). However, we believe that the revisions made in this final rule will help the Board reduce the case backlog (or at least forestall substantial additions to it), and will also reflect changes in the statute, clarify our policy on various issues, and eliminate outdated material. The Board's instructions for providers and intermediaries, as well as the Board's decisions on specific cases brought before it, are available on the CMS Web site, which, as of the date of publication of this final rule, is

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

B. Medicare Modernization Act Requirements for Issuance of Regulations

Section 902 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended section 1871(a) of the Act and requires the Secretary, in consultation with the Director of the Office of Management and Budget, to establish and publish regular timelines for the publication of Medicare final regulations based on the previous publication of a Medicare proposed or interim final regulation. Section 1871(a)(3)(B) of the Act, as amended by section 902 of the MMA, also states that the timelines for these regulations may vary but shall not exceed 3 years after publication of the preceding proposed or interim final regulation, except under exceptional circumstances. Section 1871(a)(3)(B) of the Act further provides that if the Secretary intends to vary such a timeline with respect to the publication of a final regulation, the Secretary shall publish in the

Federal Register

notice of the different timeline by not later than the timeline previously established with respect to such regulation. On June 22, 2007, a notice was published in the

Federal Register

extending by one year (or until June 25, 2008) the timeframe for publishing this final rule (see 72 FR 34425). Therefore, this final rule has been published within the time limit imposed by section 902 of the MMA.

II. Provisions of the Proposed Rule and Public Comments and Responses

On June 25, 2004, we published a proposed rule in the

Federal Register

(69 FR 35716) that set forth proposed regulations seeking to update, clarify, and revise various provisions of the regulations governing provider reimbursement determinations, appeals before the intermediary hearing officers and the Board, and Administrator review of decisions made by the Board. For purposes of the summary of the proposed provisions and for the comments and responses, we are using the same lettering sequence that appeared in the proposed rule. In each lettered section, we provide a description of our proposals and a summary of the changes from the proposed rule that we have made in this final rule. A more extensive description of the proposals is contained in the proposed rule, and a brief summary of the changes appears at section III.

A. Definitions of Entities That Review Intermediary Determinations or Decisions by Such Entities; Definition of Reimbursement (§ 405.1801(a))

We proposed definitions for “intermediary hearing officer”; “CMS reviewing official”; “CMS Reviewing official procedure”; “Administrator review”; and “reviewing entity.” We received no comments on these proposed definitions and we are adopting them without change. We note that we incorrectly stated that we were proposing a definition for “reimbursement.”

B. Calculating Time Periods and Deadlines (§ 405.1801(a) and § 405.1801(d))

We proposed specific provisions to address the timeframes for appealing determinations, including those for determining the beginning and end of a specific appeal period. Generally, we proposed to calculate the beginning period of an appeal as the date a party receives a triggering notice, and the end period for an appeal as the date by which a reviewing entity must receive the party's submission. We proposed a definition for “date of receipt” with respect to the method we would use to determine the date a document or other material is received by: (1) A party or non-party involved in proceedings before a reviewing entity and (2) a reviewing entity. Specifically, we proposed a rebuttable presumption whereby the receipt date of documents sent by a reviewing entity to providers, intermediaries and other entities would be 5 days after the postmark date. For materials submitted to a reviewing entity, we proposed the establishment of a presumption that the receipt date is the date the reviewing entity stamps the document “Received.” We also proposed that, where a reviewing entity could not conduct business due to extraordinary circumstances beyond its control, the designated time period would resume on the next work day the reviewing entity was again able to conduct business. Finally, we proposed that the last day of a designated time period would be excluded if it fell on a Saturday, Sunday, or Federal legal holiday.

We are amending our proposed definition of “Date of Receipt” in § 405.1801(a) to provide that, where a request for an intermediary or Board hearing, a request to add issues to a Board or intermediary hearing, or any other document or material is transmitted to a reviewing entity by a nationally-recognized, next-day courier service (for example, the U.S. Postal Service Express Mail, Federal Express, UPS, or DHL), the “Date of Receipt” is presumed to be the date of delivery noted by the courier, unless it can be shown by clear and convincing evidence that the materials were received on a different date. We are also amending the definition of “Date of Receipt” to provide that, where a nationally-recognized, next-day courier service is not employed to deliver materials to a reviewing entity, the “Date of Receipt” is presumed to be the date stamped “Received” by the reviewing entity, unless it can be shown by clear and convincing evidence that the materials were received by some other date. The reviewing entity's determination of whether the presumption of the correctness of the date of delivery, or the date stamp, is overcome by clear and convincing evidence is final and binding (that is, it is not subject to further administrative or judicial review).

Comment:

One commenter supported our proposal that the timeframe for requesting an intermediary hearing or a Board hearing should run from the date of receipt of the appealable decision. Another commenter agreed that the “5-day presumption” gave an accurate determination of the date of receipt of a document. One commenter suggested that the “5-day presumption” should be used by a reviewing entity when it sends and receives materials.

Three commenters suggested the rule should offer some reassurance that the reviewing entity would, in fact, stamp “Received” on the document on the day of arrival. One of these commenters also suggested using “date of mailing” as a

measure of timeliness. Another commenter stated that date stamps are unverifiable and suggested that the Board should consider an electronic docket system that would allow parties to view the actual dates of receipt of filings and Board actions via the Internet. Another commenter suggested the use of a reliable “intermediary” (for example, the United States Postal Service, because it would provide a single source of date verification) instead of relying solely on the determination of the Board. This commenter suggested that the current “mailbox rule” be retained.

Response:

After reviewing all of the comments received regarding the calculation of the various time periods and deadlines set for appealing final determinations, we have decided to adopt our proposals as final, with the modifications noted below, regarding the receipt of documents by a reviewing entity. We continue to believe that the best and most consistent way to establish a beginning and ending date for purposes of determining the various appeal periods is through the use of “date of receipt.” (We also note that employing a “date of mailing” can present some practical problems, such as unreadable postmark dates.) With respect to the situation in which a party (or interested non-party) to a proceeding receives a document from a reviewing entity or from another party, we have established a 5-day presumption for receipt of that document. The presumption may be rebutted if a preponderance of the evidence establishes that the document was actually received on a later date. The 5-day presumption does not apply in the case where the reviewing entity is on the receiving end of a document from a party (or non-party) to the proceeding. Except as noted below, the receipt date in this instance is the date the reviewing entity date stamps the document as “Received.” We have decided not to include a 5-day presumption for the receipt of documents by reviewing entities because there is a presumption of administrative regularity in agency action. This doctrine presumes that an arm of a Federal agency, such as the Board, will act responsibly, fairly, and legally in its duty to provide an appeals forum for providers of Medicare services. Thus, it is reasonable to presume that the actual receipt date of a document submitted to a reviewing entity is the date the reviewing entity stamps “Received” on the document. Nonetheless, although we believe that materials will be timely and accurately stamped “Received” by the Office of Hearings, we wish to avoid any confusion or possible prejudice to a provider, as well as any protracted disputes as to when a document was received. We also recognize the importance of the timeframes for both requesting a Board or intermediary hearing and for requesting that issues be added prior to a Board or intermediary hearing. Therefore, we are amending our definition of “Date of Receipt” in § 405.1801, to provide that, where a request for hearing or a request to add issues prior to a hearing, or any other document or material is delivered to a reviewing entity by a nationally-recognized next-day courier service, the “Date of Receipt” shall be presumed to be the date of delivery as noted by that courier service, unless it can be shown by clear and convincing evidence that the material was received on a different date. Further, in order to strongly encourage the use of next-day couriers (especially for requests for appeal and for requests to add issues), we are amending the definition of “Date of Receipt” to provide that, where a nationally-recognized next-day courier service is not employed to deliver materials to the reviewing entity, the “Date of Receipt” shall be presumed to be the date stamped “Received” by the reviewing entity, unless it is established by clear and convincing evidence that the materials were actually received on a different date. In order to prevent collateral litigation, the reviewing entity's determination as to whether clear and convincing evidence exists to establish that the materials were received on a date different from the delivery date or the date stamped “Received” is not subject to further administrative or judicial review. (We considered requiring, upon penalty of refusal to accept, that any request for a hearing or request to add issues be delivered by a next-day courier service.)

Finally, we note that, although it is not feasible at this time for the Office of Hearings to administer an electronic docket system, such a system may be implemented in the future.

Comment:

One commenter suggested that the 5-day presumption for receipt of documents from a reviewing entity be five business days instead of five calendar days because of weekends.

Response:

We believe that five calendar days is a sufficient period of time (and we note that mail is picked up and delivered on Saturdays).

Comment:

One commenter stated that reviewing entities should accept filings via facsimile (fax), with originals to follow, and use the date indicated on the fax as the date of receipt.

Response:

The Office of the Attorney Advisor, which assists in the Administrator review process, has allowed parties to submit fax copies. This practice reflects the short timeframes for Administrator review and the small number of appeals that are pending in the office at any one time. In contrast, the Office of Hearings, which assists the Board in its review, has declined to allow fax transmissions of provider requests for Board hearings and other relevant documents. The Office of Hearings' practice reflects the voluminous number of appeals pending in that office and the large number of documents submitted (several of which may be due on the same date), making the acceptance of facsimile transmissions impractical. We are not limiting either the Office of the Attorney Advisor or the Office of Hearings in determining the best office practice for the receipt of documents. Additionally, there may be future technological innovations that will make other modes of submission feasible, which these offices may wish to have the flexibility to adopt. Therefore, we decline to specify in regulations whether the Office of Hearings or Office of Attorney Advisor may or must accept fax transmissions, or hand delivery, or other modes of submission, and, consistent with present practice, will leave it to the discretion of these offices as to the additional types of submission they will accept.

Comment:

One commenter requested that we clarify the types of relevant evidence (for example, a provider date stamp) that would prove that materials sent by a reviewing entity were received by a provider beyond the 5-day presumption period.

Response:

We decline to specify types of evidence that will necessarily establish that a document was received more than five days after the postmark date. Rather, whether a piece of evidence (for example, an affidavit from the party or a date stamp from the party) is persuasive that a document was received more than 5 days after the postmark date would be determined in context with any other relevant evidence in a particular case.

Comment:

One commenter believed that providers should be allowed to request extensions of timeframes for appeal in situations involving employee strikes or extended absence due to illness or maternity leave.

Response:

In section II.E. of this final rule, regarding “Provider Requests for Good Cause Extension of Time Period for Requesting Hearing,” we state the rule that an appeal period may be extended for “good cause” only in cases

where a provider can establish that it could not reasonably have been expected to submit a hearing request within 180 days due to extraordinary circumstances beyond its control.

C. Providers Under Subpart R; Limited Applicability to Non-Provider Entities (§ 405.1801(b))

We proposed to amend § 405.1801(b)(1) to recognize as a provider under Subpart R each entity recognized under the Act for purposes of provider reimbursement determinations and appeals. In accordance with the definition of “provider of services” in section 1861(u) of the Act, we proposed to recognize specifically a hospital, critical access hospital, SNF, comprehensive outpatient rehabilitation facility, HHA, and hospice program. Also, a RHC and a FQHC would be included in accordance with section 1878(j) of the Act, and an ESRD facility would be recognized under section 1881(b)(2)(D) of the Act. Our proposed revision to § 405.1801(b)(1) would also recognize as a provider any other entity treated as a provider under the Act, in order to ensure recognition in subpart R of any other entity that may qualify as a provider under the Act for purposes of provider reimbursement determinations and appeals. We received no comments on this section and are adopting our proposals without change.

D. Provider Hearing Rights (§ 405.1803(d), § 405.1811, and § 405.1835)

Under section 1878(a) of the Act, and § 405.1835 and § 405.1841 of the regulations, a provider may obtain a Board hearing if it meets three jurisdictional requirements: (1) The provider is dissatisfied with its Medicare reimbursement for a cost reporting period; (2) the amount in controversy is at least $10,000 (at least $50,000 for a group appeal); and (3) the provider files a timely request for a hearing to the Board. The same jurisdictional requirements govern provider requests for an intermediary hearing under § 405.1811, except that the amount in controversy requirement is at least $1,000 but less than $10,000. In this section of the proposed rule, we proposed changes regarding the first and third jurisdictional requirements; that is, provider dissatisfaction with Medicare reimbursement and the timeliness of hearing requests. We are making several changes to the proposed rule.

Under § 405.1811(a)(1), and § 405.1835 (a)(1), a provider has a right to an intermediary or Board hearing, as a single provider appeal, for specific items claimed for a cost reporting period covered by an intermediary or Secretary determination, if the provider preserves its right to claim dissatisfaction with the amount of Medicare payment for the specific item(s) at issue. The provider can preserve this right either by claiming the cost on its cost report or, if the provider seeks payment that it believes may not be allowable or may not be in accordance with Medicare policy (for example, if the intermediary lacks discretion to award the reimbursement the provider seeks for the item(s)), by “self-disallowing a specific item(s) by following the applicable procedures for filing a cost report under protest.” We have amended § 405.1811(a)(1) and § 405.1835(a)(1) to be effective for cost reporting periods that end on or after December 31, 2008. This revision will be beneficial to both providers and intermediaries. The delay in the effect of the requirement will benefit providers because they will have additional time to evaluate whether they wish to file a cost report item under protest. This change will also eliminate the transitional administrative burden that intermediaries otherwise would have faced under the proposal, which would have necessitated that providers file requests to amend previously filed cost reports to explicitly file cost report items under protest.

In response to comments, we have clarified § 405.1811(b) and § 405.1835(b) to provide that, where required information is not submitted with the hearing request, the intermediary hearing officer or Board, as applicable, may dismiss with prejudice the appeal, or take any other remedial action that the reviewing entity considers appropriate. We believe that this approach is consistent with the approach we have taken in section § 405.1868 (“Board Actions in Response to Failure to Follow Board Rules”) in which we similarly leave to the Board's discretion whether to dismiss an appeal or take some other, lesser action.

We are amending proposed § 405.1835(c)(3) to address possible misleading and unnecessary language concerning adding an issue to an appeal of a revised NPR. Proposed § 405.1835(c)(3) stated that a request to add an issue to an appeal is timely if “[t]he Board receives the request to add issues no later than 60 days after the expiration of the applicable 180-day period prescribed in paragraph (a)(3) of this section or, for a request to add issue(s) following a reopening conducted in accordance with and within the period specified in § 405.1885(c)(1).” We have deleted the language in § 405.1835(c)(3) pertaining to a request to add issues following a reopening. We note that we did not include such language in the corresponding proposed intermediary hearing officer regulations at § 405.1811(c)(3). Such language is potentially misleading in that it may suggest incorrectly that a notice of reopening is the trigger point for appealing an issue, whereas, in fact, under our longstanding policy (which is reaffirmed in this final rule at § 405.1889), only those matters actually revised and specifically contained in a revised determination following a notice of reopening are appealable. We also believe the language is unnecessary because a revised determination is treated the same under our rules as an original determination for purposes of the time in which to request a hearing or add an issue. Thus, if a revised NPR containing two distinct revisions were issued, and a provider timely appealed one of the revisions (that is, within 180 days after the date of receipt by the provider of the revised NPR), it could add the second revision as an issue within 60 days after the expiration of the 180-day period for appealing the revised NPR.

In § 405.1811(b)(2)(i) and § 405.1835(b)(2)(i), we proposed that a provider would be required to explain its dissatisfaction with the amount of Medicare payment for the specific item(s) at issue by stating why Medicare payment is incorrect for each disputed item. We acknowledge that there may be instances in which a provider may be uncertain as to whether Medicare payment is incorrect because it does not have access to underlying data (for example, data from a State agency). Accordingly, we have revised § 405.1811(b)(2)(i) and § 405.1835(b)(2)(i) to allow a provider to explain why it is unable to determine whether payment is correct as a result of not having access to underlying information.

Further, in response to a commenter's suggestion that providers be required to list their parent corporation at the time of filing a single appeal so as to assist the Board in identifying providers under common ownership, we are adding new § 405.1835(b)(4) to require a provider under common ownership or control to furnish the name and address of its parent corporation and to provide a statement that: (1) To the best of the provider's knowledge, no other provider to which it is related by common ownership or control, has pending a request for a Board hearing pursuant to this section or pursuant to

§ 405.1837(b)(1) on any of the same issues contained in the provider's hearing request for a cost reporting period that falls within the same calendar year as the calendar year covered by the provider's hearing request; or (2) a pending appeal(s) exist(s), and the provider name(s) and provider number(s), and the case number(s) (if assigned), for such appeal(s).

Finally, in preparing this final rule, we have corrected minor wording inconsistencies between § 405.1811, which pertains to intermediary hearings, and § 405.1835, which pertains to Board hearings, where appropriate.

Comment:

One commenter stated that the section on who is entitled to a hearing should be clarified to include those entities that were formerly providers or the successor organizations that retained responsibility for previously filed cost reports following a change of ownership. In recent years, numerous tax-exempt organizations sold hospital operations and the proceeds went to local charitable foundations. Frequently, those organizations retained responsibility for filed cost reports, and the rules should be clarified to grant hearing rights to those organizations regarding those cost reports.

Response:

We made no specific proposal concerning the hearing rights of former providers or successor organizations following a change in ownership. However, we appreciate the concerns raised by the commenter and, therefore, we may seek to address this issue in a future rulemaking or through other instructions.

1. Provider Dissatisfaction With Medicare Reimbursement; Revised Self-Disallowance Policy

We proposed that, in order to preserve its appeal rights, a provider must either claim an item on its cost report where it is seeking reimbursement that it believes to be in accordance with Medicare policy, or self-disallow the item where it is seeking reimbursement that it believes may not be in accordance with Medicare policy (for example, where the intermediary does not have the discretion to award the reimbursement sought by the provider). In order to self-disallow an item, the provider would be required to follow the applicable procedures, which are contained currently in section 115 of the PRM, Part II (CMS Pub. 15-2), for filing a cost report under protest. We stated that we believed our proposal was appropriate under the Supreme Court's decision in

Bethesda Hospital Association

v.

Bowen

, 485 U.S. 399 (1988). We further stated that we believed that our proposed policy was a reasonable response to statements by the

Bethesda

providers and others that it was necessary, for any reimbursement request in excess of the amount allowed under program policy, to raise the entire payment request before the Board, because it would be improper to include a cost report claim for more payment than is permitted by Medicare policy. We noted that it has been our longstanding policy that a cost report claim at variance with Medicare policy is not improper, provided that the claim is not intended to procure an intermediary determination (or reviewing entity decision) by fraud or similar fault. We are adopting our proposal, effective with cost reporting periods ending on or after December 31, 2008.

Comment:

One commenter recommended that the text of section 115

et seq.

of the PRM, Part II, be placed in the regulations. The commenter noted that these sections of the PRM have not changed since 1980. Another commenter stated that the protested amount line on the cost report is available for situations where a provider is not in agreement with Medicare policy and that CMS should be holding that out as the way to assert differences of opinion with Medicare policy.

Response:

We are adopting the proposal, which is essentially a codification of the protested amount line procedures set forth in section 115

et seq.

of the PRM, Part II. We are modifying the proposal so that the requirement, that a provider self-disallow an item by following the applicable procedures for filing a cost report under protest, is effective for cost reporting periods ending on or after December 31, 2008.

Comment:

One commenter stated that the final rule should require that, when a provider self-disallows an item in accordance with the proposed policy, the provider should specifically identify the regulation or other authority the provider is challenging as invalid, and that the appeal should be limited to that challenge. The commenter stated that some providers have been misusing the protested line amount procedure. Specifically, the commenter said that it was aware of instances in which a provider listed a claim related to bad debts in the protested line amount. According to the commenter, the provider was not challenging any policy related to bad debts, but rather lacked the documentation for its bad debts claim and was using the protested amount procedure as a way of avoiding a possible reopening denial based on Program Memorandum A-01-141 (December 14, 2001). According to the commenter, this program memorandum gives intermediaries discretion to deny a reopening request where a provider was culpable in not adequately documenting its claim and where the claim was reported not under protest, but rather was made in the cost report proper.

Response:

Although we encourage providers to identify the specific manual provision, CMS Ruling, regulation, or statutory section that they believe prevents them from receiving payment for the self-disallowed item, we are not requiring through these regulations that they do so. We are attempting to strike a balance between, on the one hand, having providers present enough information so as to put the intermediaries on notice as to actual or potential reimbursement disputes, and, on the other hand, not making it unduly burdensome for providers to file cost reports. For the same reason, we are encouraging, but not requiring, providers to identify in the hearing request the specific authority they believe prevents them from receiving reimbursement for a self-disallowed item. We note, however, that where the authority allegedly preventing reimbursement for the self-disallowed item is a CMS Ruling, regulation or statute, the provider may wish to seek expedited judicial review (EJR) early in the appeals process, in accordance with the procedures under § 405.1842, or the Board may wish to explore granting EJR on its own motion. If the provider does seek EJR or the Board initiates own motion consideration of EJR, the provider would need to identify at that time the specific authority that it believes prevents it from receiving reimbursement for the self-disallowed item. We caution that the fact that we are not requiring by regulation that providers identify in the hearing request the specific authority at issue should not be seen as preventing the Board from issuing instructions that would require providers to do so. Under section 1878(e) of the Act, the Board has the authority to issue instructions governing hearings before it, provided that those instructions are not inconsistent with the statute or regulations of the Secretary.

Finally, although some providers may be using the protested line amount procedures inappropriately, as alleged by the commenter, we do not believe that mischaracterizing a documentation issue (or some other issue) as a self-disallowance prevents an intermediary from denying a reopening request. Program Memorandum A-01-141

Chapter 8, section 60.1 of CMS Pub. 100-06, states that intermediaries should inform providers that, as a general rule, they will not honor reopening requests for audit adjustments based on lack of documentation, but it also does not require intermediaries to allow all requests for reopening audit adjustments that are not based on (or are not characterized by the provider as based on) lack of documentation. Moreover, under the self-disallowance policy contained in this rule, providers should not self-disallow items for which they do not have a good faith belief that the items may not be allowable under Medicare payment policy. Under § 405.1835, in order to preserve its appeal rights, a provider must either include a claim for the specific item on its cost report, or, where it has a good faith belief that the item may not be allowable under Medicare policy, list the item on the cost report. Therefore, if a provider were to simply list an item as a self-disallowed item, when the provider is aware that the issue is one of documentation and not policy, the provider would run the risk that the appeal of that item would be dismissed.

Comment:

Several commenters asserted that the proposal that the provider identify an item as a “protested amount” was inconsistent with the Supreme Court's decision in

Bethesda

. For example, two commenters, using identical language, stated that the Supreme Court concluded that providers could claim “dissatisfaction,” within the meaning of the statute, without incorporating their challenge in the cost reports filed with their fiscal intermediaries, and that our proposal directly contradicted the Supreme Court's conclusion by mandating that a provider had to claim dissatisfaction by incorporating a challenge into the cost report through either declaring the item as a cost or declaring it as a protested item. One commenter said that the Supreme Court concluded in

Bethesda

that no statute or regulation expressly mandated that a challenge to the validity of a regulation be submitted first to the intermediary, and that it would be futile to submit challenges based on regulations, statutes or CMS's formal policies to the intermediary before seeking Board review; therefore, the proposed policy was in direct violation of clear statutory authority. Another commenter said that rather than reflecting the reasoning and findings of

Bethesda

, the proposed policy appeared to have adopted the narrowing of

Bethesda

in

Little Company of Mary Hospital and Health Centers

v.

Shalala

, 24 F.3d 984 (7th Cir. 1994). According to this commenter, the

Little Company of Mary Hospital

case narrowed the

Bethesda

decision by providing that in order for a provider to be able to self-disallow a cost, there must be a statute, regulation or CMS ruling that makes reimbursement of an item unallowable. This commenter stated that the

Little Company of Mary Hospital

case was the decision of a single circuit and therefore conflicts with the more general proposition of the Supreme Court in

Bethesda

.

Response:

It has been our longstanding view that providers that fail to claim on their cost reports costs that are allowable under the Medicare law and regulations cannot meet the “dissatisfaction” requirement. See, for example,

Little Co. of Mary Hosp. & Health Care Ctrs.

v.

Shalala

, 165 F.3d 1162 (7th Cir. 1999). This proposed change would simply codify in our regulations our longstanding interpretation of “dissatisfaction.”

We continue to believe that our proposed policy that a provider must either include a claim for reimbursement of a cost on its cost report or self-disallow the cost in order for the Board to obtain jurisdiction over an appeal pertaining to that cost is consistent with the Supreme Court's decision in

Bethesda

. We believe the commenters that specifically mentioned

Bethesda

have misunderstood the import of

Bethesda

on our proposal. In

Bethesda

, providers that submitted their cost reports to their intermediary complied with the Secretary's regulation by self-disallowing malpractice insurance costs in excess of the regulation. The providers then filed a request for a hearing before the Board to contest the regulation, and the Board dismissed for lack of jurisdiction. Ultimately, the Supreme Court rejected the Secretary's position that section 1878(a)(1)(A)(i) of the Act, which requires that a provider be dissatisfied with a final determination of its fiscal intermediary, “necessarily incorporates an exhaustion requirement.” The Court found that this “strained interpretation” of a statutory exhaustion requirement was inconsistent with the express language of the statute. (

Bethesda

, 485 U.S. at 404.) The Court agreed that, under section 1878(a)(1)(A)(i) of the Act, a provider's dissatisfaction with the amount of its total reimbursement is a condition of the Board's jurisdiction, but held that “it is clear, however, that the submission of a cost report in full compliance with the unambiguous dictates of the Secretary's rules and regulations does not, by itself, bar the provider from claiming dissatisfaction with the amount of reimbursement allowed by those regulations. No statute

or regulation

expressly mandates that a challenge to the validity of a regulation be submitted first to the fiscal intermediary. * * * Thus, [the providers in this case] stand on different ground

than do providers who bypass a clearly prescribed exhaustion requirement or who fail to request from the intermediary reimbursement for all costs to which they are entitled under applicable rules. While such defaults might well establish that a provider was satisfied with the amounts requested in its cost report

and awarded by the fiscal intermediary, those circumstances are not presented here.” (

Bethesda

, 485 U.S. at 404-05 (emphasis added).) In sum, although the Supreme Court in

Bethesda

held that the Secretary may not rely on section 1878(a)(1)(A)(i) as explicitly requiring providers to present challenges to a regulation to their intermediaries as a condition to the Board's jurisdiction, the Court specifically recognized that the Secretary could impose an exhaustion requirement by regulation, and that a provider who fails to claim all costs to which it is entitled may fail to meet the jurisdictional prerequisite of dissatisfaction. We note that we are not requiring providers to claim costs or items that they believe may not be in accordance with Medicare payment policy—rather, we are merely requiring that the provider list such items on the cost report by following the protested line amount procedures.

In

Bethesda

, the providers listed on their cost reports the costs at issue, but deliberately did not claim them. As noted by the Ninth Circuit in

Adams House Health Care

v.

Bowen

, 862 F.2d 1371, 1375 n.3 (9th Cir. 1988), the question was left open by

Bethesda

as to whether the Board is deprived of jurisdiction to hear an appeal concerning a cost that was omitted entirely from the cost report. We interpret section 1878(a)(1) of the Act to mean that a provider is not “dissatisfied” with a final determination of the intermediary or the Secretary regarding any matter that is omitted from the cost report, and that, as a result, the Board does not have jurisdiction to hear an appeal regarding the matter. Although the Supreme Court in

Bethesda

indicated that if a provider were to bypass a “clearly prescribed exhaustion requirement” it “might well” be precluded from raising the issue before the Board, we believe our proposal to be even less than an exhaustion requirement. We believe it to

be more akin to simply a presentment requirement.

We do not believe that the

Little Company of Mary Hospital

decision is inconsistent with the Supreme Court's decision in

Bethesda

. As the Seventh Circuit in

Little Company of Mary Hospital

noted,

Bethesda

“says only that a provider can challenge a

rule

before the Board even after ‘admitting’ that the rule is applicable when submitting its expenses to the intermediary,” and that

Bethesda

“strongly suggests that a hospital that does not ask its intermediary to reimburse it for all the costs for which it is entitled cannot, on appeal to the Board, first ask for new costs.” (24 F.3d at 992-93, emphasis in the original.) Thus,

Little Co. of Mary

was not a narrowing of

Bethesda

, as one commenter asserted. Rather, it was an application of

Bethesda

to the facts before it, facts that mirrored the language quoted above from

Bethesda

.

We recognize that the First Circuit's majority opinion reached a contrary result in

Maine General Medical Center

v.

Shalala

, 205 F.3d 493 (1st Cir. 2000). Because

Maine General

relied on a pre-

Bethesda

decision that analyzed Board jurisdiction under 42 U.S.C. 1395oo(d), and not 42 U.S.C. 1395oo(a), as required by

Bethesda

, and because it failed to recognize the implications of the

Bethesda

dicta, we believe that

Maine General

was incorrectly decided.

Although no commenters raised the argument that the “dissatisfaction” requirement applies only to the total amount of program reimbursement reflected in the NPR, and that “dissatisfaction” therefore does not need to be expressed with respect to each issue challenged on appeal, we note that a provider successfully made this argument in

Loma Linda University Medical Center

v.

Leavitt

, 492 F.3d 1065 (9th Cir. 2007). We respectfully submit that the Ninth Circuit erred in its analysis. Although there may be nothing in the statute indicating that dissatisfaction must be expressed with respect to “each claim”, there also is nothing in the statute indicating that the Secretary cannot interpret the dissatisfaction requirement in this manner. The statute thus is ambiguous on this point, and the Ninth Circuit should have accorded deference to the Secretary's interpretation, particularly in light of the Secretary's expertise in how the Medicare provider reimbursement process works.

Specifically, an intermediary makes distinct reimbursement determinations for each expense item and then sums these distinct determinations. The “final determination,” which here is the NPR, thus is not simply one total amount. Rather, it is comprised of many individual calculations representing the various items for which the provider seeks payment. A provider rarely, if ever, would challenge before the Board its payment for every discrete item that goes into the total reimbursement figure. Instead, a provider challenges discrete elements of the total amount, only some of which may be reviewed by the Board. Dissatisfaction with total reimbursement thus is based on dissatisfaction with items that result in total reimbursement, and it is completely reasonable to interpret 42 U.S.C. 1395oo(a) to require dissatisfaction to be shown with respect to each issue being appealed.

Moreover,

Bethesda

involved the question of whether the Board had jurisdiction over one particular issue, not whether it had jurisdiction over an entire NPR.

Bethesda

thus implicitly assumes that jurisdiction must be obtained on an issue-specific basis. Furthermore, the facts of

Little Co. of Mary

make clear that, in that case, the provider was dissatisfied with other issues in its NPR. Yet this dissatisfaction with the overall total amount of program reimbursement did not affect the court's decision in that case.

We also note that the Secretary's interpretation of the statutory language at 42 U.S.C. 1395oo(a) is consistent with court decisions related to reopenings. In those cases, the courts refrained from similar attempts to exaggerate the significance of the statutory phrase at 42 U.S.C. 1395oo(a) “total program reimbursement due the provider.”

Your Home Visiting Nurse Servs.

v.

Shalala

, 525 U.S. 449, 453 (1999) (Board lacks jurisdiction over intermediary's “refusal to reopen * * * [which] is not a ‘final determination * * * as to the amount,’ but rather a refusal to make a new determination”). In

HCA Health Services of Oklahoma

v.

Shalala

, 27 F.3d 614 (D.C. Cir. 1994), the court noted that “when an intermediary revisits only certain specified

determinations

contained in the original NPR * * * [p]art of the final determination is obviously contained in that portion of the original NPR which was never revisited, while the remaining elements are clearly to be found in the reopening decision.” 27 F.3d at 617 (emphasis added). The court thus recognized that the “final determination” is really comprised of many individual determinations.

Finally, an issue-specific requirement of “dissatisfaction” has a sound policy basis. If providers were able to claim items for the first time during a Board appeal simply because they had expressed dissatisfaction with respect to other cost items, the Board would be required to assume responsibilities that are more appropriately borne by fiscal intermediaries rather than by a “review” board. Such a system also would provide an end-run around the deadline for filing an accurate cost report, as providers could file “placeholder” appeals with respect to items claimed on their cost reports with the knowledge that they could always make additional claims later.

In any event, even if the Board has jurisdiction under the statute to hear an appeal concerning an item that was omitted entirely from the cost report, whether the cost is one that may be allowable or the item involves a challenge to a binding regulation, manual instruction or CMS Ruling, this jurisdiction is not mandatory. In

Maine General Medical Center

v.

Shalala

, 205 F.3d 493 (1st Cir. 2000), the majority held that the statute did not deprive the Board of jurisdiction to hear a claim involving a cost omitted from a cost report, but it adopted the Secretary's position that even if the Board had jurisdiction “it would be entirely permissible for the Board to conclude, as a matter of policy, not to hear [the] claim.” (

Maine General

, 205 F.3d at 501.) The court continued: “All we hold is that Congress did not, in the statute, require the Board to reach this result by stripping it of jurisdiction. This outcome preserves some flexibility for the agency, which may be exactly what Congress intended. It is not our job to exercise that flexibility for the agency.” (

Id.

) See also

Loma Linda

, 492 F.3d at 1072-73 (holding that Board jurisdiction is discretionary).

Sections 1102(a) and 1871(a) of the Act authorize the Secretary to issue regulations for the efficient administration of the Medicare program. Irrespective of whether the Board has jurisdiction under the statute to hear an appeal concerning an item that was omitted entirely from the cost report (and we do not agree with the

Maine General

or

Loma Linda

cases on this point), the requirement that providers either claim an item on their cost reports or, where the item involves a challenge to a binding regulation, manual instruction or CMS Ruling, list the disputed item in accordance with the longstanding instructions contained in section 115 of the PRM, Part II, fits comfortably within our statutory authority to issue regulations to administer the Medicare program and is a reasonable exercise of that authority. Providers are already required, for program integrity reasons, to list “protested items;” that is, items for

which they believe they are entitled to receive payment, but for which they believe that their intermediaries would disallow, on the basis that reimbursement for such items is contrary to regulation or policy interpretation. Under section 115 of the PRM, Part II, providers that do not wish to risk running afoul of the cost report certification process, by including an item on their cost reports that is contrary to Medicare regulations or payment policy, are allowed to include these items on the “protested amount” line on their cost reports. We believe it is reasonable to require providers to notify their intermediaries, via their cost report submission, of all items for which they potentially may be claiming reimbursement. Such a requirement allows the Medicare program to estimate better its potential liabilities and to issue changes or clarifications to its policies, and allows intermediaries to estimate better their workload and audit priorities. Also, if we were to adopt a policy that providers have to list on their cost reports only those items that they believe are in accord with Medicare payment policy, the Board would be required to continue adjudicating disputes as to whether an omitted cost is or is not in accord with Medicare payment policy (because if the omitted cost were in accord with Medicare payment policy, the provider would not have the right to a hearing).

Comment:

One commenter stated that it disagreed with the proposed policy that would require providers to identify self-disallowed issues as protested items. Providers have to trust the information with which they are provided when preparing cost reports and follow the directions that have been issued. The individuals who prepare cost reports may not have the background, time, or ability to evaluate or question whether the data provided by government sources or the instructions that have been issued should be challenged. This provision may put undue pressure on individuals who prepare cost reports, and could increase administrative costs as providers seek professional help to identify issues of which the providers may not be aware. According to the commenter, it can take a considerable amount of research and investigation into issues to discover that errors exist in the underlying government data used to prepare the cost report. Once this discovery is made, it seems appropriate that the error be corrected and adjustments made. Providers should not be held responsible for discovering errors made by government bodies.

Another commenter stated that it is impractical to expect providers to file under protest every potential item on their cost reports that may be disallowed under the applicable regulations or manual provisions. Providers are faced with overwhelming numbers of regulatory and policy manual issuances covering a complex array of constantly changing Medicare billing and documentation requirements. According to the commenter, there is no basis in law or equity for CMS's attempt to cut off providers' appeal rights because the providers may not recognize the invalidity of a particular intermediary's interpretation of CMS's regulations and policies at the time they file their cost reports.

Response:

We do not believe that there should be any significant difficulty for providers in identifying items for which they believe they should receive payment in derogation of Medicare payment policy. Upon deciding that it does, in fact, wish to challenge Medicare payment policy with respect to one or more item(s) the provider has self-disallowed, the provider should include the item(s) in its request for a hearing, or add the issue later, in accordance with the procedures for adding issues under § 405.1835(c). The Medicare program expects provider personnel, whether on the provider's staff or outside professionals, to have the background, time, and ability to complete and understand the cost reporting requirements.

Comment:

One commenter stated that the statute does not require that providers indicate in the cost report that they will be dissatisfied with a final determination, and that CMS is placing form over substance in this regard. This commenter said that, although increasing efficiency within the appeal system is a worthwhile goal, any efficiency gain does not justify providers' loss of their rights to appeal meritorious claims by virtue of inadvertence to procedural requirements that are not obvious.

Response:

We do not agree that our requirement amounts to a procedural requirement that is not obvious to providers. The statute at 42 U.S.C. 1395oo(a) requires that a provider express dissatisfaction with a determination of the intermediary or the Secretary. Arguably, therefore, a provider could not be dissatisfied with a determination that does not explicitly or implicitly address an item, because the item is neither claimed nor even listed on the cost report. Moreover, many providers are already availing themselves of the protested line amount procedures contained in section 115 of the PRM, Part II. In any event, in addition to the legal notice that providers are receiving through this final rule, we anticipate that providers will informally be alerted to the provisions of this rule, including the self-disallowance policy, through hospital associations and other provider organizations, law firms, trade publications and others.

Comment:

Several commenters stated that by requiring providers to follow the procedures in the PRM for filing a cost report under protest, more administrative work will be created for the hospitals and the intermediaries because the item or cost has to be manually claimed and the impact manually calculated. The commenters further stated that the intermediaries must manually review each protested cost or item and decide to remove or allow, and that the intermediaries' failure to do so would automatically reimburse providers for the cost or item.

Response:

We believe that our self-disallowance policy will not create a significant amount of work for most providers and intermediaries, for several reasons. First, many providers are already using the protested line amount procedures contained in section 115 of the PRM, Part II. Also, the commenters are incorrect that the item or cost has to be manually “claimed” on the cost report.

We do not believe that providing an estimate of the self-disallowed item will prove burdensome to providers. Moreover, if the provider believes that listing the item on the cost report is worthwhile, the provider may have already engaged in an estimate of sorts, and in any event, if the provider does decide to appeal the item, it should estimate the reimbursement effect of the item at that time. Finally, intermediaries are not required to review each protested cost or item to decide to remove or allow that cost or item. Whereas, at one time, items appearing on the protested amount line were “above the line” (that is, they appeared before, and made up part of, the total claim for reimbursement), that is no longer the case. On the current cost report, the protested amount appears “below the line” and is not included in the provider's total claim for reimbursement.

2. Audits of Self-Disallowed Items

We proposed that, where a provider is successful in obtaining reimbursement for a self-disallowed item, the intermediary must audit the item to determine the proper reimbursement effect.

Comment:

Three commenters believed that our proposal was unnecessary. One commenter stated that it does not have an objection in principle with the proposal that an intermediary must audit self-disallowed items after a decision awarding them to the provider, and said that its experience has been that in every instance in which providers have successfully challenged a CMS policy, payment has been audited or reviewed for accuracy under the agreement of the parties to the dispute. The second commenter believed that the proposal was unnecessary because CMS already has the right to, and routinely does, instruct its intermediaries to perform additional auditing steps before issuing an NPR as a result of a final agency determination. The third commenter stated that the Board would expect that self-disallowed items would be unaudited.

Response:

The final decision awarding reimbursement for a self-disallowed item may come from the Board, the Administrator, or a court. Although we believe that, in most instances, the administrative or judicial body that issues a decision would not specify a dollar figure for reimbursement, the proposal was intended to ensure that intermediaries, in fact, have the opportunity to determine the correct amount of reimbursement after an award is made. We believe that it would be inappropriate for the administrative or judicial body to award a specific amount for reimbursement without the benefit of an audit by the intermediary. Of course, the intermediary could audit the self-disallowed item prior to an award, but this would mean that the intermediary would be spending resources to determine an amount for an item that, under Medicare policy, would not be awarded.

Comment:

Three commenters said that the regulations should place a limit on the time an intermediary has to conduct the audit of the awarded self-disallowed item. One commenter stated that the regulations should set forth a reasonable time limit to audit and calculate payment, and that 60 days certainly should be sufficient. The second commenter stated that, whereas the need for an accurate determination of the amount of reimbursement is important, the proposal threatens to prolong indefinitely the closure of the appeal, because no limit is placed on the time the intermediary would have to complete the audit. The third commenter stated that any audit subsequent to a decision to pay a self-disallowed item should occur within a limited period of time.

Response:

We agree that in all cases intermediaries should complete the audit of an awarded self-disallowed item in a reasonable amount of time. We decline to impose a specific time limit on intermediaries for auditing self-disallowed items, however, because what is reasonable in a given case will depend in part on the scope and complexity of the audit and the provider's cooperation, as well as the intermediary's other program priorities.

Comment:

Two commenters disagreed with the proposal to permit intermediaries to audit self-disallowed costs that are ultimately awarded during the appeals process. In the first commenter's view, the proposal offends the judicial principle of finality and gives the Medicare program “two bites at the apple.” According to the commenter, the intermediary has enough time between the time that a provider appeals a self-disallowed cost and a Board hearing for an intermediary to audit or otherwise evaluate or question the amount of the claim. The other commenter stated that the proposal to require intermediaries to audit eventual awards of self-disallowed costs could result in an entirely new disallowance and appeal based on new grounds. A provider could be forced to litigate the same items multiple times, which would be inconsistent with the due process rights of the provider. Any audit subsequent to a decision to pay a self-disallowed item should be restricted to a determination of the payment amount, and should not open new grounds for disallowance.

Response:

We disagree that the proposal is counter to the principle of finality, or that it would give the Medicare program “two bites at the apple.” The purpose of the proposal was not to allow the intermediary to relitigate the question of whether the provider is entitled to reimbursement for the self-disallowed item, but rather to ensure that the intermediary has the opportunity to determine the reimbursement effect of the final decision awarding that self-disallowed item. We believe the language in § 405.1803(d)(3), that CMS may require the intermediary to “audit” a self-disallowed item, sufficiently conveys that, under this provision, the intermediary is restricted to determining the amount of program reimbursement, and not whether the item should be allowed. Although the intermediary could audit the self-disallowed item prior to an award, the intermediary would be spending resources to determine the correct amount for an item that may not, and, at least from the perspective of the program, should not be awarded.

Comment:

One commenter stated that one way to minimize the problem of unaudited self-disallowed costs would be to allow the provider and the intermediary to enter into a stipulation regarding whether the self-disallowed costs have been audited. Another commenter stated that a more practical procedure would be for the parties to stipulate the amount in controversy, with an audit by the intermediary, if necessary, at the outset of the appeal, rather than after a possibly lengthy process.

Response:

We believe that a stipulation that the amount at issue for a self-disallowed cost that has not been audited may be helpful, but would not be an adequate substitution for our proposal, which would prohibit the award of a specific amount of reimbursement in the absence of an audit. Where the intermediary knows the amount of potential reimbursement during the pendency of an appeal, either because it has audited the issue or otherwise has the necessary information, the intermediary can stipulate to the amount at issue. Intermediaries are in the best position to know their workload priorities and to decide on allocation of their resources. We are not preventing intermediaries from determining the amount at issue prior to a decision awarding the reimbursement at issue; rather, the purpose of the proposal was to prevent intermediaries from being forced to audit the amount of reimbursement prior to a decision favorable to the provider.

Comment:

One commenter stated that the regulations should make clear that any dispute with regard to an audit or calculations would remain in the jurisdiction of the entity that rendered the last merits decision.

Response:

We decline to require that the entity that awarded the reimbursement for the self-disallowed item maintain continuing jurisdiction in case there is a dispute concerning the audit. We would have no authority to require a court, once having remanded the case for an audit by the intermediary, to retain continuing jurisdiction over the case. The Board or the Administrator may not see the need to maintain continuing jurisdiction over the case, once having ruled for the provider on the self-disallowed item. To the extent that the provider disagrees with the calculation of the audited item, the provider may bring a new appeal to the intermediary or to the Board, if the

provider meets the amount in controversy requirements.

3. Determining Timeliness of Hearing Requests (§ 405.1811 and § 405.1835)

We proposed to revise our regulations to provide that the 180-day period for requesting a Board or intermediary hearing begins on the date of receipt by the provider of the intermediary determination or, where applicable, the expiration date of the 12-month period for issuance of a timely NPR by the intermediary. We received one comment on this issue, which pertained more closely to our proposed definition for “date of receipt” and to our proposal for a presumption that documents from a reviewing entity are received within 5 days of their mailing, unless a preponderance of the evidence establishes that they were received later than the 5-day period. Accordingly, we have addressed this commenter's concerns in section II.B. of this final rule.

4. Contents of Hearing Request

In order to facilitate an early focus by the parties and the reviewing entity on the jurisdictional requirements for a hearing before the Board or intermediary, we proposed that the original hearing request include a demonstration (through argument and supporting documentation) that the provider satisfies the jurisdictional requirements for the hearing request. We also proposed that, in order to facilitate the reviewing entity's ability to determine compliance with our proposed self-disallowance rules, the hearing request must contain a description of the nature and amount of each self-disallowed item and the reimbursement sought for each item. Finally, we proposed clarifying the current requirement that a hearing request include supporting documentary evidence. We stated that we were aware of various cases in which the need to determine Board jurisdiction over a specific matter at issue had been hampered by the absence of the NPR(s) relevant to the appeal, or by confusion about whether the NPR at issue was the initial NPR or a revised NPR issued after reopening (see § 405.1885 and § 405.1889). Because the Board would not be able to make appropriate findings of fact and conclusions of law about its jurisdiction without this information, proposed § 405.1811(b)(3) and § 405.1835(b)(3) would require the hearing request to include each intermediary determination at issue in the appeal.

Comment:

One commenter stated that the proposed rule would place an unreasonable burden on providers to look into the future and defend against unknown jurisdictional challenges that may arise. This commenter proposed that, if jurisdictional documentation must be submitted with the original hearing request, the intermediary should be required to read it and determine within a reasonable period of 60 to 90 days if any jurisdictional issues exist. Arbitrary jurisdictional challenges by intermediaries have increased dramatically in recent years, created additional demands on Board resources, and have caused substantial delays in cases moving through the administrative process. Once the Board has taken jurisdiction over an issue, that decision should have some finality. According to the commenter, if CMS's intent is to reduce the backlog, an administrative process that is fair to both the provider and the intermediary should be established.

Response:

We disagree that requiring a brief demonstration in writing that the request for hearing meets the jurisdictional requirements constitutes an unreasonable burden on providers. The party seeking relief before an administrative or judicial tribunal has the burden of demonstrating that the tribunal has jurisdiction over its claim or appeal. In most cases, the jurisdictional question will be straightforward and the provider will either be able to demonstrate easily that the intermediary hearing officer(s) or the Board has jurisdiction, or, at the least the provider will be able to anticipate arguments concerning jurisdictional deficiencies. With respect to the commenter's assertion that some intermediaries make arbitrary jurisdictional challenges, we believe that claims presented by providers, as well as defenses raised by intermediaries, should be made in good faith. If an intermediary has raised a defense, jurisdictional or otherwise, that does not have a reasonable basis in law or fact, or has not raised a reasonable jurisdictional defense in a timely manner, the intermediary's conduct should be reported to the Board, and if the Board believes it to be appropriate, the Board can refer the matter to CMS for possible action. This is not to say that, where an intermediary has raised a jurisdictional defense that is similar to one that it or another intermediary has raised unsuccessfully before, the intermediary would be precluded from raising the jurisdictional defense if it was otherwise reasonable. (However, in that situation, the intermediary should note its jurisdictional objections to the Board in a way so as not to delay the resolution of the appeal and, if necessary and appropriate, renew its jurisdictional objections in a request for Administrator review of the Board's final determination on the merits.) Similarly, we do not believe that an intermediary should purposely delay making jurisdictional defenses, but, again, the burden is on the provider to demonstrate jurisdiction, and we decline to either impose a specific time period for an intermediary to raise jurisdictional defenses or to provide that, having once determined that jurisdiction exists, the Board is precluded from revisiting the issue. Additional facts that are developed during the course of proceeding before the Board may cause the intermediary to challenge, and the Board to deny, jurisdiction. In civil litigation, jurisdictional defects can generally be raised at any time, even on appeal. Although a court may be obliged to dismiss a case for lack of jurisdiction even where the jurisdictional objection is made at a late stage in the proceedings, it reserves the authority to sanction a party if the party has unreasonably delayed in making the objection. If the Board believes that an intermediary has unreasonably delayed in making a jurisdictional objection, it may refer the matter to CMS for possible action.

Comment:

One commenter stated that an issue included in a hearing request may at times be reopened by the intermediary with a partial revision being made. Such a revised determination by the intermediary should not preclude the provider from continuing to appeal the balance of the issue on the basis that it fails to meet the amount in controversy requirement. The Board should preclude any jurisdictional challenge in this situation. There is no need for jurisdictional review in these circumstances.

Response:

If a provider satisfies the amount in controversy requirement at the time it files its appeal, a subsequent revision or partial revision to an issue or issues that causes the remaining controversy to go below $10,000 (or $50,000 in the case of a group appeal) will not deprive the Board of jurisdiction to hear the appeal. We have added new paragraph (c)(4) to § 405.1839 to clarify this point.

Comment:

One commenter stated that the proposed requirements for documenting a provider's position in the original hearing request creates an unreasonable burden due to the time and effort to prepare the documentation. As a result, this requirement would effectively reduce the 180-day filing period, in violation of the statute.

Response:

We do not believe that the proposed requirements for documenting a hearing request are onerous. As we stated in the proposed rule (69 FR 35723) requiring providers to include certain information in their hearing requests facilitates an early focus by the parties and the Board that the jurisdictional requirements for a hearing are met.

Comment:

One commenter said that the cost of developing documentation could be unnecessary for those issues that are likely to be resolved through the administrative resolution process. Because the resolution process typically results in a provider accepting less than full reimbursement for a disputed issue, if providers are forced to incur the costs of developing documentation, the costs of going forward with a hearing may be justified. As a result, more cases may go to hearing and fewer cases may be settled and withdrawn.

Response:

We do not believe that the proposed requirements for documenting a hearing request are onerous. Moreover, we do not believe that a provider would be able to reach an administrative resolution with an intermediary on an issue without developing at least as much documentation as would be needed for a hearing request on that issue.

Comment:

One commenter recommended that the final rule add a provision requiring that providers include intermediary documentation on the disallowances appealed, and that the intermediaries in turn be required to provide supporting documentation to providers. Without intermediary supporting documentation, providers cannot, in the hearing request, articulate their position and submit documentation in support of their position. Currently, many intermediaries justify disallowances by citing only general regulatory provisions and do not state why the provider did not meet the cited provisions or what auditing standards were applied. Medicare and Government Accountability Office rules require that the intermediary document reasons for disallowances and undergo supervisory review. The commenter stated that if intermediary disallowances were properly documented, challenges could be narrowed and the case backlog could be reduced.

Response:

In § 405.1835(b)(3), we are requiring providers to submit to the Board a copy of the intermediary or CMS determination under appeal. Further, providers must submit any other documentary evidence that they consider necessary to meet the requirements for obtaining a Board hearing. We agree that intermediaries should provide at least a brief explanation for the adjustment, so as to put the provider on notice as to the reason for the adjustment. However, in light of the huge number of adjustments that intermediaries make, and in view of the fact that many of these adjustments are not (and would not be, regardless of the degree of explanation) appealed, we are not requiring intermediaries to provide extensive and detailed explanations of their adjustments prior to the filing of a hearing request.

We also note that the existing requirements in § 405.1803 dictate that the intermediary include appropriate references to law, regulations, CMS Rulings and program instructions to explain why its determination of the amount of program reimbursement due to the provider differs from the amount claimed by the provider. In addition, we note that the current audit instructions for intermediaries contain similar requirements. (See CMS Pub. 100-06, Chapter 8, General Audit Guidelines, 170, Exhibit VI.) (Further, we believe that the intermediary review and adjustment process is outside the scope of this rulemaking.) Where a provider disagrees with, or has questions concerning, an intermediary's adjustment, the provider may contact the intermediary for further clarification. We note that the 180-day period for requesting a hearing should allow the parties sufficient time to exchange information concerning the basis for the claim and the adjustment and the parties' respective positions concerning the adjustment. If the provider does not receive a satisfactory response from the intermediary concerning the adjustment, the provider may appeal the adjustment. The provider should note in its request for a hearing the basis for the provider's disagreement, or, where the provider believes that it does not have enough information to articulate as full an explanation for its disagreement as it would prefer, the provider may state that, though it believes that it is entitled to a reversal of the adjustment, the provider nevertheless lacks enough information to determine at that point the full basis for its disagreement with the intermediary. In all cases, through pre-hearing conference and other communications, or through formal discovery if need be, the provider and the intermediary should be able to arrive at an understanding of the basis for the provider's claim and the intermediary's adjustment. Ultimately, if the provider does not present a full basis for its claim, it will be difficult to prevail on its appeal, and if the intermediary does not fully support its disallowance, it will be difficult for the intermediary to defend its adjustment.

Comment:

One commenter stated that it did not believe that requiring providers to submit more documentation earlier in the process would have much of an impact on relieving caseload. This commenter believes that a more effective proposal might be to charge the intermediary interest, from the time the provider submits its final position paper until the time the case is resolved, on the amount that is eventually paid to the provider.

Response:

We do not have the authority to charge interest against the intermediary, as the commenter suggests. The payment of interest is a waiver of sovereign immunity, which can be effected only through legislation enacted by the Congress.

Comment:

One commenter stated that the proposal to require providers to demonstrate in the hearing request that they meet the requirements for a Board hearing and to include a description of the nature and amount of each self-disallowed item and the reimbursement sought for each cost was outside CMS's statutory authority. According to the commenter, the Congress established the Board as an independent tribunal within the Department of Health and Human Services, not subject to CMS's direct oversight or control, permitting CMS only to review a final decision of the Board after it is issued. Under the Medicare statute, only the Board, and not CMS, has full power to make rules and establish procedures, not inconsistent with the provisions of the statute or the regulations of the Secretary, which are necessary or appropriate. This commenter also objected to the proposed requirement, that, where the provider is appealing from a revised NPR, the provider must include the pertinent reopening notice and the initial NPR so that an appropriate determination can be made as to whether a specific matter at issue is within the scope of the revised NPR. CMS's position that providers can appeal only issues that were actually adjusted in revised NPRs is contrary to the doctrine in

Edgewater Hospital

v.

Bowen

, 857 F.2d 1123 (7th Cir. 1989). The commenter stated that the proposed new requirements for hearing requests would create significant new hurdles for providers and make it much more difficult for providers to meet appeal deadlines.

Response:

We disagree that we do not have authority under the Medicare statute to govern procedures for hearings before the Board. As the

commenter notes, section 1878(e) of the Act provides that the Board's operating rules are subject to regulations issued by the Secretary, such as this final rule. With respect to the commenter's point that our proposal that providers may appeal issues only that were actually adjusted in revised NPRs is contrary to the court's decision in

Edgewater Hospital

v.

Bowen

, we continue to believe that our proposal is well-founded. We respond at length in section II.V. of this final rule (Reopening Procedures) to the assertion that, based on

Edgewater

, we should allow an appeal of a revised NPR to include an appeal of matters that were addressed in a notice of reopening but not actually revised.

Comment:

One commenter stated that clarification was necessary because providers were adding issues to an appeal of a revised NPR that were not within the scope of a revised NPR.

Response:

We agree that one benefit of requiring providers to document their position in their request for a hearing is alerting the Board as to whether the appeal concerns an issue that was or was not within the scope of a revised NPR.

Comment:

Two commenters found confusing the statement in the proposed rule (69 FR at 35723-24) that a hearing request would no longer be required to include documents necessary to support the provider's position on a specific reimbursement matter, because the reviewing entity is required to make a preliminary finding of its jurisdiction before it considers the merits of a particular issue. One of the commenters stated that, in order to determine the merits and preliminary findings of its jurisdiction, the intermediary (for purposes of an intermediary hearing officer proceeding) needs the necessary documents to support the merits of the provider's position. The commenter recommended that all supporting documentation, and not just documentation in support of jurisdiction, be required to be supplied with the hearing request. According to the commenter, documentary evidence should be required in order to facilitate a review and possible resolution of the issues. A reopening request must be accompanied by all supporting documentation, and the same rule should apply with respect to hearing requests.

Response:

We note that, because the intermediary hearing officer (or the Board in a Board appeal) must make a preliminary determination of its jurisdiction (that is, whether the request for hearing was timely and whether the amount in controversy requirement was met) prior to addressing the merits, the provider would not need initially to file documents that pertain only to the merits of the appeal. If, however, the provider believes that there is documentation that is necessary to support a preliminary determination of jurisdiction and that documentation is intertwined with the merits of the appeal, the provider must, under § 405.1835(b)(3), submit that documentation with its hearing request. Likewise, if the intermediary hearing officer or the Board believes that additional documentation is necessary to examine jurisdiction, the reviewing entity may request additional documentation from the provider. We have amended § 405.1840(a)(2) to clarify that, by “preliminary determination of jurisdiction,” we mean a determination of whether the request for hearing was timely (either received within 180 days after the date of receipt by the provider of the intermediary or Secretary determination, or the period for receipt was extended under § 405.1836), and whether the amount in controversy requirement was met.

Comment:

One commenter questioned whether the Board would have the ability to dismiss an appeal if required information is not submitted with the hearing request. Similarly, another commenter stated that the rule should specify whether an imperfect but timely request would be dismissed or whether there would be an opportunity for the provider to correct the defect.

Response:

Proposed § 405.1811(b) and § 405.1835(b) stated that a request for an intermediary or Board hearing “must” be submitted in writing and “must” include certain prescribed items. Although one could fairly conclude that a hearing request that would meet the requirements of proposed § 405.1811(b) or § 405.1835(b) would be a prerequisite to obtaining a hearing, the proposed rule did not state whether a provider that submits a non-conforming request would have the opportunity to cure the request, and if so, whether the provider could have more than one opportunity to cure the request before its appeal would be dismissed. We have clarified § 405.1811(b) and § 405.1835(b) to state that the intermediary or Board may dismiss with prejudice an appeal that does not comply with the requirements of § 405.1811(b) or § 405.1835(b), or take other action as it deems appropriate. We believe that this approach is consistent with the approach we have taken in section § 405.1868 (“Board Actions in Response to Failure to Follow Board Rules”) in which we similarly leave to the Board's discretion whether to dismiss an appeal or take some other, lesser action.

Comment:

Two commenters stated that they were concerned that the “detailed” information required for the content of the initial hearing request would unduly burden small, rural, and less sophisticated providers that would not have the ability to file appeals without the assistance of outside expertise. In addition, the proposed contents requirements would remove the Board's flexibility to accept appeals.

Response:

We do not believe that the proposed requirement is unduly burdensome, even for “small, rural and less sophisticated providers.” As adopted, our proposal requires only that the provider demonstrate that it has met the various requirements for obtaining a hearing. As we stated in the proposed rule (69 FR 35723), the hearing request would no longer need to include documents necessary to support the merits of the provider's appeal.

Comment:

One commenter stated that it was concerned with proposed requirements that the provider document and provide argument that its appeal is strictly and demonstrably within the jurisdiction of the appeals panel. Likewise, according to the commenter, the proposed requirements for documentation regarding self-disallowance issues seem to unfairly shift the burden entirely onto the provider, without offering detailed and specific criteria for what is and is not acceptable documentation and standards of argument.

Response:

The purpose of proposed § 405.1835(b) was to provide the Board with the information necessary to make a preliminary determination (timeliness and amount in controversy) as to whether it had jurisdiction over the provider's appeal, as well as providing the intermediary with the information necessary to determine whether it would file a jurisdictional challenge with the Board. A provider would not be required to argue its case in detail at this point in the process. Rather, as the moving party, the provider would be required only to demonstrate that it is dissatisfied with an intermediary or Secretary determination and that it has filed its request for a hearing timely and that the amount in controversy is at least $10,000.

5. Adding Issues to Original Hearing Request (§ 405.1811(c) and (§ 405.1835(c))

In the proposed rule, we believed it was necessary to amend the regulations addressing the provider's ability to add issues to its original hearing request. Currently, a provider is effectively

allowed to wait for new issues to appear and add issues anytime before the hearing begins. It is our view that, because providers may add issues to a request at any time prior to a hearing, the ability of the Board to conduct hearings and decide cases expeditiously has been seriously compromised. At the time of the publication of the June 25, 2004 proposed rule, there were approximately 10,000 cases at the Board that had yet to be resolved. We believed the availability of such an extended period for adding issues had become a major obstacle to the Board's efforts to reduce its backlog.

The ability of providers to add issues at any time to a hearing request not only has led to larger and more complex cases, but has also meant that the Board's ability to schedule and hold hearings efficiently has been significantly impaired through the practice of some providers of adding issues shortly before the scheduled hearing date. Some providers apparently wish to keep a hearing request open as long as possible in the hope or anticipation of a favorable court case on some reimbursement issue that they can then add to their hearing requests. Therefore, we proposed that, rather than having an open-ended period for adding issues, it would be appropriate and prudent to allow providers a 60-day period for adding issues, commencing with the expiration of the applicable 180-day period for filing the original hearing request. In essence, this additional 60-day period would afford providers an adequate opportunity to appeal all the issues that may have been overlooked in the original hearing request. We examined section 1878(d) of the Act, which gives the Board the power not only to affirm, modify, or reverse the intermediary's determination, but also to make any other revisions on matters covered by the cost report, regardless of whether these matters were considered by the intermediary in its determination. We interpreted this statutory provision to address only the Board's powers over a jurisdictionally proper appeal under section 1878(a) of the Act; therefore, section 1878(d) does not prevent us from limiting the period a provider has to add issues. We believe our proposal to allow a 60-day period for adding issues is an appropriate exercise of the Secretary's general rulemaking authority under sections 1102 and 1871 of the Act.

Comment:

Three commenters supported our proposal. One commenter noted that requiring all issues to be identified within our proposed timeframe would add huge efficiencies to the process. All three commenters stated that providers are afforded ample time to decide which items they wish to appeal during the 180-day appeal period.

Several commenters opposed our proposed change. Some commenters suggested that the proposed rule restricts provider appeal rights, denies access to appeal, and is contrary to the statute. One commenter suggested that the 60-day period is far too brief to allow providers to add issues to appeals, and that CMS has provided no additional information as to how it determines 60 days to be an appropriate period. A few commenters suggested that the Supreme Court's decision in

Bethesda Hospital Association

v.

Bowen

, 485 U.S. 399 (1988), is informative on this issue. Commenters opined that

Bethesda

made clear that, once jurisdiction for a cost reporting year was established, the only requirement was “that the matter must have been covered by such cost report.”

Response:

After careful consideration of the comments received in this final rule, we are adopting our proposal to include a 60-day period for a provider to add issues beyond the 180-day period permitted for filing a hearing request. For the efficient administration of the appeals process, we believe our policy of having the appeal resolved as early as possible, while at the same time giving the parties to the hearing ample opportunity to present their cases, is appropriate. Following a given cost reporting year, providers have five months to file a cost report. (See § 413.24(f)(2).) After a cost report is filed, the intermediary typically takes about a year to issue a final determination on an unaudited cost report. We believe it is quite reasonable to expect that from the time it takes to file a cost report to a 240-day period after a final determination has been issued, covering a span of approximately two years or more, a provider should have sufficient opportunity to identify the issues it wishes to appeal for that cost year. The Board will then be able to set a hearing date with full knowledge that the hearing will not be further delayed by the inclusion of last minute issues.

We disagree with those commenters that asserted that there is a statutory right to add issues at any time prior to a hearing. The Medicare statute does not address a timeframe for adding issues to an appeal. The only statutory provision related to the timing of an appeal is found at section 1878(a)(3) of the Act. There, a provider is entitled to request a hearing before the Board if it files a request within 180 days after notice of the final determination. We believe it is reasonable to read this statutory provision in conjunction with section 1878(d) of the Act to mean that a provider must include in its notice of appeal all the issues it wants to appeal, especially given that section 1878(a)(3) of the Act allows a generous 180-day period to request a hearing. Although we continue to believe that providers should not be allowed to delay interminably the hearings process by adding issues at the last minute before a scheduled hearing date, we believe our approach of providing an additional 60 days beyond the timeframe for requesting a hearing to add issues that may have been overlooked strikes an equitable balance that will serve the interests of the parties to the hearing and the Board.

Section 1878(d) of the Act, the provision upon which some commenters relied as granting a right to providers to add issues at any time, in fact affords no such right. Section 1878(d) of the Act states in relevant part that: “The Board shall have the power to affirm, modify, or reverse a final determination of the fiscal intermediary * * * and to make any other revisions on matters covered by such cost report * * * even though such matters were not considered by the intermediary in making such final determination.” We interpret section 1878(d) of the Act as permitting the Board to make revisions to cost report items that directly flow from the determination with which the provider has expressed dissatisfaction and from which the provider has filed a jurisdictionally proper appeal under section 1878(a) of the Act. See

Little Co. of Mary Hosp. and Health Care Ctrs.

v.

Shalala

, 828 F.Supp. 570, 576 (N.D. Ill. 1993), aff'd 24 F.3d 984 (7th Cir. 1994). However, section 1878(d) of the Act does not pertain to the timing for the inclusion of issues, contrary to the commenters' view.

For similar reasons, we disagree with the commenter that suggested that the Supreme Court's decision in

Bethesda

controls in this situation. As discussed more fully in section II.C. of this final rule, the

Bethesda

decision involved a challenge to the Board's decision that it did not have jurisdiction to consider a cost that was not claimed on the provider's cost report, and did not in any way deal with the question of the timeliness of adding issues to a hearing request. We believe that

Maine General Medical Center

v.

Shalala

, 205 F.3d 493 (1st Cir. 2000), also discussed in section II.C. of this final rule, is more relevant. In

Maine General

, the court held that the statute did not deprive the Board of jurisdiction to hear a claim involving a

cost omitted from a cost report (a conclusion with which we strongly disagree), but it agreed that “it would be entirely permissible for the Board to conclude, as a matter of policy, not to hear [such a] claim.” (

Maine General

, at 501.) The court continued: “All we hold is that Congress did not, in the statute, require the Board to reach this result by stripping it of jurisdiction. This outcome preserves some flexibility for the agency, which may be exactly what Congress intended. It is not our job to exercise that flexibility for the agency.” (

Id.

) Similarly, whereas we agree that the statute does not have to be interpreted as preventing the Board from hearing an appeal of an issue that was added subsequent to the submission of the request for hearing, we believe that we retain the authority to prescribe explicitly by regulation the Board's authority to hear issues that were not contained in the request for hearing.

Comment:

Several commenters suggested that a deadline for adding issues should be directly related to the imminence of the Board hearing. For example, the deadline should be set with the filing of position papers or tied to a reasonable period prior to the scheduled hearing date, such as 60 or 90 days.

Response:

We considered, but ultimately declined to adopt, the approach of requiring that issues be added no later than a set period (for example, 60 or 90 days) prior to the scheduled hearing date. We rejected this approach as potentially unworkable because adding an issue (or multiple issues) even months prior to a scheduled hearing could delay the hearing and interfere with the Board's ability to schedule hearings in a predictable manner.

Comment:

One commenter stated that the time in which an issue may be added is solely within the Board's purview. Another commenter suggested that the ability to add issues could be waived by agreement of both the provider and the intermediary.

Response:

We disagree with the commenter that suggested that the time for which an issue may be added is (or should be) solely within the Board's purview. Section 1878(e) of the Act gives the Board full power and authority to prescribe rules, to the extent not inconsistent with the regulations of the Secretary. Here, we believe that it is appropriate to regulate the time period for adding issues, rather than allowing the Board to prescribe by rule or determine on a case-by-case basis the time in which to add an issue. The Secretary, not only the Board, has an interest in ensuring that the appeals process is conducted in an efficient manner. The Secretary also has an interest in gauging at any particular time the Medicare program's potential liabilities due to administrative and judicial appeals, which is made much more difficult if issues may be added at any time, or at some point in time later than the period we proposed. We also believe that, if the Board had the authority to prescribe or to extend, on a case-by-case basis, the time for adding an issue, it could be besieged by requests and objections thereto by the parties. Because we disagree that the Board should have the discretion to prescribe or extend the time for adding an issue, it follows that we also disagree with the commenter that suggested that the timeframe for adding issues could be waived if both the provider and the intermediary agreed to do so. Any process in which the parties could waive the time period for adding issues, without the consent of the Board, is inherently undesirable, as it would have the potential to interfere with the Board's ability to effectively manage its caseload.

Comment:

Two commenters suggested that CMS has not furnished any evidence of a cause and effect relationship between the large backlog of cases before the Board and the addition of issues to pending appeals. Another commenter suggested that a comprehensive analysis of the reasons for the large case backlog should be undertaken. Other commenters suggested that our proposal was unnecessary because steps already taken by CMS have significantly reduced the backlog at the Board.

Response:

We do not believe that we are required to quantify a cause and effect relationship between the backlog of cases and the addition of issues to a pending appeal, nor is it incumbent upon us to undergo a comprehensive analysis of the reasons for the large backlog at the Board. We believe the Secretary, under sections 1102(a) and 1871(a) of the Act, has the statutory authority to issue regulations for the efficient administration of the Medicare program. The Board's experience with the adding of issues and the resulting increase in the complexity of cases and the delays in cases because of the need to reschedule hearings has convinced us that the proposal is necessary. We also disagree that the proposal is unnecessary because of other measures that have been taken. At the present time there are approximately 6,800 cases pending before the Board. Irrespective of other measures that may have reduced the backlog, the present number of pending cases is still unacceptable, and can be reduced, or at least better controlled, with this deadline to add issues.

Comment:

One commenter suggested that providers should have the right to add to pending appeals an issue arising from a change or clarification in the law. Because intermediaries are prohibited from conducting a reopening based on a change in the law, adding an issue to the appeal is the only available means by which a provider may vindicate its legal rights. Another commenter suggested that a provider should be given a full year after it receives the NPR to evaluate potential issues, and noted that a 1-year timeframe is considerably less than the 3-year timeframe in which an NPR can be reopened. Another commenter suggested that, just as CMS seeks to limit a provider from adding issues beyond 60 days from the expiration of the 180-day appeal period, CMS should also limit an intermediary's right to reopen and revise an NPR beyond 60 days from the issuance of the NPR.

Response:

We disagree that because intermediaries are prohibited from conducting a reopening based on a change in law, adding an issue to the appeal is the only means by which a provider may vindicate its legal rights. A provider may vindicate its legal rights by bringing a timely appeal from an NPR and identifying in its request for hearing all issues it wishes to appeal, or by adding any issue within 60 days after the 180-day period for requesting a hearing. As noted above, a provider thus has approximately 2 years after filing its cost report to identify all issues it wishes to bring to the Board.

We disagree with the commenter that suggested that the timeframe for adding issues should be at least a year after it receives the NPR. We also disagree with the commenter that suggested that, if the time to add issues is limited, an intermediary's ability to reopen a previous determination should be similarly limited. As explained above, we believe 240 days after receipt of an NPR is a reasonable time to identify all issues the provider wants to appeal. We also note that the time period for requesting a reopening does not need to correlate to the time period for appealing an issue because the reopening and appeals procedures are separate and distinct. Unlike the effect of allowing an inordinate amount of time to add an issue, the time period for requesting a reopening does not directly impact upon the Board's ability to effectively manage its caseload. Also, the appeals process is mandated by statute, and is designed to give

providers the right to contest matters before the Board (assuming that the timely filing, amount in controversy and other requirements are satisfied). In contrast, the reopening process is a creature of the regulations, allowing an intermediary, through the exercise of its discretion (or upon direction from CMS), to reopen and potentially revise matters covered by a cost report for which, in most cases, the time for appealing the matters at issue has expired. Thus, although there is a lengthy period to request a reopening, there is no right to a reopening.

Comment:

A few commenters also requested a technical clarification concerning the end of the proposed timeframe for adding issues; that is, whether the end of the period is 60 days from the date the provider files an appeal, or 60 days from the end of the 180-day period during which the provider may file an appeal.

Response:

We proposed that providers could add issues to their hearing requests no later than 60 days beyond the expiration of the 180-day filing period for requesting a Board hearing (or intermediary hearing, as applicable). After careful consideration of all comments received, we continue to believe this policy is fair and strikes an equitable balance for the parties to the hearing and the Board.

Comment:

Several commenters suggested that by limiting the timeframe for adding issues, providers would be forced to appeal everything and then weed out issues later, as appropriate, causing even further delays in settling hearings.

Response:

We expect that providers will not file frivolous claims. Also, as we stated above, we believe that our proposal provides ample time for providers to identify all issues they wish to appeal. Moreover, the final rule also requires a provider to submit to the Board with its hearing request an explanation for each specific item at issue with the reasons that the provider believes Medicare payment is incorrect, and how and why Medicare payment must be determined differently. This latter requirement should effectively deter any provider from disputing every item on the cost report simply to protect itself on appeal.

Comment:

One commenter noted that a provider might not have the necessary information from the intermediary to meet the proposed deadline for adding issues. For example, it can take several months for providers to obtain the intermediary's audit work papers needed to determine the merits of a new issue. Two commenters suggested that CMS could provide the Board with the authority to extend the deadline for adding issues when it deems an extension to be appropriate.

Response:

We would expect that an intermediary will promptly provide its work papers to a provider upon request. If, however, the intermediary has not timely provided documentation to support an adjustment, and the provider is dissatisfied with the determination, the provider must add the issue to its hearing request prior to the 60-day deadline in order to preserve its appeal rights. If, upon receipt of the work papers, the provider is satisfied that the adjustment is correct, the provider should withdraw that issue from the appeal. For the reasons stated above, we are not providing the Board with the authority to extend the deadline for adding issues.

Comment:

One commenter suggested that the current policy of adding issues until the hearing is held should continue because providers would have no other reliable recourse to correct errors found in the cost report. This commenter stated that intermediaries were abusing their discretion by refusing to reopen and revise cost reports for clear and obvious errors within 3 years of the issuance of the NPR.

Response:

We disagree with the suggestion that providers should be able to add issues until the commencement of the hearing because intermediaries have allegedly abused their discretion in refusing to reopen and revise cost reports. Providers are responsible for identifying all issues that they wish to appeal. Under our proposal, which we are finalizing, providers have ample time to identify all issues they wish to bring before the Board. As stated in an earlier response, the appeals process is different from the reopening process. If intermediaries are allegedly improperly refusing to reopen cost reports, the remedy does not lie with an adjustment to the appeals process. CMS would have to investigate the allegations, determine if the allegations are in fact supportable, and if so, take appropriate action against the intermediary.

E. Provider Requests for Good Cause Extension of Time Period for Requesting Hearing (§ 405.1813 and § 405.1836)

Under current rules, a provider may request an intermediary hearing officer or the Board to extend “for good cause shown” the 180-day period for requesting a hearing. The request must be filed within 3 years of the date of the original NPR. In the proposed rule, we cited a split among the Federal circuit courts of appeals on the basic authority of the Board to extend the 180-day period. In response to the case law and the case backlog at the Board, we proposed retaining this policy, with certain modifications. We believed that, in many instances, the current 3-year period for requesting an extension was unreasonably lengthy and could result in an increase in the Board's backlog of cases. As a result, we proposed allowing providers a shorter period in which to file for a hearing beyond the normal 180 days, and only in limited specialized circumstances. Thus, the appeals period could be extended “for good cause” only in cases where a provider could establish that it could not reasonably have been expected to submit a hearing request within the 180-day period due to extraordinary circumstances beyond its control. Also, the request could be made only if it was submitted within a reasonable time after the expiration of the 180-day period, and in no event would a request be honored if it was made more than 3 years after the date of the NPR or other determination that the provider wished to appeal. This 3-year outside limit for requesting extension represents the same timeframe that existed in the previous regulations at § 405.1841(b).

We also proposed that the Board or other reviewing entity would be prohibited from granting a “good cause” extension request if the provider attempted to rely on a change in the law, regulations, CMS Rulings, CMS instructions, or other Federal legal provisions as the basis for the extension request. In addition, we proposed that a decision by the Board or other reviewing entity to grant or deny an extension would be reviewable by CMS but would not be subject to judicial review.

We are adopting our proposals. We have made a technical change to proposed § 405.1813(e)(1) concerning the component within CMS to which intermediary hearing officer decisions should be sent. As the CMS Office of Hearings neither currently receives nor reviews such decisions, we changed this provision to indicate only that an intermediary hearing officer decision should be sent to CMS (currently, the decisions are received by the Center for Medicare Management, a component within CMS).

As § 405.1813 and § 405.1836 are virtually identical in their treatment of good cause extension requests for intermediary and Board hearings respectively, we have made minor, non-substantive wording changes to make these sections consistent, wherever possible.

Comment:

Several commenters were concerned about the proposed lack of

judicial review of a decision by the Board to grant or deny an extension request. One of these commenters asserted that, because the Board would be prohibited from granting an extension request due to a change in the law or regulations, our proposal constituted a “pre-emptive strike” at precluding judicial review of an issue that challenged a provision of the law or the regulations. Another commenter suggested that a decision by the Board denying a requested extension constituted a final determination and should therefore be subject to judicial review in the same manner that a Board's decision finding that a provider lacked jurisdiction constituted an appealable final determination.

Response:

After a careful review of all of the comments received regarding provider requests for extension, we have decided to finalize our policy as proposed. Our longstanding policy has permitted extensions of the timeframe for requesting hearings only in limited circumstances, and that concept has been carried forward in the final rule. Thus, we have retained a procedure whereby a provider will have the opportunity to request an extension for filing an appeal with the Board, even after the 180-day statutory period for requesting appeal has expired. Moreover, even though we will require that the extension request be made within a reasonable time in all cases, we are retaining the current outside limit of 3 years after the date of the intermediary determination or other determination that the provider wishes to appeal.

With regard to the lack of judicial review following a decision by the Board to grant or deny an extension request, we believe that the Supreme Court's decision in

Your Home Visiting Nurse Services, Inc.

v.

Shalala

, 525 U.S. 449 (1999), is informative. In that decision, the Supreme Court ruled that an intermediary's declination to reopen upon request a determination was not subject to further review, either administratively or by a court. It is important to note that Medicare rules also prohibit an intermediary from reopening a determination at a provider's request when there is a change in the law or regulations. Just as the reopening of intermediary determinations are governed solely by regulations, so too are decisions made by the Board as to whether an extension request should be granted or denied. Therefore, under sections 1102(a) and 1871(a) of the Act, which give the Secretary authority to issue regulations for the efficient administration of the Medicare program, we believe we are authorized to provide for discretionary grants and denials of requests to extend the time for requesting a hearing, and to further provide that these discretionary actions are not reviewable by the courts.

We disagree with the commenter that suggested that, because the Board would not be permitted to grant an extension request on the basis that a change in the law or regulations occurred, judicial review of a challenge to a law or regulation would be precluded. Providers are responsible for identifying, at the time of their hearing request or within 60 days following the expiration of the 180-day appeal period, all issues they want to appeal. We also disagree with the commenter that suggested that a decision by the Board denying an extension request should be treated as a final determination, similar to a final appealable determination by the Board finding that the Board lacked jurisdiction. There is an important distinction between these two types of Board decisions. In the first instance, when the Board denies an extension request that alleged good cause, the provider has acknowledged that it failed to meet the statutory 180-day timeframe for requesting an appeal. Therefore, the provider has lost any statutory right to appeal in this situation. In contrast, in a case where the Board issues a decision that it lacks jurisdiction, and dismisses the appeal, the provider does not necessarily concede that it has failed to file a timely appeal or that the Board lacks jurisdiction for some other reason. Therefore, where a provider does not agree that the Board lacked jurisdiction pursuant to the statute, it is entitled to bring an appeal to the Administrator and, if applicable, to Federal district court in order to resolve the issue.

Comment:

One commenter suggested that CMS failed to provide sufficient reasons for the removal of the 3-year timeframe, replacing it with an ambiguous “reasonable time” standard. The commenter believed the 3-year period should be retained and, in the event that it is not retained, suggested that the Board be given discretion to determine whether an extension request was made within a reasonable timeframe. The commenter also suggested that there is nothing in the proposed rule that supports prohibiting the reliance on a change in the law or regulations as a reason for finding that “good cause” exists. Another commenter questioned the phrase “reasonable time” and wanted to know how “reasonable time” could be viewed as equaling “no more than three years after the date of the intermediary determination.”

Response:

As noted in the proposed rule, we considered eliminating altogether good cause extensions of the 180-day period for requesting a hearing. We proposed retaining good cause extensions to allow providers to submit hearing requests beyond the 180-day limit only in extraordinary circumstances beyond their control (for example, fire, catastrophe or strike) that existed prior to the expiration of the 180-day appeal period. We believe it is fair and appropriate that, absent extraordinary circumstances, providers should be expected to file their appeals within the 180-day period. Specifically, providers that are dissatisfied with a final determination should file a timely appeal, rather than depend on a right to file late if there is a favorable change in the law at some point after the 180-day appeal period.

We also believe that setting a reasonable time, not to exceed 3 years, for filing a late appeal is appropriate. Again, given that the circumstances giving rise to the claim of good cause for a late filing must exist prior to the expiration of the 180-day appeal period, the purpose of the reasonable time requirement is to allow the provider a sufficient time to recover from the unseen event and gather the necessary records, and make the necessary preparations for filing an appeal. The purpose is not to allow the provider to file a late appeal based on a favorable change in law or other circumstances that could arise after the expiration of the 180-day period. We decline to set a definite period, and instead believe that what constitutes a reasonable time for filing an appeal beyond the timely filing limit should be left to the Board's discretion (subject to the outside limit of 3 years) based on the particular facts before it. Moreover, because a provider must file a claim under protest to preserve its right to appeal a claim when the provider seeks reimbursement for an amount that may not be allowable under the controlling law, regulations, or policy, we do not consider a subsequent change in the law, regulations, or policy as falling within the “good cause” exception.

Comment:

Three commenters suggested that CMS has too much involvement in the Board's decision-making process. One of the commenters suggested that the Administrator's ability to review the Board's decision to grant or deny a good cause extension request was an example of CMS's intention to gain total oversight over the Board. Another commenter believed that CMS was attempting to usurp the Board's discretion in determining whether there was good cause to grant an extension. The commenter suggested that only the Board is authorized to

establish the procedures and limitations governing its own independent review of provider appeals. The other commenter suggested that CMS should provide for extensions in circumstances where either CMS employees or appeals personnel contributed to the delays in filing a timely appeal (for example, unreasonable delays in responding to written inquiries).

Response:

We disagree with the suggestion that we are overly involved in the Board's decision-making process. Again, we rely upon sections 1102(a) and 1871(a) of the Act, which grant the Secretary the necessary authority to issue regulations for the efficient administration of the Medicare program. It is our view that the parties to a Board hearing may avail themselves of Administrator review following a decision rendered by the Board. That particular policy has never varied throughout the existence of the Board. The Board is independent of CMS and, as an independent body, issues decisions outside of the realm of CMS influence. Section 1878(f)(1) of the Act authorizes the Secretary (delegated to the Administrator of CMS) to reverse, affirm, or modify a decision made by the Board. A decision rendered by the Board to grant or deny a provider a good cause extension request is merely another example of the myriad decisions handed down by the Board that are subject to review by the Administrator.

A provider is required to establish “good cause” before the Board can allow an extension of the 180-day time limit for filing a hearing request. We have not defined all the “extraordinary circumstances” that the provider can rely upon to satisfy a “good cause” extension. Therefore, the Board has the discretion to weigh the factual scenarios presented by a provider and make its decision accordingly.

Finally, in the scenario where a provider believes that CMS or Board personnel are not responding in a timely fashion to written inquiries, in our view, the Board should not grant an extension request for “good cause.” Instead, the provider would be expected to protect its rights by filing a timely appeal within the 180-day period prescribed by the Act.

F. Intermediary Hearing Officer Jurisdiction (§ 405.1814)

In the proposed rule, we sought to clarify the scope of an intermediary hearing officer's jurisdiction; that is, appeals that have amounts in controversy of between $1,000 and $9,999.

In proposed § 405.1814(a)(1)(ii) (and § 405.1840(a)(2), for Board cases), we required the intermediary hearing officer (and the Board) to make a preliminary determination of the scope of its jurisdiction and notify the parties of its jurisdictional findings, before conducting certain proceedings. For clarity, we have amended these sections by way of a parenthetical to explain that the intermediary hearing officer's (or Board's) preliminary determination of the scope of its jurisdiction consists of a review as to whether the request for hearing was timely and whether the amount in controversy has been met. Also, we removed language from these sections that required the intermediary hearing officer (or Board) to “notify” the parties of such preliminary determination. The latter revision was made primarily because, as most Board cases are settled prior to hearing, it would be costly and inefficient for the Board to notify the parties of preliminary jurisdictional findings. Requiring such notification would unnecessarily slow the ultimate resolution of cases.

For clarity, we also made minor technical changes to other portions of § 405.1814, and conformed language in § 405.1814 to that in § 405.1840 (concerning the Board's jurisdiction), wherever possible.

Comment:

One commenter suggested that if an appeal were initially filed as a request for an intermediary hearing, but it was subsequently determined that the amount at issue in the appeal had exceeded $10,000, the regulations should provide that the appeal must be transferred to the Board.

Response:

We agree with the commenter. Our policy is that, when an intermediary hearing officer has initially accepted jurisdiction because the amount in controversy is between $1,000 and $9,999, any change increasing the amount in controversy to at least $10,000 (for example, a more accurate estimate of the amount in controversy or the adding of an issue) will produce a change in forum; that is, the Board will accept jurisdiction. However, where the Board initially accepts jurisdiction after determining that a case has at least $10,000 in controversy, and that amount is subsequently reduced to a figure below $10,000 because one or more of the issues has been settled or withdrawn, it is our policy that, notwithstanding the amount in controversy falling to a level below $10,000, the Board will continue to have jurisdiction and, as a result, may hold a hearing and issue a decision. (We have a similar policy regarding the situation in which a group appeal initially satisfies the $50,000 jurisdictional threshold and subsequently falls below that threshold.) We have added paragraph (c)(4) to § 405.1839 to clarify the effect of a change in the amount in controversy.

G. CMS Reviewing Official Procedure (§ 405.1834)

In the proposed rule, we sought to codify the procedures currently located in section 2917 of the PRM for the CMS review of intermediary hearings. The proposed rule stated that the provider, by submitting a proper request, would be entitled to review of the intermediary hearing officer(s) decision, and also proposed that the Administrator would have discretionary, “own motion” review authority. In proposed § 405.1834(d)(2), we stated that the Administrator, through the CMS reviewing official, may exercise his or her discretionary authority to review an intermediary hearing officer decision by accepting review within 60 days after receipt of the decision by CMS's Office of Hearings. We received one comment on this proposal, which is discussed below.

We are making the following changes. First, we have revised the regulation text at § 405.1834(d)(2) to provide that the 60-day period for noticing own motion review begins from the date of the intermediary hearing officer decision. In § 405.1834(e)(2), we are clarifying the proposal that the CMS reviewing official's review of an intermediary hearing officer decision would not be limited to a hearing on the written record if certain criteria are met, including that the CMS reviewing official determines that holding the hearing is preferable, in the interest of administrative efficiency, to remanding the matter to the intermediary. For clarity, in § 405.1834(e)(2)(iii), we are replacing the language “the matter must not be remanded” with “[i]t is not necessary or appropriate to remand the matter to the intermediary hearing officer(s).”

We have made technical changes to proposed § 405.1834(b) and § 405.1834(c), and § 405.1834(e)(3) concerning the component within CMS to which intermediary hearing officer/CMS reviewing official decisions should be sent. As the CMS Office of Hearings neither currently receives nor reviews either of these decisions, we changed these provisions to indicate that intermediary hearing decisions should be sent to the appropriate CMS component for review by a CMS reviewing official. Following the review and issuance of a written decision by a CMS reviewing official, the decision is

then sent to CMS (currently, both intermediary hearing officer decisions and CMS reviewing official decisions are received by the Center for Medicare Management, a component within CMS).

We clarified language in § 405.1834(d)(1), pertaining to own motion review by the Administrator.

In § 405.1834(e)(1) we proposed that the CMS reviewing official must give great weight to “other interpretive and procedural rules and general statements of policy.” We revised the quoted language to read “other interpretive rules, general statements of policy, and rules of agency organization, procedure, or practice established by CMS” in order to be consistent with the language in § 405.1867 regarding the authorities to which the Board is not bound but must give great weight.

Comment:

One commenter suggested that the proposed provision at § 405.1834(d)(2) is inconsistent with other provisions that give CMS the right to conduct and complete review within 60 days of the date the provider receives the decision. The commenter was also concerned that there may be a problem with intermediaries sending decisions to the appropriate CMS component at the same time they send them to providers.

Response:

We believe that the statutory provision that mandates the Administrator both accept review and render a decision within 60 days of the provider's receipt of the Board's decision is unusual and not the optimal procedure for taking review. We continue to believe it would not be appropriate to constrain the CMS reviewing official in this manner when taking review of an intermediary hearing officer decision. We do not share the commenter's concern that the intermediary hearing officers will unduly delay forwarding their decisions to the appropriate CMS component. Rather, we believe that intermediary officers will promptly forward their decisions to CMS. Moreover, to the extent that a provider is concerned that CMS has not promptly received an intermediary hearing officer decision, the provider may contact CMS to verify its receipt of the decision. Nevertheless, in response to the commenter, we are providing a date certain for the onset of the 60-day period for the CMS reviewing official to notify the provider and the intermediary that he or she is taking own motion review. Therefore, we have revised proposed § 405.1834(d)(2) to provide that the 60-day period for noticing review begins from the date of the intermediary hearing officer decision.

H. Group Appeals (§ 405.1837)

In the proposed rule, we introduced various revisions to clarify and update the regulation to reflect longstanding group appeal procedures. For example, we provided that each provider in a group appeal must satisfy individually the requirements for a single provider appeal (except for the $10,000 amount in controversy requirement). We also provided that a group appeal must be limited to one legal or factual issue that is common to each provider in the group. Additionally, we clarified the distinction between mandatory and optional uses of group appeal procedures. We also added a new provision that specified the requirements for the contents of a request for a group appeal. We also clarified existing regulations regarding the processing of group appeals pending full formation of the group and issuance of a Board decision.

We are making several changes to the proposed rule, including technical and editorial changes.

We have revised § 405.1837(b)(1) (with respect to mandatory group appeals) and § 405.1837(b)(2) (with respect to optional group appeals) to provide that one or more of the providers in the group may, as a matter of right, appeal more than one cost reporting period with respect to the issue that is the subject of the group appeal for purposes of meeting the $50,000 amount in controversy requirement, and, subject to the Board's discretion, may appeal more than one cost reporting period with respect to the issue that is the subject of the group appeal for other purposes, such as convenience. We have added some examples in the text following § 405.1837(b)(1) in order to illustrate the application of—(1) The amount in controversy requirement; and (2) the rules on when a provider under common ownership may (either as a matter of right or as a matter of Board discretion) join a group appeal involving a different cost reporting period than that pertaining to the provider, to specific situations. We have revised the language in § 405.1837(b)(3) to clarify that whereas one or more commonly owned or operated providers may initiate a mandatory group appeal (group appeals brought under § 405.1837(b)(1)), at least two providers are required to initiate an optional group appeal (group appeals brought under § 405.1837(b)(2)).

In proposed § 405.1837(c)(4), we would have required the providers in a group appeal to submit a statement that either—(1) The providers believe that they meet all the requirements for a group appeal and that the Board can proceed to make jurisdictional findings; or (2) the Board “must defer” making jurisdictional findings until the providers request the Board to do so. Consistent with proposed § 405.1837(c)(4)(ii), proposed § 405.1837(d)(4) and § 405.1837(e)(2) stated that the Board may not make jurisdictional findings until the providers request them. After further consideration, however, it is our position that, if the Board believes at any point in the group appeals process that, for purposes of administrative efficiency, it should make jurisdictional findings, it should be allowed to do so. Accordingly, we have revised § 405.1837(c)(4)(ii) and § 405.1837(e)(2), and have deleted § 405.1837(d)(4).

Likewise, we believe the Board should not be required to make jurisdictional findings before conducting further proceedings in the appeal. The Board is in the best position to know whether, in any given case, it is administratively efficient and proper to conduct proceedings in advance of making jurisdictional findings. Accordingly, we have deleted proposed § 405.1837(d)(3).

We have revised proposed § 405.1837(e) with respect to the procedures for determining that a group is fully formed, to be consistent with the current regulations and the Board's practice. Proposed § 405.1837(e)(2) would have provided that a group would be fully formed upon notice from the providers to the Board, but did not include a mechanism for determining that the group would be considered fully formed absent such a notice. We believe that it is appropriate for the Board to retain the abilities both to determine that a group is fully formed and that the group appeal should proceed, and to set schedules for the closures of groups, rather than being required to hold open indefinitely the group formation. Accordingly, we have deleted certain language in proposed § 405.1837(e)(2) and have revised § 405.1837(e)(1) to provide that with respect to mandatory group appeals, absent a notice from the providers that the group is fully formed, the Board may issue an order requiring the providers to demonstrate that there is at least one commonly-owned or controlled provider that is a potential addition to the group. With respect to optional group appeals, we have revised § 405.1837(e)(1) to provide that, absent a notice from the providers that the group is fully formed, the Board will issue an order that the group is fully formed or will issue general instructions

that set forth a schedule for the closing of optional group appeals.

We have revised § 405.1837(e)(2) to state that the Board will not dismiss any group appeal hearing request for failure to meet the amount in controversy requirement until the Board has determined that the group is fully formed.

We have deleted language from proposed § 405.1837(e)(5) that stated that the Board must grant a request to join a group appeal if the request is unopposed by the group members and is received by the Board prior to a final decision by the Board on the appeal. Our rationale for this revision is that the Board generally should have the discretion, for purposes of administrative efficiency, to grant or deny a request for joining a group appeal. We note that the Board may modify an order that a group has been fully formed, and thus could allow a provider to join a group appeal that was originally declared fully formed. Note that we have moved the language in proposed § 405.1837(e)(6), which stated that a denial by the Board of a request to join a group is without prejudice to the provider bringing a separate appeal, to § 405.1837(e)(4). We have substantially revised the language of proposed § 405.1837(e)(7) and also incorporated proposed § 405.1837(e)(7) into § 405.1837(e)(4). We proposed that, for purposes of determining the timeliness of any separate appeal, the period from the date of receipt of the provider's original hearing request through the date of receipt by the provider of the Board's denial of the provider's request to join the group appeal, must be excluded from the applicable 180-day period for filing a separate appeal (see § 405.1835(a)(3)) and from the 60-day period for adding issues to any single provider appeal (see § 405.1835(c)(3)). We have revised this language to state that, for purposes of determining timeliness for the filing of any separate appeal and for the adding of issues to that appeal, the date of receipt of the provider's request to form or join the group appeal is considered the date of receipt for purposes of meeting the applicable 180-day period prescribed in § 405.1835(a)(3). We were concerned that our proposal was potentially confusing and could have been disadvantageous for providers that filed the request for a group appeal hearing on or near the end of the deadline for doing so. For example, under our proposal, a provider that filed a request for a Board hearing on a group appeal on the 177th day after receiving its intermediary determination, would have only three days after the Board denied its request to join the group to file a separate appeal. Under our revision, because the provider's request for a hearing on the group appeal was timely, its subsequent request for a separate hearing also would be timely.

In response to a comment, in revised § 405.1837(e)(5), we provide that, as a general rule, where a provider has appealed an issue through electing to form, or join, a group appeal, it may not subsequently request the Board to transfer that issue to a single provider appeal brought in accordance with § 405.1811 or § 405.1835. We provide an exception to the general rule in the case of a group appeal that does not meet the jurisdictional requirements. Where the Board determines that the requirements for a group appeal are not met (that is, where there has been a failure to meet the amount in controversy or the common issue requirement), it will transfer the issue that was the subject of the group appeal to a single provider appeal (or appeals) for the provider (or providers) that meets (or meet) the requirements for a single provider appeal.

Comment:

A commenter objected to our proposal to clarify that each provider in a group appeal must satisfy the requirements for a single provider appeal (except for the amount in controversy requirement) as interfering with the Board's statutory authority to establish the procedural requirements governing provider appeals.

Response:

We believe our proposal is consistent with what is required by statute. The statute provides for a different amount in controversy requirement for group appeals, but still requires that providers appeal from a final determination of an intermediary or the Secretary and that the appeal be timely.

Comment:

One commenter stated that it was generally supportive of the proposals on group appeals, but sought clarification on a few points. This commenter stated that some of the proposals, if adopted, would conflict with the Board's current instructions on group appeals. Therefore, we should be prepared to immediately revise the Board's instructions to avoid confusion.

Response:

To the extent that there is any conflict between the provisions of this final rule and the Board's current instructions, the former will control. We anticipate that the Board will make revisions to its current instructions as a result of the publication of this rule.

Comment:

Two commenters stated that they supported the proposal to allow groups to aggregate claims across multiple cost reporting periods in order to satisfy the $50,000 amount in controversy requirement. One of these commenters believed that the proposal is ambiguous as to whether items may be combined across cost years only for the purpose of meeting the $50,000 amount in controversy requirement. According to the commenter, providers should be allowed to combine common issues from multiple cost reporting periods, regardless of cost report year end, into one group appeal. Because providers have a variety of cost reporting periods, and some may even have multiple cost reporting periods within one calendar year, there is no reason to require a commonality of cost reporting periods as a requirement for a group appeal.

Response:

Our proposals for group appeals were made with the view that, to the extent we have discretion under the statute, we should allow appeals to be brought as group appeals so as to reduce the workload on the Board, as well as the burden on providers and intermediaries. Our specific proposal to allow providers to combine the same item for multiple cost reporting periods into one group appeal was made under the section of the proposed rule pertaining to the amount in controversy requirements. However, we have further examined the issue and believe that providers with different cost reporting periods may, subject to the Board's discretion, raise the same issue in a group appeal, even when the amount in controversy requirement can be satisfied without including all of the multiple cost reporting periods. We have amended § 405.1837(b)(1) and § 405.1837(b)(2) accordingly.

Comment:

One commenter stated that, whereas it agrees that it is proper to transfer an issue from an individual appeal to a group appeal, the regulations should specifically state that the amount in dispute for a transferred issue is applied, for purposes of the amount in controversy requirement, only to the group appeal. For example, the commenter stated, if an individual Board appeal had two issues with $9,000 in dispute for each issue, and one of the issues was transferred to a group appeal, the $9,000 amount in dispute would be applied to the group appeal for purposes of meeting (or exceeding) the $50,000 amount in controversy requirement, and the single appeal would be left with one issue with $9,000 in controversy (in which case the appeal would have to be dismissed for not meeting the $10,000 minimum).

Response:

Our longstanding approach regarding meeting the amount in controversy requirement for single provider appeals is that, as long as the

provider has met the $10,000 requirement initially, subsequent events (including, but not limited to, withdrawal, transfer or settlement of an issue) that takes the amount below $10,000 will not deprive the Board of jurisdiction. As noted in section II.I. of this final rule, we are amending § 405.1839(c)(4) to provide specifically that, where a provider or group of providers has requested a hearing before the Board pursuant to § 405.1835 or § 405.1837, and the amount in controversy changes to an amount less than the minimum for a Board appeal due to the settlement or partial settlement of an issue, transfer of an issue to a group appeal, or the abandonment of an issue in an individual appeal, the change in the amount in controversy does not deprive the Board of jurisdiction.

Comment:

One commenter noted that proposed § 405.1837(b)(1) states that any commonly owned or controlled provider may not appeal to the Board any common issue in a single provider appeal brought under § 405.1835. The commenter asked whether this meant that providers under common ownership or control cannot appeal an issue at all if the combined amount in controversy does not meet the $50,000 threshold for a group appeal.

Response:

We believe that the language of section 1878(f)(1) of the Act, which requires that any appeal to the Board by providers that are under common ownership or control be brought as a group appeal, can reasonably be read to mean that any appeal by commonly owned or controlled providers that could be brought as a group appeal must be brought as a group appeal. Therefore, if there are, for example, three commonly owned providers that wish to appeal the same issue, but the amount in controversy is $10,000 for each (so that the $50,000 amount in controversy requirement for group appeals would not be met), each of the three providers could bring an individual appeal. We have clarified the language in § 405.1837(b)(1) for this purpose.

Comment:

One commenter asked whether a provider may add an issue to a group appeal when the provider has appealed one issue of an original NPR, joined a group appeal, and is within the 60-day proposed time limit to add an issue, but is beyond 180-days from the original NPR.

Response:

We understand the commenter to be asking whether a provider, having appealed only issue A in an individual appeal, can join a group appeal that involves issue B. The answer depends on whether the provider first (or concurrently) requests the Board to add issue B to its individual appeal and meets the requirements for adding the issue to its individual appeal. Under § 405.1835(c) of this final rule, a provider may add an issue to its individual appeal if its request to do so meets certain requirements, including the requirement that the Board receive the request no later than 60 days after the expiration of the applicable 180-day appeal period prescribed in § 405.1835(a)(3). If the provider requests and meets the requirements for adding an issue to its individual appeal, it may also request, under § 405.1837(b)(3)(ii), that, upon addition of the issue to the individual appeal, the issue be transferred from the individual appeal to the group appeal. If the provider is beyond the time for adding an issue to its individual appeal, it may not circumvent the time limit for doing so by seeking to appeal that issue through joining a group appeal.

Comment:

One commenter noted that, under current Board instructions, a group appeal may be initiated only by two or more providers, but because of varying fiscal year ends and varying dates of NPRs, an appeal on a common issue for one provider may be due to be filed before the time is ripe for other providers to join in the group. Therefore, this commenter supports the proposal to allow a group appeal to be initiated by a single provider, with other providers joining later.

Response:

We are clarifying that, although a single provider may initiate a mandatory group appeal, two or more providers are required to initially file an appeal for optional groups pursuant to § 405.1837(b)(3). Our policy for optional group appeals is based upon administrative efficiency concerns. Fundamentally, by definition, a group appeal must ultimately contain two or more providers. Accordingly, without the requirement to meet this definition from the onset of filing an appeal, the Board would be forced to entertain an abundance of requests to transfer to (or create) an individual appeal from single providers who filed a group appeal, but failed to join with another provider before the group closing deadline. We recognize, however, that due to the statutory requirement that providers under common ownership or control must appeal common issues as a group, combined with the fact that these providers may receive their final determinations on a staggered basis, we will allow, pursuant to § 405.1837(b)(3), a single provider that anticipates that a commonly owned or controlled provider will have an identical issue under appeal, to initiate a mandatory group appeal, despite the administrative efficiency concern above. In the unlikely event that no other providers ultimately appeal the issue, the Board will either transfer the group appeal issue to an existing individual appeal, administratively convert the group case number to an individual case number, or administratively create a new individual case number for the issue if the jurisdictional requirements of § 405.1811 or § 405.1835 are met.

Comment:

One commenter believed that the current policy permitting hospitals to file individual appeals and to subsequently transfer common issues to group appeals should be retained. Providers under common ownership should not be precluded from pursuing a common issue in a group appeal if they initially appealed it in an individual appeal. This would allow hospitals time to determine whether an issue is common to other hospitals under common ownership, which is not always evident when one hospital receives a particular adjustment. Similarly, another commenter stated that it is not practical for a commonly owned provider to be required to file the initial appeal request as a group appeal. Not all commonly owned hospitals are centralized or situated in a way that enables them to coordinate initial appeals as a group appeal within the 180-day deadline for seeking a hearing. This commenter suggested that, instead, we could require consolidation of single appeals into a group appeal within a certain time after the single appeals have been filed. The commenter also suggested that providers could be required to list their parent corporation at the time of filing a single appeal to assist the Board in identifying providers under common ownership.

Response:

We believe it is reasonable to expect that the parent corporation of commonly owned or controlled providers has a mechanism in place to identify issues that are common to more than one provider and to coordinate any appeals of these issues. Further, we believe that the parent corporation is in a better position than the Board to identify commonly-owned providers. Therefore, we are requiring a commonly owned provider to bring a timely appeal, as—(1) A group appeal (either initiating it or joining it) for an issue that is shared by other provider(s) to which it is related by common ownership; or (2) a single provider appeal for an issue that is peculiar to itself. (By “timely” we mean an appeal that satisfies the time limits stated in § 405.1835(a)(3) and § 405.1835(c).) Where a commonly owned or controlled provider mistakenly files an issue

within a single provider appeal that should have been brought as a group appeal, the Board will transfer the issue to an existing group appeal (or, where applicable, the Board will form a group appeal by transferring the same issue that was filed by two or more commonly owned or controlled providers within single provider appeals). We believe, however, that where a provider has brought a single provider appeal and then wishes to join (or form) a group appeal involving providers to which it is not related, the Board should retain discretion as to whether to deny the provider's request. In order to assist the Board in identifying individual appeals that should have been brought as group appeals (or should have been joined to an existing group appeal), we are amending § 405.1835 to add a new paragraph (b)(4) to require a commonly owned provider to provide the Board with certain information. Specifically, a commonly owned provider must list the name of its parent corporation, and either state that, to the best of its knowledge, no other provider related to it by common ownership or control has an individual or group appeal pending before the Board on the same issue for a cost reporting period that falls within the same calendar year. Alternatively, when an appeal already exists, the provider must give information (for example, the provider nam

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